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Steering Incentives and Bundling Practices in the Telecommunications Industry

Author

Listed:
  • 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)

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.

Suggested Citation

  • Brian McManus & Aviv Nevo & Zachary Nolan & Jonathan W. Williams, 2018. "Steering Incentives and Bundling Practices in the Telecommunications Industry," Working Papers 18-12, NET Institute.
    • Handle: RePEc:net:wpaper:1812
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    File URL: http://www.netinst.org/Nolan_18-12.pdf
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    More about this item

    Keywords

    Steering; Bundling; Nonlinear pricing; Telecommunications industry; cord-cutting; broadband;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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