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

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  • Lukasz Grzybowski
  • Maude Hasbi
  • Julienne Liang

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.

Suggested Citation

  • Lukasz Grzybowski & Maude Hasbi & Julienne Liang, 2018. "Transition from Copper to Fiber Broadband: The Role of Connection Speed and Switching Costs," CESifo Working Paper Series 7431, CESifo.
    • Handle: RePEc:ces:ceswps:_7431
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    References listed on IDEAS

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    Cited by:

    1. Vogelsang, Ingo, 2019. "Has Europe missed the endgame of telecommunications policy?," Telecommunications Policy, Elsevier, vol. 43(1), pages 1-10.
    2. Sylvain Dejean & Sophie Tarascou, 2021. "A qui profite la fibre ? Estimation des besoins en très haut débit et déploiement de la fibre optique en France," Working Papers hal-03341938, HAL.
    3. Charalampopoulos, George & Katsianis, Dimitris & Varoutas, Dimitris, 2020. "Investigating the intertwining impact of wholesale access pricing and the commitment to net neutrality principle on European next-generation access networks private investment plans: An options-game a," Telecommunications Policy, Elsevier, vol. 44(3).
    4. repec:zbw:itse23:277968 is not listed on IDEAS
    5. Abrardi, Laura & Cambini, Carlo, 2019. "Ultra-fast broadband investment and adoption: A survey," Telecommunications Policy, Elsevier, vol. 43(3), pages 183-198.
    6. Fabian Queder, 2020. "Towards a vertically separated broadband infrastructure: The potential role of voluntary separation," Competition and Regulation in Network Industries, , vol. 21(2), pages 143-165, June.
    7. Szabó, Andrea & Pham, Vinh, 2022. "Net neutrality and consumer demand in the video on-demand market," Information Economics and Policy, Elsevier, vol. 61(C).
    8. Liu, Yu-Hsin & Prince, Jeffrey & Wallsten, Scott, 2018. "Distinguishing bandwidth and latency in households’ willingness-to-pay for broadband internet speed," Information Economics and Policy, Elsevier, vol. 45(C), pages 1-15.
    9. Gerpott Torsten J., 2018. "Relative fixed Internet connection speed experiences as antecedents of customer satisfaction and loyalty: An empirical analysis of consumers in Germany," Management & Marketing, Sciendo, vol. 13(4), pages 1150-1173, December.

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    More about this item

    Keywords

    FttH; DSL; connection speed; switching costs;
    All these keywords.

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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