The Broadband Adoption Index: Improving Measurements and Comparisons of Broadband Deployment and Adoption

Article excerpt

  I. INTRODUCTION

 II. THE BROADBAND ADOPTION INDEX
     A. A Measure of Value
     B. The Broadband Adoption Index
     C. Accounting for Heterogeneity
     D. A Graphical Exposition

III. NUMERICAL SIMULATION OF THE BROADBAND ADOPTION
     INDEX
     A. Setup for Benchmark Case
     B. Results for Benchmark Case
     C. Alternative Scenarios

 IV. IMPLEMENTATION GUIDELINES, SUGGESTIONS, AND
     APPLICATIONS
     A. Econometric Implementation of the BAI
        1. Basic Setup
        2. Generating the Data Set
        3. Estimation of the Demand System
        4. Calculation of the BAI
        5. Subscription Targets at Different Costs
        6. Social Premia
     B. Comparative Valuation of Broadband Connection
        Technologies
     C. Simplification of the BAI and Quantity-Based Measures
        of Adoption
        1. The Single Modality and Per Capita Measures of
           Adoption
        2. Two Modalities
     D. Endowments and Broadband Adoption Targets

  V. MEASUREMENT, MULTIPLE MODALITIES, AND PUBLIC
     POLICY
     A. The Model
     B. Caveats and Discussion

 VI. POLICY RECOMMENDATIONS

VII. CONCLUSION

Editor's Note: A version of this Article originally appeared as Phoenix Center Policy Paper No. 36. (1)

I. INTRODUCTION

Policymakers around the globe regard the deployment and adoption of Internet technologies as critically important to the economic and social development of their countries. (2) Perhaps rightfully so: the Internet is commonly viewed not only as a general-purpose technology that can sharply reduce transaction costs in the modern economy and spur economic growth, but it also is argued to be a forum for increased political discourse, a tool for educational opportunities, and even a platform for social change. (3) As a result, for many policymakers, promoting the deployment and adoption of Internet access technologies is an important public policy. (4)

Given this attention to broadband Internet service--and even efforts in some countries to establish and spend funds efficiently to stimulate broadband deployment, adoption, and usage (5)--policymakers have a keen interest in measuring and benchmarking these efforts. It is, therefore, somewhat surprising that, in general, the current tools used to track Internet deployment and adoption worldwide are so crude. The most commonly cited statistics on broadband adoption--broadband connections per capita--are published regularly by the Organisation of Economic Cooperation and Development (OECD) and the International Telecommunications Union (ITU). (6) However, as we have discussed in prior research, this approach is inaccurate and can even be misleading, as fixed broadband connections, either at a household or business premise, are routinely the only connection in the household and, in some instances, are shared among multiple users. (7) This disconnect renders per capita measures conceptually defective and produces an incorrect index of relative adoption rates. Demographic and economic differences between countries make cross-country comparisons of raw Internet penetration rates of little policy relevance, even if a penetration rate is properly constructed. Indeed, ninety-one percent of the differences in fixed broadband adoption rates in the thirty OECD member countries can be explained by reference solely to differences in income, education, population, age, and other demographic factors that bear little relationship to broadband or telecommunications policy. (8)

More importantly, the method that the OECD currently uses to measure Internet adoption includes only fixed broadband connections and affirmatively excludes the growing class of connections based on mobile broadband technologies. (9) Other connection types, such as libraries and public Internet connection centers that serve many end users, are also ignored in the OECD's analysis. These shared methods of accessing the Internet provide considerable social value, particularly for low-income families. …