The impact of data caps on mobile broadband Internet access: A welfare analysis (original) (raw)

Demand Curves and Operator Strategies in the Finnish Mobile Broadband Market

International Journal of Business Data Communications and Networking, 2014

Finland, among the first to adopt mobile broadband services, faces rapid growth of mobile data traffic. Therefore, Finnish mobile operators continually invest in their radio access networks to handle this growth, which represents an attractive revenue source. This study presents a demand curve estimate for mobile broadband data traffic, which takes into account the impact of technology evolution on network coverage and capacity. Based on the demand curve and the market equilibrium, this study proposes two strategies for mobile operators: i) reducing the marginal cost of traffic, and ii) changing the pricing structure. Assuming that mobile operators are price-takers (perfect competition), the findings of this study indicate that a continuing reduction of marginal cost is imposed by market forces. However, this policy of cost reduction will inevitably reach its limits. Thus, this study proposes a change in pricing structure from flat-rate tariff to usage-based charging.

Demand for and Pricing of Mobile Internet: Evidence from a Real-World Pricing Experiment

SSRN Electronic Journal, 2000

ABSTRACT I study a budget-constrained, private-valuation, sealed-bid sequential auction with two incompletely-informed, risk-neutral bidders in which the valuations and income may be non-monotonic functions of a bidder's type. Multiple equilibrium symmetric bidding functions may exist that differ in allocation, efficiency and revenue. The sequence of sale affects the competition for a good and therefore also affects revenue and the prices of each good in a systematic way that depends on the relationship among the valuations and incomes of bidders. The sequence of sale may affect prices and revenue even when the number of bidders is large relative to the number of goods. If a particular good, say [alpha], is allocated to a strong bidder independent of the sequence of sale, then auction revenue and the price of good [alpha] are higher when good [alpha] is sold first.

Pricing Wireless Access Services: The Effect of Offloading and Users ’ Bounded Rationality

2016

Abstract—Offloading through WiFi access networks has been recently proposed as a cost-effective solution for coming up against the unprecedented increase in the mobile data traffic volume. However, apart from reducing the operational costs of a network operator, WiFi access can be also promoted as an alternative low-cost service for users with low willingness-to-pay. In this paper, we consider a monopolistic scenario of a Mobile Virtual Network Operator (MVNO) offering LTE and WiFi access services and make the optimal pricing decisions. We further show that the presence of reluctant users to switch to the WiFi service could increase the profits of the MVNO. I.

Service provision in telecommunications markets with endogenous network capacity

We present a model in which the consumers' capacity to access broadband internet facilities depends negatively on the price charged by the network owner per capacity unit. In the reference scenario, a monopolist operates in both the network and the service provision stage. In the liberalized scenario, we assume duopolistic competition in the service provision market between the network owner and an entrant …rm. We allow for endogenous di¤erentiation of the services provided by the two competitors. We …nd that network density may be maximal depending on the regulation scheme. Accordingly, there exists a trade-o¤ between network density and retail prices.

The Welfare Impacts of Broadband Network Management: Can Broadband Service Providers Be Trusted?

SSRN Electronic Journal, 2000

The extent to which broadband Internet service providers can engage in "reasonable traffic management" when faced with potentially congestion-causing applications like BitTorrent or other file-sharing applications is currently the subject of heated debate. This PAPER provides a formal economic analysis of the likely welfare consequences of broadband Internet network management that is directed at controlling network congestion. We show that it is socially desirable to charge a congestion premium or utilize other traffic management techniques when congestioncausing applications impose a congestion externality and degrade the experience of other users. The most efficient traffic management actions would be targeted at applications that cause congestion externalities and not upon all applications generally. The model also suggests congestion externalities caused by applications may vary depending upon network capacity constraints and protocols.

Pricing, Competition and Content for Internet Service Providers

IEEE/ACM Transactions on Networking, 2020

We examine competition between two Internet Service Providers (ISPs), where the first ISP provides basic Internet service, while the second ISP provides Internet service plus content, i.e., enhanced service, where the first ISP can partner with a Content Provider to provide the same content as the second ISP. When such a partnering arrangement occurs, the Content Provider pays the first ISP a transfer price for delivering the content. Users have heterogeneous preferences, and each in general faces three options: (1) buy basic Internet service from the first ISP; (2) buy enhanced service from the second ISP; or (3) buy enhanced service jointly from the first ISP and the Content Provider. We derive results on the existence and uniqueness of a Nash equilibrium, and provide closed-form expressions for the prices, user masses, and profits of the two ISPs and the Content Provider. When the first ISP has the ability to choose the transfer price, then when congestion is linear in the load, it is never optimal for the first ISP to set a negative transfer price in the hope of attracting more revenue from additional customers desiring enhanced service. Conversely, when congestion is sufficiently super-linear, the optimal strategy for the first ISP is either to set a negative transfer price (subsidizing the Content Provider) or to set a high transfer price that shuts the Content Provider out of the market.

DEMAND FOR MOBILE INTERNET: EVIDENCE FROM A REAL-WORLD PRICING EXPERIMENT

2004

Mobile phones are increasingly used as a gateway to the Internet. The take-up of mobile phone-enabled Internet services was, however, initially slower than expected, at least in Europe. We estimate non-parametrically the price elasticities of demand for firstgeneration wireless services using (i) consumer-level panel data from a real world pricing experiment and (ii) the restrictions of a structural model. We decompose the number of wireless connections into the number of needs and the conditional probability of establishing a connection, given a need. According to our estimates needs were plenty, but the conditional usage probability small. Demand for first-generation wireless services was highly elastic and the welfare gains to an (early) adopter moderate. Pricing and taxation of wireless services had a large suppressing effect on demand.

Uncapacitated Pricing Optimization for Mobile Broadband Services

Jurnal Teknik Industri, 2018

The success of revenue management starting in the mid-1980s has been driving pricing decision to be more tactical and operational. Since then, statistics and operations research have been important tools in pricing and revenue optimization. This research seeks to determine optimal price for mobile broadband services of a particular service provider. The case study is mobile broadband services in Indonesian market. We made a plausible assumption that there is no capacity constraint. We used choice-based conjoint with hierarchical Bayes estimation method to derive individual part-worth utilities, based on which market simulation was run to obtain the price-response function. By combining this with information about market size, we came up with a number of data points representing the demand function. Instead of fitting the data points with some theoretical demand functions, we used monotonic cubic splines to interpolate the demand function. Accordingly, we did not use explicit demand ...

Internet access and investment incentives for broadband service providers

Working Papers, 2011

This paper studies a model of the Internet broadband market as a platform in order to show how di¤erent pricing schemes from the so-called "net neutrality " can increase economic e¢ ciency by allowing more investment of access providers and enhancing consumers surplus and social welfare. We show that departing from the "net neutrality", where ‡at rates are used, introducing termination fees can increase incentives to invest for the ISP and enhance social surplus.

Pricing and revenue sharing in secondary market of mobile internet access

2015 IEEE 34th International Performance Computing and Communications Conference (IPCCC), 2015

There is a fast growing number of public spaces offering Wi-Fi access to meet the rising demands for Internet access. It is common for such service to be offered to users at no charge or for a flat fee. Both situations provide very little incentive for Wi-Fi providers to offer better service to the users. Similarly, Wi-Fi providers pay a monthly flat rate to ISP for Internet access and, this too does not incentivize ISP to offer better service to Wi-Fi users. As a result, Wi-Fi users may experience poor connection when network becomes congested during peak hours. In this paper we propose a dynamic pricing scheme for Internet access and a revenue sharing mechanism that provides incentives for both ISP and Wi-Fi providers to offer better service to their users. We build our revenue sharing model based on Shapley value mechanism. Importantly, our proposed revenue sharing mechanism captures the power negotiation between ISP and Wi-Fi providers, and how shifts in power influences revenue division. Specifically, the model assures that the party who contributes more receives a higher portion of the revenue. In addition, our simulation demonstrates that our model captures the bargaining power shifts between Wi-Fi providers and ISP, and shows that the division of revenue asymptotically converges to a percentage value.