Private Solutions to Broadband Adoption: An Economic Analysis

Phoenix Center Policy Bulletin No. 38

22 Pages Posted: 8 Feb 2017

See all articles by T. Randolph Beard

T. Randolph Beard

Auburn University

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Michael L. Stern

Auburn University; Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: February 7, 2017

Abstract

For the last twenty years, promoting broadband adoption has been a focal point of communications policy around the world. Despite significant advances, there is still much work to be done. To help bridge this adoption gap, in many countries private communications companies are now offering services at deeply discounted prices or even for free. Facebook’s “Free Basics” program, for instance, helps to address the awareness, digital literacy and affordability barriers to adoption by offering consumers in more than 45 countries free access to basic on-line services such as communication tools, health services, educational information, and job tools. And, by increasing digital awareness, many of the program’s users upgrade to fee-based services to the broader Internet in a short amount of time. Nonetheless, questions are being asked about the propriety of the basic connectivity offered by such programs. Using economic theory, we demonstrate that the price-quality variations of such programs are economically sensible, if not necessary, to address the key barriers to adoption without attenuating investment incentives. In addition, we demonstrate that such “free but limited” programs can increase adoption by “smoothing” Internet consumption over time and present econometric evidence of “connectivity insurance,” keeping consumers on-line during periods of financial distress.

Keywords: Broadband, Adoption, Universal Service, Deployment, Facebook, Free Basics, Digital Literacy

JEL Classification: D04, D78, L96

Suggested Citation

Beard, T. Randolph and Ford, George S. and Stern, Michael L., Private Solutions to Broadband Adoption: An Economic Analysis (February 7, 2017). Phoenix Center Policy Bulletin No. 38. Available at SSRN: https://ssrn.com/abstract=2913113 or http://dx.doi.org/10.2139/ssrn.2913113

T. Randolph Beard

Auburn University

415 West Magnolia Avenue
Auburn, AL 36849
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

Michael L. Stern

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Phoenix Center for Advanced Legal & Economic Public Policy Studies

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

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