Steering Incentives and Bundling Practices in the Telecommunications Industry

43 Pages Posted: 13 Nov 2018

See all articles by Brian McManus

Brian McManus

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Aviv Nevo

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Zachary Nolan

Duke University

Jonathan W. Williams

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: October 1, 2018

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 inter- net 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.

Keywords: Steering, Bundling, Nonlinear Pricing, Telecommunications In- dustry, Cord Cutting, Broadband

JEL Classification: L11, L13, L96

Suggested Citation

McManus, Brian and Nevo, Aviv and Nolan, Zachary and Williams, Jonathan W., Steering Incentives and Bundling Practices in the Telecommunications Industry (October 1, 2018). NET Institute Working Paper No. 18-12. Available at SSRN: https://ssrn.com/abstract=3267060 or http://dx.doi.org/10.2139/ssrn.3267060

Brian McManus

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Aviv Nevo

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zachary Nolan (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Jonathan W. Williams

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

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