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Transition from copper to fiber broadband: the role of connection speed and switching costs

Abstract : We estimate a mixed logit model using data on choices of broadband technologies by 94,388 subscribers to a single broadband operator in a European country on a monthly basis from January to December 2014. We find that valuation of DSL connection speed in the range between 1 and 8 MB/s is very similar. Moreover, in January 2014, the valuation of FttH connection with speed of 100 MB/s is not much different than of DSL connection with speed of 1 or 8 MB/s but it increased over time. The small initial difference in valuation of DSL and FttH connections may be because basic Internet needs of consumers such as emailing, reading news, shopping, browsing and even watching videos online could be satisfied with connection speed below 8 MB/s. We also find that consumers face significant switching costs when changing broadband tariffs, which are substantially higher when switching from DSL to FttH technology. According to counterfactual simulations based on our model estimates, switching costs between technologies are the main factor which slows down transition from DSL to FttH.
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Contributor : Lukasz Grzybowski Connect in order to contact the contributor
Submitted on : Friday, November 8, 2019 - 3:58:57 PM
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Lukasz Grzybowski, Maude Hasbi, Julienne Liang. Transition from copper to fiber broadband: the role of connection speed and switching costs. Information Economics and Policy, Elsevier, 2018, 42, pp.1-10. ⟨10.1016/j.infoecopol.2017.07.001⟩. ⟨hal-02102338v2⟩



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