Review of Industrial Organization 25: 295–316, 2004.
© 2004 Kluwer Academic Publishers. Printed in the Netherlands.
Are Interactive TV-Pioneers and Surfers
Different Breeds? Broadband Demand
and Asymmetric Cross-Price Effects
, KENNETH FJELL
and ØYSTEIN FOROS
Telenor R&D, E-mail: Kjetil.Andersson@telenor.com
Norwegian School of Economics and Business Administration, E-mail: firstname.lastname@example.org
Norwegian School of Economics and Business Administration, E-mail: email@example.com
Abstract. We consider two different qualities of broadband access, one that simply means
greater access speed to Internet applications and content, and a premium version that also
gives access to interactive TV services. Based on a market survey we ﬁnd that potential
consumers of this premium broadband access do not consider basic broadband Internet
access as a substitute. The price of basic broadband does not constrain the price that
may be charged for the premium broadband that allows for interactive TV services.
Key words: Asymmetric cross-price effects, broadband access.
Since the introduction of the Internet, the development of access speed
has moved forward in increments. Residential demand for Internet access
was initially derived from the demand for the basic applications, WWW
and e-mail. These applications could, and still can, be utilized with nar-
rowband access technologies such as dial-up modem (up to 56 kbps) and
(up to 128 kbps). Currently, telecommunications operators and
content providers face a large and rather mature market for such ser-
vices. Broadband access technologies allow substantially greater access
speed, and make available applications or content that cannot be accessed
through narrowband technologies. Examples of such applications offered
by broadband ISPs
today include video and audio streaming, interactive
gaming, video-on-demand and high-speed home-ofﬁce networking.
Author for correspondence: Norwegian School of Economics and Business Adminis-
tration, Dep. of Economics, Hellev. 30, N-5045 Bergen, Norway. Tel.: +47 55 95 97 16.
Fax: +47 55 95 95 43.
Integrated Services Digital Network (ISDN).
Internet Service Providers.