Date of Award

12-30-2008

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Dr Bruce A. Seaman - Chair

Second Advisor

Dr. Shiferaw Gurmu

Third Advisor

Dr. Mark W. Rider

Fourth Advisor

Dr. Seymour Douglas

Abstract

This dissertation investigates the capacity required by an internet application in tandem with the network connection type (dial-up or broadband). An internet user’s experience in accessing various types of applications with either high bandwidth or low bandwidth is examined in a consumer choice model of broadband adoption. A consumer implicitly values the time-saving benefits derived from a higher speed internet connection used to access a particular internet application, and compares those utility benefits to the higher price of high speed connection services in making the decision to shift to broadband or remain with a dial-up connection. We find that using broadband rather than dial-up to run bandwidth intensive applications presents considerable gains in the implicit value of time saved. Assuming that internet users are rational utility maximizing agents, a logit model is used to calculate the likelihood of broadband adoption as a function primarily of the nature/type of the internet applications (“elastic or inelastic”). While the empirical results are generally consistent with our hypothesis that consumers are more likely to subscribe to broadband if they regularly run applications that are bandwidth intensive, the results vary somewhat by model specification, and are potentially sensitive to controlling for endogeneity. Correcting for endogeneity remains the major challenge in extending this research. Research Question: What is the relationship between consumer valuation of the net benefits of using bandwidth intensive applications and the adoption of broadband internet? Hypothesis: The less a consumer requires bandwidth intensive applications; the lower is the likelihood of switching from a low level bandwidth internet service like dial-up to a high level bandwidth internet type like broadband. While this relationship may appear obvious, it has not been systematically investigated or measured, nor has its importance in affecting lags in broadband adoption been adequately appreciated.

Included in

Economics Commons

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