Broadband Adoption in the United States: An Empirical Analysis

Abstract:     
There is a policy debate at both state and federal levels over how to facilitate consumer adoption of the Internet and, particularly, broadband technology to access the Internet. The objective of this study is to offer empirical evidence directly relevant to this debate. In so doing, we examine the influence of availability, competition, and demographics on the adoption of broadband technology in the U.S. The focus of our study is on the effect of intermodal (cable modem v. DSL) competition on broadband penetration, relative to the effect of simple broadband availability. The econometric results indicate that after controlling for the demand and cost influences on adoption, intermodal competition drives increased penetration in a state. In fact, while total broadband penetration in a state increases with total broadband availability in the state, the effect of total availability disappears when intermodal competition is controlled for. It appears, then, that broadband availability in a state is driven by intermodal competition and the demand and cost factors, but not by raw availability of broadband services, given those other factors. The independent effect of direct, intermodal competition is statistically significant and of substantial magnitude.

Keywords: Telecommunications, Broadband, Cable Modem, DSL, Intermodal Competition, Regulatory Policy

JEL Classifications: K2, L1, L5, L9, L96

Working Paper Series