Estimating Demand for Fixed-Mobile Bundles and Switching Costs between Tariffs

This paper estimates demand for fixed-mobile bundles (quadruple play tariffs) using a database of subscribers to a single mobile operator from a single town in a European country which has full coverage with both ADSL and FTTH broadband technologies. Based on the mixed logit demand estimation we find that consumer valuation of FTTH broadband in 2013 increased over time, while ADSL lost attractiveness relative to FTTH and in absolute terms, which suggests that consumers increasingly care about the speed of connection offered by FTTH. Consumer surplus increased substantially due to ongoing transition of consumers from less valued quadruple play tariffs with ADSL to more valued ones with FTTH. We also find that for quadruple play subscribers mobile data is complementary to fixed broadband access, which suggests that these consumers use Internet access via mobile data to sample online content but complete their online activity using fixed Internet access at home. On the other hand, mobile voice usage is a substitute to fixed broadband access and consumers reduce their voice consumption once they get a broadband connection. We also find that there are substantial switching costs between tariffs which, other things being equal, greatly decrease consumer surplus.