More Movies, More Messages, More Bandwidth? How OTT Usage Intensity Drives IAS Upgrades in Germany

Posted: 19 Mar 2018

See all articles by René Arnold

René Arnold

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste; WIK-Consult GmbH

Serpil Tas

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste

Date Written: March 16, 2018

Abstract

Both telecommunications providers and policy makers would like to see consumers upgrading their fixed, wireless-fixed and wireless IAS. While telecommunications providers value such upgrades to increase the average revenue per user (ARPU), policy makers hope for socio-economic benefits by increasing the usage of Next Generation Networks (NGN). Investigations into the drivers of upgrades of IAS have so far focused on competition and market intervention. Our paper seeks to contribute a novel perspective to the debate by exploring the impact of over the top (OTT) services on consumers’ purchases of fixed IAS with higher access speed and mobile IAS with more included high speed data volume. Specifically, we hypothesize that higher OTT usage intensity increases consumers’ likelihood of having purchased an upgraded IAS.

Our paper draws on three representative surveys in Germany (n=1,027 (2015); n=1,003 (2016); n=2,036 (2017)). For each sample, we estimate two binary logistic regressions seeking to explain the purchases of upgraded fixed and mobile IAS respectively. We introduce the usage intensity of OTT services offering communication functionality such as WhatsApp, Skype or Snapchat and OTT entertainment services such as Netflix, Spotify or Amazon Video as the two main explanatory variables. To improve the predictive power of our model, we introduce additional variables for 4G, above average bandwidth and smartphone ownership.

Results are consistent across the three years and the six regressions, all of which present good predictive power and quality criteria (logistic regressions for fixed IAS upgrade: χ²=76.3, Nagelkerke-R²=.101 (2015); χ²=99.2, Nagelkerke-R²=.134 (2016); χ²=257.4, Nagelkerke-R²=.173 (2017); logistic regressions for mobile IAS upgrade: χ²=169.1, Nagelkerke-R²=.217 (2015); χ²=131.7, Nagelkerke-R²=.179 (2016); χ²=269.7, Nagelkerke-R²=.182 (2017)). For fixed access, OTT entertainment services usage intensity significantly increases the odds of a consumer having purchased an IAS upgrade, while OTT communication services usage intensity does not. For mobile access, both OTT entertainment and communications services usage intensity have got a significant positive impact on the odds of having purchased a new mobile plan with more high-speed data volume included. All other explanatory variables are also statistically significant. We also find a marked increase in both the share of 4G contracts (2015: 22%; 2016: 30%; 2017: 40%) and high speed fixed IAS (2015: 25%; 2016: 28; 2017: 36%) in our samples.

OTT communications services are most commonly used on mobile devices and outside of one’s home. Thus, it is not surprising that the usage intensity of these services increases the odds of having upgraded one’s mobile plan, but not one’s IAS at home. OTT entertainment services have become increasingly popular across all devices and usage situations. Consequently, it is plausible that an increase in usage intensity of these services increases the odds of having purchased an upgrade for both one’s mobile plan and one’s IAS at home.

For telecommunications providers, our results underscore that OTT services can help to drive take-up of premium IAS enabling an increase in ARPU. For policy makers, our results point to the effectiveness of demand-side policies to increase take-up of NGN.

Keywords: Internet, broadband take-up, OTT, consumers

JEL Classification: K23, L86, L96

Suggested Citation

Arnold, René and Tas, Serpil, More Movies, More Messages, More Bandwidth? How OTT Usage Intensity Drives IAS Upgrades in Germany (March 16, 2018). TPRC 46: The 46th Research Conference on Communication, Information and Internet Policy 2018. Available at SSRN: https://ssrn.com/abstract=3142175

René Arnold (Contact Author)

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste ( email )

Rhöndorfer Str. 68
53604 Bad Honnef, 53604
Germany

WIK-Consult GmbH ( email )

Rhöndorfer Str. 68
Bad Honnef, 53604
Germany

Serpil Tas

Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste ( email )

Rhöndorfer Str. 68
53604 Bad Honnef, 53604
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
158
PlumX Metrics