Consumer Adoption of Bandwidth Intensive Applications and Its Impacts on Broadband Adoption

149 Pages·2015·0.56 MB·English

by  Peter Helekiah Oburu

GGeeoorrggiiaa SSttaattee UUnniivveerrssiittyy
SScchhoollaarrWWoorrkkss @@ GGeeoorrggiiaa SSttaattee UUnniivveerrssiittyy
Economics Dissertations
12-30-2008
CCoonnssuummeerr AAddooppttiioonn ooff BBaannddwwiiddtthh IInntteennssiivvee AApppplliiccaattiioonnss aanndd IIttss
IImmppaaccttss oonn BBrrooaaddbbaanndd AAddooppttiioonn
Peter Helekiah Oburu
Follow this and additional works at: https://scholarworks.gsu.edu/econ_diss
Part of the Economics Commons
RReeccoommmmeennddeedd CCiittaattiioonn
Oburu, Peter Helekiah, "Consumer Adoption of Bandwidth Intensive Applications and Its Impacts on
Broadband Adoption." Dissertation, Georgia State University, 2008.
doi: https://doi.org/10.57709/1061464
This Dissertation is brought to you for free and open access by ScholarWorks @ Georgia State University. It has
been accepted for inclusion in Economics Dissertations by an authorized administrator of ScholarWorks @ Georgia
State University. For more information, please contact [email protected].
PERMISSION TO BORROW

In presenting this dissertation as a partial fulfillment of the requirements for an advanced
degree from Georgia State University, I agree that the Library of the University shall
make it available for inspection and circulation in accordance with its regulations
governing materials of this type. I agree that permission to quote from, to copy from, or
to publish this dissertation may be granted by the author or, in his or her absence, the
professor under whose direction it was written or, in his or her absence, by the Dean of
the Andrew Young School of Policy Studies. Such quoting, copying, or publishing must
be solely for scholarly purposes and must not involve potential financial gain. It is
understood that any copying from or publication of this dissertation which involves
potential gain will not be allowed without written permission of the author.

____________________________________
Signature of the Author
NOTICE TO BORROWERS

All dissertations deposited in the Georgia State University Library must be used only in
accordance with the stipulations prescribed by the author in the preceding statement.

The author of this dissertation is:

Peter H. Oburu
506 Wicklow Pl
Acworth, GA 30102

The director of this dissertation is:

Dr. Bruce A. Seaman
Associate Professor, Department of Economics
Andrew Young School of Policy Studies
Georgia State University,
Atlanta, GA, 30303

Users of this dissertation not regularly enrolled as students at Georgia State University
are required to attest acceptance of the preceding stipulations by signing below. Libraries
borrowing this dissertation for the use of their patrons are required to see that each user
records here the information requested.

Type of use
Name of User Address Date (Examination only or copying)
CONSUMER ADOPTION OF BANDWIDTH INTENSIVE APPLICATIONS AND ITS
IMPACTS ON BROADBAND ADOPTION

By
PETER HELEKIAH OBURU

A Dissertation Submitted in Partial Fulfillment
of the Requirements for the Degree
of
Doctor of Philosophy in Economics
In the
Andrew Young of Policy Studies
of
Georgia State University

GEORGIA STATE UNIVERSITY
2008
Copyright by
Peter Helekiah Oburu
2008
ACCEPTANCE

This dissertation was prepared under the direction of the candidate’s Dissertation
Committee. It has been approved and accepted by all members of that committee, and it
has been accepted in partial fulfillment of the requirements for the degree of Doctor of
Philosophy in Economics in the Andrew Young School of Policy Studies of Georgia
State University.

Dissertation Chair: Dr. Bruce A. Seaman

Committee: Dr. Shiferaw Gurmu
Dr. Mark W. Rider
Dr. Seymour Douglas

Electronic Version Approved:

James R. Alm, Dean
Andrew Young School of Policy Studies
Georgia State University
December 2008
ACKNOWLEDGEMENTS

Over the past six years, I had the opportunity to learn from some renowned
economists. I would like to express my gratitude to all the faculty members at the
Andrew Young School of Policy Studies who have contributed, directly or indirectly, to
the successful completion of my doctoral program at Georgia State University.

I owe a debt of gratitude to Dr. Shiferaw Gurmu, Dr. Mark Rider, and Dr.
Seymour Douglas, who as members of my committee provided me with help and
encouragement during this research work. Without their commitment and patience, this
dissertation would never have been completed. I am especially grateful to Dr. Bruce
Seaman, who in addition to being the chair of my dissertation committee has been a great
inspiration to me through my entire graduate program. Dr. Seaman has taught me how to
apply economics to the real world; through the courses he has taught me, the guidance he
has provided me throughout the dissertation coupled with the many conversations I have
had with him throughout my graduate program. I have meet few people who have such a
grasp of economic concepts and are able to disseminate them in the effective manor he
does. Dr. Seaman has made me enjoy the subject of economics like no one else and I
remain grateful for his inspiration and tutorship.

I am also thankful to my wife, Jeniffer Oburu, who has been tirelessly supportive
of my efforts. She has been a true partner with me through this process. She has
sacrificed her time and provided me with endless encouragement throughout my entire
doctoral program. Without her help it would have been very difficult to complete my
program. Thank you, darling for your support. I would also like to thank my daughter
Sarah and son Joseph who have endured with me through each step of the dissertation.
Finally, I want to thank my parents and family for what has been their continual support
for me through the entire process.

iv
TABLE OF CONTENTS

ACKNOWLEDGEMENTS...............................................................................................iv

LIST OF TABLES............................................................................................................vii

LIST OF FIGURES...........................................................................................................ix

ABSTRACT........................................................................................................................x

CHAPTER 1: INTRODUCTION.......................................................................................1
Overview.....................................................................................................................1
Dissertation Question..................................................................................................2
Broadband Adoption: An Argument from the Consumer Perspective......................5
Prior Approaches to Explaining Broadband Adoption...............................................7
Motivation, Policy Significance and Contribution to Literature..............................13
Key Terms.................................................................................................................15

CHAPTER 2: REVIEW OF LITERATURE...................................................................18
Product Adoption Models.........................................................................................18
Origins of Diffusion..................................................................................................19
Structure of diffusion models....................................................................................20
Modeling diffusion....................................................................................................20
Bass diffusion model.................................................................................................22
Application of the Bass diffusion model to the study of broadband adoption..........25
Diffusion models using the S-shape diffusion curve................................................27
Limitations of studying broadband through product diffusion methodologies........29
The role of individual choice....................................................................................31
Time Allocation Models...........................................................................................33
Limitations of Becker’s approach in empirical modeling.........................................36
Varian’s bandwidth consumer choice model............................................................36

CHAPTER 3: THEORETICAL FRAMEWORK.............................................................39
Type of Internet Connection.....................................................................................39
Type of Internet Application.....................................................................................40
Consumer Utility when using Internet applications..................................................41
Elasticity: Reconciling Economics Elasticity and Internet Application Elasticity...44
Suggested Framework...............................................................................................46
Theoretical Model.....................................................................................................52
CHAPTER 4: IMPLICIT VALUE OF TIME SAVED BY THE TRANSITION
FROM A DIAL-UP TO BROADBAND..........................................................................58
Variables Used in the Empirical Estimation of the Implicit Value of Time Saved
between different Bandwidth Levels........................................................................61
Amount of Information Accessed Monthly..............................................................61
Connection Types, Speeds and Prices......................................................................63
Empirical Estimation of the Implicit Value of Time Saved between Different
Bandwidth Levels.....................................................................................................65

CHAPTER 5: EXPLAINING BANDWIDTH CHOICE: THE EMPIRICAL
MODEL AND RESULTS................................................................................................71
Data...........................................................................................................................71
Dependant Variable..................................................................................................74
Explanatory variables................................................................................................77
The Empirical Estimation Strategy...........................................................................85
Empirical Results and Implications..........................................................................91
Empirical Results for survey-1 (S1): The Daily Tracking Survey November 2003.91
Empirical Results for Survey-2 (S2): February 2004 Tracking Survey...................97
Empirical Results for survey-3 (S3): January 2005 Daily Tracking Survey..........103
Empirical Results for survey-4 (S4): November/December 2005 Daily Tracking
Survey……….........................................................................................................109

CHAPTER 6: CONCLUSIONS.....................................................................................117

Appendix A:....................................................................................................................120
Likelihood Ratio tests of for the various specifications for Survey-1 (S1):
The Daily Tracking Survey November 2003..........................................................120
Likelihood Ratio tests of for the various specifications for Survey-2 (S2):
The February 2004 tracking survey........................................................................121
Likelihood Ratio tests of for the various specifications for Survey-3 (S3):
January 2005 Daily Tracking Survey.....................................................................123
Likelihood Ratio tests of for the various specifications for Survey-4 (S4):
The January 2005 Daily Tracking Survey..............................................................124
LIST OF TABLES
Table Page
1 Residential and Small Business Adoption of Broadband in the United States............26

2 Non-Linear Least Squares estimates for Semi-annual data, December 2000 –
December 2005.............................................................................................................28

3 Reliability, bandwidth, and timing requirements of some popular and emerging
internet applications.....................................................................................................41

4 Summary of User Tolerable Waiting Time for Web Page Downloads........................58

5 Monthly Average Usage of a Home User....................................................................62

6 Types of Internet Connections, Download Speeds and their Corresponding Prices....64

7 Comparison of the Choice between Various Internet Speeds and Cable Modem -
For a Light User...........................................................................................................69

8 Comparison of the choice between Various Internet Speeds and Cable Modem-
For an Average/Medium User......................................................................................70

9 Comparison of the choice between Various Internet Speeds and Cable Modem-
For a Heavy User..........................................................................................................70

10 List of Surveys used in the Empirical Analysis...........................................................72

11 Internet Applications and their classification by Elasticity..........................................74

12 Variable Definitions.....................................................................................................82

13 Descriptive Statistics of Survey-1 (S1), Survey-2 (S2), Survey-3 (S3), and
Survey-4 (S4)...............................................................................................................84

14 Maximum Likelihood Estimates for the Daily Tracking Survey November 2003......93

15 Marginal Effects, Discrete changes and Elasticities for the Daily Tracking
Survey November 2003................................................................................................96

16 Maximum Likelihood Estimates for the February 2004 Daily Tracking Survey.........98

vii