Addressing review feedback:

Ensure that we unsubscribe upstream "parent" when switching to alternate. That way upstream will trigger unsubscribe when the first Observable completes. Added test.
Child should contain downstream subscriptions - not parent.

Author: Alex Wenckus

src/main/java/rx/Observable.java

@@ -3739,17 +3739,20 @@ public final Observable<T> defaultIfEmpty(T defaultValue) {
     /**
      * Returns an Observable that emits the items emitted by the source Observable or the items of an alternate Observable if the source Observable
      * is empty.
-     * <p>
+     * <p/>
      * <dl>
      *  <dt><b>Scheduler:</b></dt>
      *  <dd>{@code switchIfEmpty} does not operate by default on a particular {@link Scheduler}.</dd>
+     *  <dt><b>Beta:</b></dt>
+     *  <dd>{@code switchIfEmpty} is currently in {@link rx.annotations.Beta} and subject to change.</dd>
      * </dl>
      *
      * @param alternate
      *              the alternate Observable to subscribe to if the source does not emit any items
      * @return  an Observable that emits the items emitted by the source Observable or the items of an alternate Observable if the source Observable
      *          is empty.
      */
+    @Beta
     public final Observable<T> switchIfEmpty(Observable<T> alternate) {
         return lift(new OperatorSwitchIfEmpty<T>(alternate));
     }

src/main/java/rx/internal/operators/OperatorSwitchIfEmpty.java

@@ -35,7 +35,9 @@ public OperatorSwitchIfEmpty(Observable<T> alternate) {
 
     @Override
     public Subscriber<? super T> call(Subscriber<? super T> child) {
-        return new SwitchIfEmptySubscriber(child);
+        final SwitchIfEmptySubscriber parent = new SwitchIfEmptySubscriber(child);
+        child.add(parent);
+        return parent;
     }
 
     private class SwitchIfEmptySubscriber extends Subscriber<T> {
@@ -46,8 +48,6 @@ private class SwitchIfEmptySubscriber extends Subscriber<T> {
         private final Subscriber<? super T> child;
 
         public SwitchIfEmptySubscriber(Subscriber<? super T> child) {
-            super(child);
-
             this.child = child;
         }
 
@@ -69,12 +69,13 @@ public void onCompleted() {
             if (!empty) {
                 child.onCompleted();
             } else if (!child.isUnsubscribed()) {
+                unsubscribe();
                 subscribeToAlternate();
             }
         }
 
         private void subscribeToAlternate() {
-            add(alternate.unsafeSubscribe(new Subscriber<T>() {
+            child.add(alternate.unsafeSubscribe(new Subscriber<T>() {
                 @Override
                 public void onStart() {
                     final long capacity = consumerCapacity.get();

src/test/java/rx/internal/operators/OperatorSwitchIfEmptyTest.java

@@ -21,8 +21,6 @@
 import rx.Subscriber;
 import rx.Subscription;
 import rx.functions.Action0;
-import rx.functions.Action1;
-import rx.schedulers.Schedulers;
 import rx.subscriptions.Subscriptions;
 
 import java.util.Arrays;
@@ -115,4 +113,18 @@ public void onNext(Long aLong) {
         assertTrue(empty.isUnsubscribed());
         assertTrue(sub.isUnsubscribed());
     }
+
+    @Test
+    public void testSwitchShouldTriggerUnsubscribe() {
+        final Subscription s = Subscriptions.empty();
+
+        Observable.create(new Observable.OnSubscribe<Long>() {
+            @Override
+            public void call(final Subscriber<? super Long> subscriber) {
+                subscriber.add(s);
+                subscriber.onCompleted();
+            }
+        }).switchIfEmpty(Observable.<Long>never()).subscribe();
+        assertTrue(s.isUnsubscribed());
+    }
 }