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The Liftoff of Consumer Benefits from the Broadband Revolution

Author(s): Dutz, Mark A; Orszag, Jonathan M; Willig, Robert D

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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.
Publication Date: 12-Jan-2012
Citation: Dutz, Mark A, Orszag, Jonathan M, Willig, Robert D. (2012). The Liftoff of Consumer Benefits from the Broadband Revolution. Review of Network Economics, 11 (4), 10.1515/1446-9022.1355
DOI: doi:10.1515/1446-9022.1355
EISSN: 1446-9022
Pages: 1 - 34
Type of Material: Journal Article
Journal/Proceeding Title: Review of Network Economics
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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