Transition from Copper to Fiber Broadband: The Role of Connection Speed and Switching Costs

Lukasz Grzybowski, Maude Hasbi and Julienne Liang

No 7431, CESifo Working Paper Series from CESifo

Abstract: We estimated a mixed logit model using data on the broadband technologies chosen by 94,388 subscribers of a single European broadband operator on a monthly basis between January and December 2014. We found that consumers have similar valuation of DSL connection speeds in the range between 1 and 8 Mbps. Moreover, in January 2014, the valuation of FttH connections with a speed of 100 Mbps was not much higher than of DSL connections with a speed of 1 to 8 Mbps, but it has increased quickly over time. The small initial difference in the valuation of DSL and FttH connections may be because consumers' basic Internet requirements such as browsing, emailing, reading news, shopping, and even watching videos online could be satisfied with a connection speed below 8 Mbps. We also found that consumers face significant switching costs when changing broadband tariff plans, which are substantially higher when switching from DSL to FttH technology. According to counterfactual simulations based on our model, switching costs between technologies are the main factor which slows down consumer transition from DSL to FttH.

Keywords: FttH; DSL; connection speed; switching costs (search for similar items in EconPapers)
JEL-codes: L43 L50 L96 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ict, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Journal Article: Transition from copper to fiber broadband: The role of connection speed and switching costs (2018)
Working Paper: Transition from copper to fiber broadband: the role of connection speed and switching costs (2018)
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