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The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey

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  • Carare, Octavian
  • McGovern, Chris
  • Noriega, Raquel
  • Schwarz, Jay

Abstract

We use data from a large-scale survey of non-adopting households to provide estimates of their willingness to pay for broadband. A large fraction – approximately 2/3 – of the reporting households indicated that they would not consider subscribing to broadband at any price. For the remaining households who indicated that they would consider subscribing, we find strong evidence in the data of over-reporting at high values of the willingness to pay for broadband. We correct for reporting bias using a semi-parametric procedure. Our estimate of the price elasticity of demand for broadband using the bias-corrected willingness to pay values is equal to −0.62, markedly different from the estimate of −0.95 obtained with the values reported by the survey respondents. Our estimates indicate that, on average, to achieve a 10% increase in subscribership, a price reduction of about 15% is needed. In addition, we estimate the impact of several household characteristics on the likelihood of broadband adoption.

Suggested Citation

  • Carare, Octavian & McGovern, Chris & Noriega, Raquel & Schwarz, Jay, 2015. "The willingness to pay for broadband of non-adopters in the U.S.: Estimates from a multi-state survey," Information Economics and Policy, Elsevier, vol. 30(C), pages 19-35.
  • Handle: RePEc:eee:iepoli:v:30:y:2015:i:c:p:19-35
    DOI: 10.1016/j.infoecopol.2014.12.001
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    2. Lehtonen, Olli, 2020. "Population grid-based assessment of the impact of broadband expansion on population development in rural areas," Telecommunications Policy, Elsevier, vol. 44(10).
    3. Chiha, Asma & Van der Wee, Marlies & Verbrugge, Sofie & Colle, Didier, 2018. "Techno-economic viability of integrating satellite communication in 4G networks to bridge the broadband digital divide," 29th European Regional ITS Conference, Trento 2018 184938, International Telecommunications Society (ITS).
    4. Orhan Dagli & Glenn P. Jenkins, 2015. "Consumer Preferences for Improvements in Mobile Telecommunication Services," Development Discussion Papers 2015-05, JDI Executive Programs.
    5. Kopczewski, Tomasz & Sobolewski, Maciej & Miernik, Ireneusz, 2018. "Bundling or unbundling? Integrated simulation model of optimal pricing strategies," International Journal of Production Economics, Elsevier, vol. 204(C), pages 328-345.
    6. Carthy, Philip & Lunn, Pete & Lyons, Sean, 2018. "Demographic variation in active consumer behaviour: Who searches most for retail broadband services?," MPRA Paper 90366, University Library of Munich, Germany.
    7. Levin, Stanford L. & Schmidt, Stephen & Scott, Graham, 2016. "Broadband Adoption: Translating the Digital Divide Literature into Effective Government Policies and Actions," 27th European Regional ITS Conference, Cambridge (UK) 2016 148684, International Telecommunications Society (ITS).
    8. Levin, Stanford Lee & Schmidt, Stephen & Scott, Graham, 2015. "Broadband for all: Policies for a connected society," 2015 Regional ITS Conference, Los Angeles 2015 146346, International Telecommunications Society (ITS).
    9. Lee, Hyun Ji & Whitacre, Brian, 2017. "Estimating willingness-to-pay for broadband attributes among low-income consumers: Results from two FCC lifeline pilot projects," Telecommunications Policy, Elsevier, vol. 41(9), pages 769-780.
    10. Ford, George S., 2021. "Confusing relevance and price: Interpreting and improving surveys on internet non-adoption," Telecommunications Policy, Elsevier, vol. 45(2).
    11. Christopher S. Yoo, 2017. "Avoiding the Pitfalls of Net Uniformity: Zero Rating and Nondiscrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(4), pages 509-536, June.
    12. Chiha, Asma & Van der Wee, Marlies & Colle, Didier & Verbrugge, Sofie, 2020. "Techno-economic viability of integrating satellite communication in 4G networks to bridge the broadband digital divide," Telecommunications Policy, Elsevier, vol. 44(3).
    13. Sobolewski, Maciej & Kopczewski, Tomasz, 2017. "Estimating demand for fixed-line telecommunication bundles," Telecommunications Policy, Elsevier, vol. 41(4), pages 227-241.
    14. Paulo Chahuara, 2018. "Preferencias y Valorizacion por Atributos del Servicio de Internet Fijo en el Peru: un primer acercamiento via experimento de eleccion discreta," Documentos de Trabajo 39, OSIPTEL.
    15. McCoy,Selina & Lyons,Seán & Coyne,Bryan & Darmody,Merike, 2017. "Teaching and Learning in Second- Level Schools at the Advent of High-Speed Broadband," Research Series, Economic and Social Research Institute (ESRI), number RS51.

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    More about this item

    Keywords

    Telecommunications; Broadband; Demand estimation; Survey data; Reporting bias;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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