Scholarship (Affiliate)
Does Pricing of Internet Usage Steer Consumers or Meter Usage? Evidence from a Pricing Experiment
The Review of Economics and Statistics (Forthcoming)
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Abstract
Competition authorities have expressed concern that firms selling broadband internet and TV subscriptions may employ usage-based pricing (UBP) of internet to steer consumers toward TV over streaming video. We study this issue with household-level panel data from an internet service provider’s UBP experiment, capturing the prices’ effects on internet and TV subscriptions, internet usage, and firm revenue. UBP served largely to meter internet usage by high-demand households rather than steering them toward TV. Households’ payments increased due to usage-related overage charges and internet subscription upgrades to avoid overages. Households that avoided internet-related payments reduced usage rather than adding TV subscriptions.