Usage-Based Pricing of Residential Broadband: Cost Savings and Implications for Subscribers
Posted by Social Science Research Network
Usage-Based Pricing of Residential Broadband: Cost Savings and Implications for Subscribers – Jacob B. Malone, John L. Turner & Jonathan W. Williams (University of Georgia – C. Herman and Mary Virginia Terry College of Business – Department of Economics)
ABSTRACT: Despite the growing prevalence of usage-based pricing, its effects on subscribers are largely unknown, primarily due to limited data access. Using novel data that tracks broadband usage by over 75,000 subscribers at the monthly and fifteen- minute level, we first show that usage-based pricing is effective at reducing usage and limiting growth in the most extreme subscribers. Second, we show low-usage subscribers pay up to forty times more per gigabyte than high-usage subscribers to emphasize the degree of subsidization that is occurring. Next, we demonstrate that when provided with simple means to track their usage, subscribers are very adept at doing so. They rarely choose dominated plans and respond sensibly to the possibility of incurring overage charges. Subscribers tend to reduce usage in a uniform fashion across the day to avoid overage charges. This suggests peak usage, which determines an Internet Service Provider’s costs, is fairly elastic, yet a pro- portionate reduction in off-peak usage indicates an inefficiency. This suggests more progressive policies like congestion-based pricing are likely required to effectively manage peak usage and more equitably distribute costs among subscribers, so long as the implementation costs are not too large.
Featured News
Redfin Settles $9.2M Commission Inflation Lawsuits
May 7, 2024 by
CPI
DOJ Supports Colorado’s Efforts to Block Kroger-Albertsons Merger
May 7, 2024 by
CPI
Japan Considers Regulation of AI Developers
May 7, 2024 by
CPI
European Commission Extends Decision Deadline for Ita-Lufthansa Merger
May 7, 2024 by
CPI
UK, US and Australia Sanction Senior Leader of LockBit Cybercrime Gang
May 7, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI