viewpoints CACM_TACCESS_one-third_page_vertical:Layout 1 6/9/09 1:04 PM Page 1

estimated valuation for internet service ($ per month).

ACM Transactions on Accessible Computing

features Speed reliability Priority Telehealth Mobile Laptop videophone Movie rental All Users inexperienced Users

Basic

Fast
Less reliable
No
No
No
No
No
$59.10
($0.50)
$30.74

Reliable
Fast
very reliable
No
No
No
No
No
$78.98
($0.66)
$40.80

Premium
Fast
very reliable
yes
No
No
No
No
$85.35
($1.09)
$58.69

Premium Plus

Fast
very reliable
yes
yes
yes
yes
yes
$98.09
($1.64)
$71.00

($2.35) ($2.67)

Note: Standard error of estimated valuation in parentheses.

($4.63)

($8.05)

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alternatives, labeled A and B. A follow-up question is then presented that asks respondents to make an additional choice between their hypothetical choice—A or B—and their “status quo” Internet service they now experience at their homes.

The hypothetical alternatives differ by the levels of the three Internet features: cost, speed, and reliability, and one of five Internet activities: the ability to designate some uploads and downloads as high priority (labeled “Priority” in the accompanying table); the ability to interact with their health professionals and view their records online (“Telehealth”); the ability to connect remotely regardless of WiFi availability (“Mobile Laptop”); a built-in Skype-like service (“Videophone”); and a video-on-demand movie service

the typical u.s.
household is involved
in internet activities
and applications
at home that do not
require very fast
download and
upload speeds.

for viewing full-length movies (“Movie Rental”).

We estimate the WTP for a subsample of experienced users, as well as for a subsample of inexperienced users (that is, those with less than 12 months of online experience). This difference provides some indication of valuations for households that have recently connected to the Internet.

 

empirical Results

Speed and reliability are important features of Internet service with consumers willing to pay approximately $20 per month for more reliable service, $45 for an improvement in speed from slow to fast, and $48 for an improvement in speed from slow to very fast. These estimates indicate a very fast service is worth only about $3 more than fast service. The latter finding requires an explanation. As it turns out, the typical U.S. household is involved in Internet activities and applications at home that do not require very fast download and upload speeds, such as reading and writing email or light Web usage. Households are sensitive to other aspects of their service. They are also willing to pay an additional $6 per month for Priority, $4 for Telehealth, $5 for Videophone, and $3 for Movie Rental. Mobile Laptop is not valued by respondents.

For comparison with the findings of previous studies, we calculate the own-price elasticity of the demand for broadband Internet of –0.44, which is less elastic than estimates using older