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Consumers Value Bandwidth and Latency, but Not as Much as You’d Think

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Wallsten et. al. perform the first relative valuation of bandwidth and latency in new study

August 16, 2017 – Broadband consumers place a relatively high value on bandwidth enhancements at low speeds, but the incremental value consumers attach to such enhancements decreases rapidly as speeds increase. This is one finding of new research from TPI President Scott Wallsten and co-authors from Indiana University, PhD candidate Yu-Hsin Liu and Professor Jeffrey Prince, which helps shed light on consumers’ willingness to pay for various improvements in their broadband plans.

The authors also found that households moderately value reduced latency, willing to pay $8.66 per month to reduce latency from satellite to wired terrestrial levels.

Additionally, failing to account for latency increases measured willingness to pay (WTP) for download bandwidth, but has no effect on measured WTP for upload bandwidth or higher data caps.

The new research should be valuable to policy makers concerned with expanding broadband access, as it can help inform guidelines and targets for broadband criteria other than bandwidth. For example, the proposed rules for the FCC’s upcoming reverse auction for universal service funds weigh latency relative to bandwidth at least five times more than our results would suggest.

The new research is based on survey-based discrete-choice experiments that measure households’ WTP for three aspects of broadband: bandwidth (download/upload), latency, and data cap.

Distinguishing Bandwidth and Latency in Households’ Willingness- to-Pay for Broadband Internet Speed” is available on the TPI website.

Contact: Ashley Benjamin, 202-828-4405, abenjamin@techpolicyinstitute.org

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at http://www.techpolicyinstitute.org/.