Advanced Search
MyIDEAS: Login to save this article or follow this journal

Complementarities and the Demand for Home Broadband Internet Services

Contents:

Author Info

  • Hongju Liu

    ()
    (School of Business, University of Connecticut, Connecticut 06269)

  • Pradeep K. Chintagunta

    ()
    (Booth School of Business, University of Chicago, Chicago, Illinois 60637)

  • Ting Zhu

    ()
    (Booth School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

Before the deregulation of digital subscriber line (DSL) services by the Federal Communications Commission (FCC) in 2005, phone companies were required to share their DSL bandwidth with independent DSL providers. Despite the large number of independent providers that entered the market, phone companies accounted for 95.3% of all DSL subscribers in 2005. A common explanation for this is based on supply-side factors such as the costs faced by these providers to lease phone lines from phone companies, as well as the price discounts offered by phone companies. In this paper, we look for a demand-side explanation for this market outcome. Analyzing consumer choices in the broadband category alone would lead us to the conclusion that consumers have a much higher preference for their local phone providers--a finding at odds with service awards received by independent DSL providers. Thus we look for a demand-side explanation that is based on the demand not just for broadband services but also for related services such as cable TV and local phone. We find evidence of strong complementarities between the consumption of broadband and of those related categories. The main source of such complementarities, in our data, is the benefits to consumers from having a single provider for multiple services. We then carry out counterfactual experiments assuming that there are no changes in the regular prices of the various services. Our results indicate that the share of phone companies in the broadband market would have been 43% smaller without complementarities stemming from such a single-provider effect, whereas shutting off the state dependence effects would have reduced their share by 30%, and shutting off the effects of price discounts on the DSL+local phone bundle would have resulted in their share declining by 21%.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://dx.doi.org/10.1287/mksc.1090.0551
Download Restriction: no

Bibliographic Info

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 29 (2010)
Issue (Month): 4 (07-08)
Pages: 701-720

as in new window
Handle: RePEc:inm:ormksc:v:29:y:2010:i:4:p:701-720

Contact details of provider:
Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
Phone: +1-443-757-3500
Fax: 443-757-3515
Email:
Web page: http://www.informs.org/
More information through EDIRC

Related research

Keywords: complementarities; product bundle; broadband;

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pereira, Pedro & Ribeiro, Tiago & Vareda, João, 2013. "Delineating markets for bundles with consumer level data: The case of triple-play," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 760-773.
  2. A. Orhun, 2013. "Spatial differentiation in the supermarket industry: The role of common information," Quantitative Marketing and Economics, Springer, vol. 11(1), pages 3-37, March.
  3. Trevor Roycroft, 2013. "Empirical study of broadband adoption using data from the 2009 Residential Energy Consumption Survey," Journal of Regulatory Economics, Springer, vol. 43(2), pages 214-228, April.
  4. Joao Macieira & Pedro Pereira & Joao Vareda, 2013. "Bundling Incentives in Markets with Product Complementarities: The Case of Triple-Play," Working Papers 13-15, NET Institute.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:29:y:2010:i:4:p:701-720. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.