Understanding the equilibrium dynamics of European broadband diffusion
This study examines the equilibrium dynamics of European broadband markets within a simultaneous demand and supply model. Unlike alternative reduced-form approaches, our model explicitly incorporates key features of the demand for network services: a bell-shaped distribution of heterogeneous consume...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
Routledge
2018
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| Online Access: | http://hdl.handle.net/20.500.11937/71304 |
| _version_ | 1848762444649857024 |
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| author | Suenaga, Hiroaki Madden, Gary |
| author_facet | Suenaga, Hiroaki Madden, Gary |
| author_sort | Suenaga, Hiroaki |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This study examines the equilibrium dynamics of European broadband markets within a simultaneous demand and supply model. Unlike alternative reduced-form approaches, our model explicitly incorporates key features of the demand for network services: a bell-shaped distribution of heterogeneous consumers and presence of network effects. Our empirical analysis of European countries reveals that although the demand for broadband services exhibits strong network effects they are not ‘strong enough’ to archive critical mass in these markets. Furthermore, the systems equilibrium dynamics show that even though the technology is introduced at very high prices initially, the expansion of suppliers’ infrastructure investment reduces the equilibrium prices rapidly in the first few years. This price reduction, combined with strong network effects, stimulates expansion of the subscription base until consumers at the peak of the distribution enter the market. Convergence to the steady state happens at around 8 years for service price and 15 years for subscription. Comparative static analysis illustrates that steady state equilibrium subscription relates positively to national population density, inter-platform concentration, and the share of unbundled local loop, while the equilibrium price relates inversely to these factors. Other supply and demand factors (viz. intra-platform concentration, income and education) have minimal impact on the steady state equilibrium. |
| first_indexed | 2025-11-14T10:47:40Z |
| format | Journal Article |
| id | curtin-20.500.11937-71304 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:47:40Z |
| publishDate | 2018 |
| publisher | Routledge |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-713042019-02-08T05:25:53Z Understanding the equilibrium dynamics of European broadband diffusion Suenaga, Hiroaki Madden, Gary This study examines the equilibrium dynamics of European broadband markets within a simultaneous demand and supply model. Unlike alternative reduced-form approaches, our model explicitly incorporates key features of the demand for network services: a bell-shaped distribution of heterogeneous consumers and presence of network effects. Our empirical analysis of European countries reveals that although the demand for broadband services exhibits strong network effects they are not ‘strong enough’ to archive critical mass in these markets. Furthermore, the systems equilibrium dynamics show that even though the technology is introduced at very high prices initially, the expansion of suppliers’ infrastructure investment reduces the equilibrium prices rapidly in the first few years. This price reduction, combined with strong network effects, stimulates expansion of the subscription base until consumers at the peak of the distribution enter the market. Convergence to the steady state happens at around 8 years for service price and 15 years for subscription. Comparative static analysis illustrates that steady state equilibrium subscription relates positively to national population density, inter-platform concentration, and the share of unbundled local loop, while the equilibrium price relates inversely to these factors. Other supply and demand factors (viz. intra-platform concentration, income and education) have minimal impact on the steady state equilibrium. 2018 Journal Article http://hdl.handle.net/20.500.11937/71304 10.1080/00036846.2018.1490002 Routledge restricted |
| spellingShingle | Suenaga, Hiroaki Madden, Gary Understanding the equilibrium dynamics of European broadband diffusion |
| title | Understanding the equilibrium dynamics of European broadband diffusion |
| title_full | Understanding the equilibrium dynamics of European broadband diffusion |
| title_fullStr | Understanding the equilibrium dynamics of European broadband diffusion |
| title_full_unstemmed | Understanding the equilibrium dynamics of European broadband diffusion |
| title_short | Understanding the equilibrium dynamics of European broadband diffusion |
| title_sort | understanding the equilibrium dynamics of european broadband diffusion |
| url | http://hdl.handle.net/20.500.11937/71304 |