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Empirical Consideration of the Effects of Bit/Data Cap on Telecommunications Operators

  • Kazuma Kobayashi
Article

Abstract

This article considers a case where a regulatory agency introduces a qualitative incentive into competition. Due to severe competition, telecom operators use charging schemes to increase revenues and introduce differentiated services to meet individual demands. This means that include many factors for differentiation. It is hard to explain or justify the pricing of that services differentiated only by price and quantity. For agency oversight, we use logit and probit model which can set a threshold of Bit/Data cap at standard deviation level and 5GB level derived from sample basic statistics. Basic statistics show that downlink speed under a data cap is about 24Mbits/s, and other variables show that operators tend to set lower than standard deviation level. This implies that customers using data cap plan receive lower quality of service. The estimation at 5GB level suggests that setting the cap at 5GB would be statistically more significant than the case of the cap at standard deviation level, and would be justified even for fixed line data. This implies that the cap of 5GB in the mobile market seems to be calculated, justified, and set by the operators. The irrationality of this implication is that most operators set the same amount of the cap, even though the capacity, density, and quality of their networks are different. A 5GB cap could be justified as long as their services are offered by bundling. This article concludes that the agency could determine to what extent the threshold of the cap seems appropriate. Estimation in this article suggest that the Price-per-Mbit/s price could be an effective indicator and regulatory instrument of bit/data cap because this variable has statistically significant sensitivity.

Key words

Telecommunications Regulations Bit/Data Cap Incentive 

JEL Classification

L43 L86 L96 

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Copyright information

© Japan Economic Policy Association (JEPA) 2012

Authors and Affiliations

  1. 1.Chuo University Graduate School of EconomicsHachioji, TokyoJapan

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