Australian domestic internet download behaviour: is there a sunk cost effect?

Abstract

Australian ISPs are unusual compared to other countries in that access is typically "capped". This refers to restricting the total volume of data that can be downloaded each month. Subscribers pay different prices for monthly access; higher prices entitle the user to download more than lower prices. This is effectively a user-pays model, in which heavy users pay higher prices than light users. Once the permitted volume of data has been reached for that month, either the subscriber's access is artificially slowed or fees are charged for additional data downloaded, depending on the subscriber's access plan with the ISP. The rationale most frequently given by ISPs for this approach is that the Australian context is different to other countries. The large geographic size and low population makes provision of high-speed links extremely costly, hence the need to control usage of high-speed connections to prevent unnecessary congestion. This paper investigates whether this pricing approach creates a sunk-cost effect in which users download as much as possible each month, up to the amount specified in their Internet access plan. Analysis reveals that a sizeable proportion of users appears to be influenced by a sunk cost effect. The paper concludes with some discussion of the implications of this finding.