Essay About Price Of Broadband Access And Broadband Access Networks

Internet Access Via Broadband Access Networks – Oecd
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48 Telektronikk 3/4.2008
1 Introduction
Internet access via broadband access networks is now
widely adopted throughout the 30 member countries
of the Organisation for Economic Co-operation and
Development (OECD). On average, there are 18.8
broadband subscribers per 100 inhabitants. However,
this average varies from a high of 34.3 % in Denmark
to just 4.6 % in Mexico, as shown in Figure 1.
We also find that there are substantial variations in
the price of broadband access. According to the
OECDs Broadband Portal (
/ict/broadband), in October 2007 the highest average
subscription price per month is found in the Czech
Republic ($ 88.91) and the lowest in Finland
($ 31.18). There is also a substantial variation in the
level of income measured as GDP1) per capita:
$ 77,841 in Luxembourg down to $ 8,571 in Turkey.
In this brief paper we explore the relationship
between price, wealth and broadband adoption to
determine the importance of price as a driver of
demand.
2 The Data
All the data used in our model of price and income
elasticity are sourced from the OECD and are briefly
described overleaf. The capitalised text in parentheses
refers to the label given to the variable in our model.
3 Model Specification
We were only able to obtain data for a single point in
time. We have therefore created a cross section model
as at October 2007.
We have found that the best models are based on
logged values of PEN, PRICE and GDPPC. YSL and
YSL2 have not been converted to log values as they
need to be kept in level values. The model therefore
takes the functional form:
log(PEN) = α + β log(PRICE) + χ log(GDPPC)
+ δYSL + φYSL2 + ε
A useful characteristic of log models is that the value
of the coefficient on log(PRICE) and log(GDPPC)
can be interpreted as the elasticity.
Price and Income Elasticity of Demand for Broadband
Subscriptions: A Cross-Sectional Model of OECD Countries
R I C H A R D C A D M A N , C H R I S D I N E E N
Richard Cadman
is Director of
SPC Network,
Norwich, UK
Chris Dineen is a
Consultant with
SPC Network
based in Ottawa,
Canada
In this brief paper we explore the relationship between price, wealth and broadband adoption to
determine the importance of price as a driver of demand.
Figure 1 Broadband Subscriber per 100 inhabitants (Source: OECD Broadband Portal)
1) Gross Domestic Product.
Broadband subscribers per 100 inhabitants
Denmark
Netherlands
Switzerland
Korea
Norway
Iceland
Finland
Sweden
Canada
Belgium
United Kingdom
Australia
France
Luxembourg
United States
Japan
Germany
Austria
Spain
New Zealand
Italy
Ireland
Portugal
Czech Republic
Hungary
Poland
Greece
Slovak Republic
Turkey
Mexico
ISSN 0085-7130 ©Telenor ASA 2009
Telektronikk 3/4.2008 49
4 Results
The results of the model, based on 28 observations,
are presented in the table below. The Slovak Republic
was excluded due to lack of YSL data as was Spain
due to lack of comparable PRICE data: only a simple
average price was available whereas for all other
countries a weighted average price has been used.