Never a Sporting Chance: Broadband and Content Bundling in the Merger of Two Dominant Firms

32 Pages Posted: 11 May 2017

See all articles by Bronwyn E. Howell

Bronwyn E. Howell

Victoria University of Wellington - School of Management

Petrus H. Potgieter

University of South Africa (UNISA); Institute for Technology and Network Economics

Date Written: May 10, 2017

Abstract

Bundling of broadband access and other services prevails in telecommunications markets. In converging markets, bundling broadband with video content is feared to foreclose broadband market competition. However, the motivations for bundling are many and complex, as are the forms it can take in different demand- and supply-side circumstances and its effects on both profits and welfare. Yet discussion of bundling in telecommunications markets has focused almost exclusively on the potential for strategic foreclosure by a dominant firm.

Analysing the recently-declined New Zealand merger between Sky Television and Vodafone, we find that bundling fixed broadband with fixed voice connections or with mobile services likely harms dynamic efficiency more than bundling it with one content deliverer or application. Preventing content and broadband bundling can potentially interfere with infrastructure investment and decommissioning decisions during the transition to an all-IP environment. Furthermore, deep discounting of bundles may be evidence of informed consumers acting rationally or effectively competitive firms responding to market incentives, as well as of an intention to foreclosure.

We recommend that more attention be given in future analyses to demand-side factors influencing the efficiency of bundled offers, and the form of bundling employed in addition to its presence or absence.

Keywords: broadband, bundling, content, merger, New Zealand, telecommunications

JEL Classification: L11, L12, L41, L42, L96

Suggested Citation

Howell, Bronwyn E. and Potgieter, Petrus H., Never a Sporting Chance: Broadband and Content Bundling in the Merger of Two Dominant Firms (May 10, 2017). Available at SSRN: https://ssrn.com/abstract=2965966 or http://dx.doi.org/10.2139/ssrn.2965966

Bronwyn E. Howell (Contact Author)

Victoria University of Wellington - School of Management ( email )

Wellington 6001
New Zealand
+64 4 463 5563 (Phone)
+64 4 463 5566 (Fax)

Petrus H. Potgieter

University of South Africa (UNISA) ( email )

P.O. Box 392
UNISA
Pretoria, Gauteng 0003
South Africa
+27 12 433 4622 (Phone)

Institute for Technology and Network Economics ( email )

Posbus 2015
Groenkloof, 0027
South Africa

HOME PAGE: http://www.itne.eu

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
84
Abstract Views
792
Rank
439,277
PlumX Metrics