Household Demand for Broadband Internet Service
As part of the Federal Communications Commission (“FCC”) National Broadband Report to
Congress, we have been asked to conduct a survey to help determine consumer valuations of
different aspects of broadband Internet service. This report details our methodology, sample and
preliminary results. We do not provide policy recommendations.
This draft report uses data obtained from a nationwide survey during late December
2009 and early January 2010 to estimate household demand for broadband Internet service.
The report combines household data, obtained from choices in a real market and an
experimental setting, with a discrete-choice model to estimate the marginal willingness-to-pay
(WTP) for improvements in eight Internet service characteristics. The first three are standard
features for all current Internet services and include: cost; connection speed; and the reliability
of the connection to the Internet. The remaining five characteristics are new activities that
could be bundled with future Internet services. They include the ability to connect to the
Internet wirelessly from outside the home, download and watch high-definition movies,
designate certain downloads as high-priority, interact with health specialists, and place free
videophone calls over the Internet.
Choice experiments are used to estimate household preferences. Respondents are
presented with eight choice scenarios, and in each scenario, must choose between a pair of
Internet service alternatives that differ by the levels of their characteristics. The information in
these choices is enriched with market data by having respondents indicate whether they would
stay with their current (actual) Internet service or switch to the hypothetical service they had
just selected. The marginal utility parameters of the representative household's utility function,
and WTP, are then estimated from all observed choices.