Estimating switching costs for telecommunications services and bundles

We develop a consumer level demand model of telecommunications and broadcasting services taking into account the exhaustive set of alternatives available to consumers, including bundled services. We then estimate the switching costs associated with bundling. Previous studies are confined to choices of only one or two services, rather than addressing interrelationships among different services made possible through bundling. We find that our approach improves the accuracy of switching cost estimates compared with when the choice sets are restricted in demand models. Our results also indicate that switching costs incurred with bundling are substantial, making up approximately 65% of monthly service costs.