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The Liftoff of Consumer Benefits from the Broadband Revolution

Author

Listed:
  • Dutz Mark A.

    (The World Bank)

  • Orszag Jonathan M.

    (Compass Lexecon)

  • Willig Robert D.

    (Princeton University)

Abstract

This paper uses both a discrete choice demand model and a direct survey method to derive robust measures of the contribution of home broadband to consumer welfare during the early years of broadband adoption by U.S. households. We estimate a demand system that distinguishes between cable, DSL, satellite and fiber broadband versus dial-up Internet services. We allow household preferences for Internet services to vary depending on the share of rural households in each geographic market, and find a significant impact of rural geography on demand. The estimated own-price elasticity of demand for broadband declines over time from -1.5 in 2005 to -0.7 in 2008. Consumer surplus from Internet is found to concentrate in broadband services, with the net consumer benefits from home broadband in 2008 on the order of $32 billion per year.

Suggested Citation

  • Dutz Mark A. & Orszag Jonathan M. & Willig Robert D., 2012. "The Liftoff of Consumer Benefits from the Broadband Revolution," Review of Network Economics, De Gruyter, vol. 11(4), pages 1-34, December.
    • Handle: RePEc:bpj:rneart:v:11:y:2012:i:4:p:1-34:n:3
    DOI: 10.1515/1446-9022.1355
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