The impact of tariff diversity on broadband penetration—An empirical analysis

• Impact of tariff diversity on broadband penetration.
• Country-level data base, comprising over 1000 fixed-line broadband tariffs.
• Demand estimation using instrumental variables and various industry and socio-economic factors as controls.
• Significant positive effect of tariff diversity on broadband adoption.
• Shows the importance of innovative pricing schemes in expediting the ascent of broadband internet access.

This paper provides an empirical analysis how tariff diversity affects fixed broadband penetration. To measure tariff diversity on a country-level a detailed data set comprising over 1000 fixed-line broadband tariffs is used. An instrumental variable approach is applied to estimate demand, controlling for various industry and socio-economic factors. Our results indicate that service-related and socio-economic factors affect broadband demand the most. An increase in tariff diversity provides a significant impetus to broadband adoption. A positive relationship is indicative of the importance of innovative pricing schemes in expediting the ascent of broadband internet access.