A Cross-National Study of Broadband Adoption: An Integrated Demand-Supply Perspective
21 Pages Posted: 17 Jan 2012
Date Written: September 24, 2011
Broadband adoption across countries has been studied by several scholars. Most of these studies analyze the different factors that affect the adoption of broadband. While these studies have provided insight on what factors may be important in the adoption process, there have been fewer efforts to analyze the entire landscape and paths involved in the adoption process. This paper uses data from 30 OECD countries, to understand the paths involved in the process of broadband adoption to help identify the role of government/industries in devising strategies for efficient future adoption of next generation technologies.
Whereas the majority of other studies use more or less ad hoc empirical models, this paper makes an attempt to develop more explicit microeconomic foundations that explicitly take demand and supply factors into account. This framework enables us identify the different paths involved in the adoption process, their relative importance and their interactions. The study examines the interaction of different economic and technological factors and their effect on broadband adoption across countries from a demand and supply perspective. The goal was to use this approach to help make decisions about where the focus of public policy decisions aimed at promoting broadband needs to be. This study also attempts to look at demand and supply conditions (unobservable constructs) without the specification of equilibrium conditions. Two methodological approaches are used where one method (structural equation modeling) does not assume that the market is in equilibrium and the other (traditional econometric approach using two stage least squares) makes the assumption that the market is in equilibrium.
The findings highlight that income and number of existing internet users were positively related with demand and adoption, whereas price was negatively related to demand and adoption of broadband. While most of the hypotheses on the demand side were supported, the supply side findings indicate that for higher broadband adoption to take place, investments in supply needs to complemented with encouragement of consumer demand. The study suggests that supply centric regulations need to be complemented with policies to encourage end-user adoption for effective penetration of the technology to take place. Another important finding of this study is that the regulatory environment is an important mediator on both the demand and supply side for broadband adoption. Both methodological approaches provide complementary perspectives. One simultaneously analyzes the effect of individual demand and supply side factors on adoption, whereas the other analyzes the paths involved in the process of adoption. The study is able to not only shed light on the importance of policy making, but it is also able to suggest where the policy focus should be if more effective national broadband adoption is desired.
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