The analysis of broadband demand using data on willingness-to-pay

As has been widely tracked, the 1990's and early 2000's have seen an explosive growth worldwide in the Internet in terms of both users and web sites. As the Internet has grown, access speed has become increasingly important. Although access by dial-up modem is still the standard type of Internet access for the majority of households, an increasing number are demanding higher speed access either in the form of Digital Subscriber Line (DSL) or by cable modem. This chapter focuses on the demand for these two forms of high-speed demand, and makes use of data from an omnibus survey conducted in early 2002 by the Marketing Systems Group of Philadelphia, in which respondents were asked questions concerning their willingness-to-pay (WTP) for cable-modem or DSL access to the telecommunications network. Price elasticities for both cable-modem and DSL access are obtained from the cumulative distributions of willingnesses-to-pay that range from an order of -3 for high willingness-to-pay (and therefore low implied penetration rates) to an order of 1 for low willingness-to-pay (and therefore high implied penetration rates). Other findings include: (1) an (inverse) importance of age as a determinant of willingness-to-pay; (2) the emergence of what would appear to be a material difference between the demand for cable-modem access and DSL access; (3) cable-modem access, but not DSL access, appears to be pretty much independent of income and education.