Start Date
10-12-2017 12:00 AM
Description
Sponsored data services provide an alternative data consumption option for users of mobile broadband services. Data sponsoring programs allow content providers (CPs), rather than consumers, to pay for data traffic incurred when consuming the sponsoring CP’s digital content. Internet service providers (ISPs) have been experimenting with this option for effective monetization of mobile broadband traffic. Meanwhile, policy makers are concerned about its market implications. In this study, we examine the impact of sponsored data services on an ISP’s pricing decisions and consumer welfare in a stylized game-theoretical model. We allow consumer heterogeneity in both usage pattern and taste for content services. Our model analysis reveals that a profit-maximizing ISP will always, irrespective of the market condition, prefer the arrangement that allows both CPs to sponsor data traffic. However, we find that the ISP’s decision to induce sponsoring competition on the CPs’ side will not help to increase consumer welfare.
Recommended Citation
Qiu, Liangfei; Wang, Chong (Alex); and Jia, Jia, "Sponsored Data Services and Consumer Welfare on Mobile Broadband" (2017). ICIS 2017 Proceedings. 17.
https://aisel.aisnet.org/icis2017/Economics/Presentations/17
Sponsored Data Services and Consumer Welfare on Mobile Broadband
Sponsored data services provide an alternative data consumption option for users of mobile broadband services. Data sponsoring programs allow content providers (CPs), rather than consumers, to pay for data traffic incurred when consuming the sponsoring CP’s digital content. Internet service providers (ISPs) have been experimenting with this option for effective monetization of mobile broadband traffic. Meanwhile, policy makers are concerned about its market implications. In this study, we examine the impact of sponsored data services on an ISP’s pricing decisions and consumer welfare in a stylized game-theoretical model. We allow consumer heterogeneity in both usage pattern and taste for content services. Our model analysis reveals that a profit-maximizing ISP will always, irrespective of the market condition, prefer the arrangement that allows both CPs to sponsor data traffic. However, we find that the ISP’s decision to induce sponsoring competition on the CPs’ side will not help to increase consumer welfare.