SCIENTIFIC RESEARCH PROJECT COORDINATED by ICP-ANACOM and ANATEL with a FOCUS on MOBILE BROADBAND Final Report Dr. Janice Hauge
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SCIENTIFIC RESEARCH PROJECT COORDINATED BY ICP-ANACOM AND ANATEL WITH A FOCUS ON MOBILE BROADBAND Final Report Dr. Janice Hauge University of North Texas Dr. Mark Jamison Director, Public Utility Research Center University of Florida Dr. Mircea Marcu University of Florida September 10, 2009 We are pleased to present this report to satisfy the proposal to assist the Autoridade Nacional de Comunicações of Portugal (ANACOM) and the Agência Nacional de Telecomunicações (ANATEL) of Brazil in analyzing the adoption, use, and economic impact of mobile broadband within their countries. Final Report – September 10, 2009 Table of Contents Page Executive Summary 7 I. Introduction 11 II. Background and Literature Review 13 A. Supply Drivers 13 B. Demand Elasticity 15 C. Demographic and Economic Factors Affecting Demand 16 D. Impacts of Broadband on Various Economic and Social Factors 17 i. Productivity, Investment, and Innovation Effects 18 ii. Impacts on National Income, Jobs, and Business Development 20 iii. Impacts on Education and Health Care 21 E. Implications for Broadband Indices and Rankings 22 F. Consideration of Reports and Studies Particularly Relevant to Portugal 22 III. Data 24 A. Socio-economic Characteristics of Regions in Portugal 24 B. Socio-economic Characteristics of Data Included in Our Analyses 25 C. Strengths and Weaknesses of the Data 33 IV. Analyses and Results 34 A. Identification, Comparison, and Analysis of the Adhesion Factors of Fixed, Nomadic, and Mobile Broadband 34 B. Estimation and Analysis of Own and Cross-Price Elasticities of Fixed, Nomadic, and Mobile Broadband 46 C. Identification of the Usage Objectives and Usage Patterns of Fixed, Nomadic, and Mobile Broadband; Analysis of Differences Among Each of the Usage Patterns; and Explanation of the Main Differences 50 D. Identification, Comparison, and Explanatory Analysis (in Terms of Socio- Geo-Demographic Variables) of Factors that are Common and Different Between End Users of Fixed, Nomadic, and Mobile Broadband 61 2 Final Report – September 10, 2009 E. Identification, Comparison, and Explanatory Analysis (in Terms of Socio- Geo-Demographic Variables) that are Common and Different Between End Users Who Are Simultaneously Clients of Fixed, Nomadic, and Mobile Broadband 71 F. Evaluation of the Degree of Substitutability Between Fixed, Nomadic, and Mobile Broadband 72 V. Future Directions for Study 74 A. Data Enhancements and Research Extensions 74 B. Other Important Research Questions 75 VI. Conclusion 76 References 78 Appendix 84 Table A.1.1 Variable descriptions for 2006 BCS estimations 84 Table A.1.2 Variable descriptions for 2008 ICSCE estimations 85 Table A.2.1 Tabulation of NUTS II categories represented in BCS 2006 survey 87 Table A.2.2 Tabulation of regional categories represented in BCS 2006 survey 87 Table A.3.1 Tabulation of ICSCE 2008 survey responses for methods of accessing Internet 88 Table A.3.2 Tabulation of ICSCE 2008 survey responses for main method of accessing Internet 88 A-IV.A. Results for Identification, Comparison, and Analysis of the Adhesion Factors of Fixed, Nomadic, and Mobile Broadband 89 1. Logit Model for the Intention to Switch (using the survey design), BCS, 2006 89 1.a Logit Model for the Intention to Switch (using the survey design), ICSCE, 2008 90 2. Ordered Logit of the Intensity with which Individuals Want to Switch, BCS, 2006 90 2.a. Ordered Logit of Satisfaction with Current Provider, ICSCE, 2008 91 3.a. Bivariate Tobit of Switching Costs of Fixed Internet Users, ECSI, 2008 93 3 Final Report – September 10, 2009 3.b. Bivariate Tobit of Switching Costs of Mobile Internet Users, ECSI, 2008 95 A-IV.C. Identification of the Usage Objectives and Usage Patterns of Fixed, Nomadic, and Mobile Broadband; Analysis of Differences Among Each One of the Usage Patterns; and Explanation of the Main Differences 96 1a. Negative Binomial Regression of the Hours of Use (using survey design), BCS, 2006 96 1b. Ordered Logit Regression of Usage (using survey design), ICSCE, 2008 98 2. Ways of Using the Internet, BCS, 2006 99 a. Filing Taxes (using survey design) 99 b. Internet Banking (using survey design) 100 c. Paying for Services (using survey design) 101 d. Searching for Study Related Material (using survey design) 102 e. Downloading Music, Games, and Videos (using survey design) 103 f. Entertainment (using survey design) 104 g. Getting the News Online (using survey design) 105 h. Online Shopping (using survey design) 106 ia. VOIP (using survey design) 107 ib. VOIP (using survey design), ICSCE, 2008 108 j. Messenger (using survey design) 109 k. VOIP or Messenger (using survey design) 110 A-IV.D. Identification, Comparison and Explanatory Analysis (in Terms of Socio-Geo-Demographic Variables) of Factors that are Common and Different Between End Users of Fixed, Nomadic, and Mobile Broadband 111 1. Weighted Multinomial Logit Estimation of Choice between No Internet, Narrowband, Fixed Broadband, Mobile Broadband (using survey design), BCS, 2006 111 2. Weighted Multinomial Logit Estimation of Choice between No Internet, Narrowband, Fixed Broadband, Mobile Broadband (using survey design), ICSCE, 2008 113 4 Final Report – September 10, 2009 List of Maps, Tables, and Figures Maps Map 1. Regions of Portugal 26 Tables Table 1. Primary indicators by region 25 Table 2.1. Means of responses by region for key socio-economic variables, BCS, 2006 27 Table 2.2. Means of responses by region for key socio-economic variables, ICSCE, 2008 28 Table 3. Summary statistics for survey data, BCS, 2006 29 Table 4. Summary statistics for nomadic broadband users, ICSCE, 2008 31 Table 5. Intent and intensity of intent to switch providers, BCS, 2006 38 Table 6. Measure of switching costs, ECSI 2008 45 Table 7. Summary of hours of use raw numbers and associated frequencies, BCS, 2006 51 Table 8. Hours of use, BCS, 2006 and Intensity of Use, ICSCE, 2008 54 Table 9. Usage patterns of those older than 25 with Internet in the home: financial applications, BCS, 2006 56 Table 10. Usage patterns of those older than 25 with Internet in the home: non-financial applications, BCS, 2006 57 Table 11.1. Characteristics of individuals by Internet access method, BCS, 2006 64 Table 11.2. Characteristics of individuals by Internet access method, ICSCE, 2008 65 Table 12. Telecommunications subscriptions in Brazil, 2002-2008 67 Table 13. Internet access and 3G mobile phone operators, BCS, 2006 72 Figures Figure 1. Fixed, Mobile, and Nomadic Usage by Region, 2008 32 Figure 2. Fixed, Mobile, and Nomadic Usage by Education, 2008 32 5 Final Report – September 10, 2009 Figure 3. Customers Desiring to Change Broadband Providers in About a Year, 2006 37 Figure 4. Customer Satisfaction with Speed, Reliability, or Bill Clarity: All Customers vs. Customers Likely to Switch, 2006 40 Figure 5. Customers Desiring to Change Broadband Providers, Having Filed a Complaint, 2006 41 Figure 6. Satisfaction with Current Service, 2008 42 Figure 7. Satisfaction with Speed, 2008 42 Figure 8. Likelihood of Switching Providers, 2008 43 Figure 9. Minimum Change in Price to Change Provider, 2008 44 Figure 10. Stand-Alone Price per Mbps for Download Speeds up to 25 Mbps for Fixed Line Broadband in Portugal, June 2008 48 Figure 11. Geographic Distribution of Hotspots in Portugal by Data Source, 2009 49 Figure 12. Average Hours of Usage per Week, Fixed and Mobile, by Age Group and by Region, 2006 52 Figure 13. Patterns of Use by Access Type, 2006 52 Figure 14. Patterns of Fixed and Mobile Broadband Use by Region, 2006 53 Figure 15. Mobile Broadband Usage per Customer as Percent Above Fixed Broadband Usage, 2006 58 Figure 16. Frequency of Use by Access Type, 2008 59 Figure 17. Distribution of Frequency of Use by Type of Access, 2008 60 Figure 18. Educational Characteristics of Respondents by Access Type, 2006 62 Figure 19. Personal Computers per 100 Population, 1998 – 2007 68 Figure 20. Fixed Broadband Subscriptions per 100 Population, 1999 – 2007 69 Figure 21. Fixed Broadband Subscriptions per 100 Households, 1999 – 2007 70 Figure 22. Internet Users per 100 Population, 1998 – 2007 70 Figure 23. Per Capita Gross Domestic Product in U.S. Dollars, 1998 – 2007 71 Figure 24. Characteristics of Respondents with Multiple Access Types, 2006 73 Figure 25. Respondents with Multiple Access Types, by Region, 2006 74 6 Final Report – September 10, 2009 Executive Summary A primary goal of this study is to extend the existing research on broadband provision and adoption by comparing the factors that determine mobile broadband adoption with those that determine fixed broadband adoption, the patterns of use for each technology, and the substitutability of mobile and fixed broadband. We also draw conclusions about improved data collection and reporting on fixed and mobile broadband deployment, adoption, and usage patterns, and on the impact of nomadic broadband deployment where such analysis is possible.1 The two most important papers that we build on are those by Cardona, Schwarz, Yurtoglu and Zulehner (2007), and Lee and Marcu (2008). Cardona et al. analyzes residential demand for Internet access in Austria, with a focus on both fixed and mobile broadband Internet access, specified by type (DSL, cable, mobile, and narrowband). The study uses data from a 2006 survey conducted by the Austrian Regulatory Authority for Broadcasting and Telecommunications to estimate elasticities of demand. Based on the finding that the availability of one technology limits other technology providers’ abilities to raise prices, the authors conclude that customers view the different broadband technologies as substitutes. Our study is constructed similarly to the Cardona et al. study, using data specific to Portugal and applying econometric models we developed for our study. The second relevant paper (Lee and Marcu, 2008), uses six years of OECD data to analyze the factors that influence the diffusion of fixed and mobile broadband.