Distinguishing bandwidth and latency in households’ willingness-to-pay for broadband internet speed
Jeffrey Prince and
Information Economics and Policy, 2018, vol. 45, issue C, 1-15
We measure households’ willingness-to-pay for changes in key home broadband Internet connection features using data from two nationally administered, discrete choice surveys. Both surveys include price, data caps, and download and upload bandwidth, but only one includes latency. Together, these surveys allow us to measure tradeoffs between bandwidth and other connectivity features such as price and data caps, and perhaps most notably, provide the only empirical evidence to date of tradeoffs between bandwidth and latency. We find that households’ valuation of bandwidth is highly concave, with relatively little added value beyond 100 Mbps. For example, households are willing to pay about $2.34 per Mbps ($14 total) monthly to increase bandwidth from 4 Mbps to 10 Mbps, $1.57 per Mbps ($24) to increase from 10 to 25 Mbps, and only $0.02 per Mbps ($19) for an increase from 100 Mbps to 1000 Mbps. We also find households willing to pay about $8.66 per month to reduce latency from levels obtained with satellite Internet service to levels more common to wired service. Household valuation of increased data caps is also concave as caps increase from 300 GB to 1000 GB, although consumers place a significant premium on unlimited service. Our findings provide the first relative valuation of bandwidth and latency and suggest that current U.S. policy may be over-penalizing latency relative to reductions in bandwidth and data caps. For example, we find that in its CAF Phase II Auction, the FCC is imposing a bidding penalty for latency that is about five times higher than what our WTP estimates suggest it should be relative to bandwidth offered.
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:45:y:2018:i:c:p:1-15
Access Statistics for this article
Information Economics and Policy is currently edited by D. Waterman
More articles in Information Economics and Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().