Demand for different qualities of service for Internet access: a review of INDEX findings

The Internet Demand Experiment (INDEX) is a market experiment to measure demand for Internet access as a function of Quality of Service (QoS), pricing scheme and application. INDEX subjects choose their desired network services from a menu of QoS-price offerings, which currently consists of different bandwidth-price choices, and they pay for their usage of the network services. The approximately 70 subjects currently in the experiment include faculty, staff and students of the University of California, Berkeley. This paper describes the objectives and experimental design and summarizes the findings to date from the first four experiments conducted under the INDEX project. This paper also characterizes the INDEX subject pool using demographic data collected. Overall, the INDEX findings indicate that usage is responsive to price signals, although the degree of responsiveness varies widely across users. The INDEX findings also show that the INDEX subject pool is heterogeneous in many respects, including individual-specific valuations of time and convenience. In addition, we conclude that users prefer a pricing scheme in which they pay a flat-rate for basic service and have access to higher bandwidths that they can use on demand. We also find that when usage is free of marginal usage charges, users tend to transmit significantly greater volume than when usage is priced at the margin, which lends further support to the implementation of the suggested pricing scheme.