The diffusion of ADSL and costs of switching Internet providers in the broadband industry: Evidence from the French case

The innovative broadband Internet industry is characterised by inertia phenomena in terms of technology choice, as well as selection of Internet service providers (ISPs). Within the set of firms providing the Internet, very often in Europe the incumbent operator has the lion's share of end-customers and supplies the dominant technology. Focusing on the French case, this paper shows that although inertia on the supply side (partly due to the regulation process itself), helps to explain the technology mix reached to date, a more complete picture of the inertia can be obtained when we consider the existence of costs faced by customers when switching between ISPs. We calculate these so-called “switching costs”. The closing section of this paper derives several implications in terms of policy.