Steering Incentives and Bundling Practices in the Telecommunications Industry

Brian McManus (), Aviv Nevo (), Zachary Nolan () and Jonathan W. Williams ()
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Brian McManus: University of North Carolina at Chapel Hill
Aviv Nevo: University of Pennsylvania
Zachary Nolan: Duke University
Jonathan W. Williams: University of North Carolina at Chapel Hill

No 18-12, Working Papers from NET Institute

Abstract: We model mixed-bundle pricing by internet service providers (ISPs) to study their incentive to steer consumers across different subscription options and influence usage decisions. Using unique panel data from an ISP, we test predictions from the model. We find that the ISP's introduction of internet usage allowances and overage charges steered internet-only consumers into bundled TV and internet subscriptions; this effect was greatest for heavy users of streaming services most similar to conventional TV. Internet usage growth –- especially in streaming video services –- was curtailed for consumers who added TV subscriptions, and it also fell for consumers who did not upgrade their internet usage allowances. We discuss the implications of these findings for antitrust and regulatory issues in the telecommunications industry.

Keywords: Steering; Bundling; Nonlinear pricing; Telecommunications industry; cord-cutting; broadband (search for similar items in EconPapers)
JEL-codes: L11 L13 L96 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2018-10
New Economics Papers: this item is included in nep-com, nep-ict, nep-ind and nep-reg
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