Demand Estimation and Market Definition for Broadband Internet Services

Abstract

This paper analyses residential demand for internet access in Austria with a focus on broadband internet connections. Austria has a cable network coverage of about 50% and is, therefore, a good candidate to analyse the elasticity of demand for DSL where cable is available and where it is not. We also include mobile broadband via UMTS or HSDPA in our analysis. We estimate various nested logit models and derive conclusions for market definition. The estimation results suggest that the demand for DSL is elastic and that cable networks are likely to be in the same market as DSL connections both at the retail and at the wholesale level. We discuss possible implications for the regulation of wholesale broadband access markets.

Keywords: Estimation of discrete choice models, broadband internet access, market definition, regulation

JEL Classification: L51, L96