Demand Analysis by Modeling Choice of Internet Access and IP Telephony

Abstract

In Japan, demands for broadband Internet access and IP telephony have increased dramatically in recent years. According to official sources, as of September 2009, there are 30.9 million users of broadband Internet access and 20.9 million of IP telephony. This study evaluates and estimates the market share of fiber-optic Internet connection, which is becoming the major player in broadband services, paying specific attention to IP telephony. A comprehensive combined choice model of Internet access line, IP telephony, and awareness of IP telephony is presented. The most suitable parameters for the model were determined by using an original market research survey conducted in Japan during 2004 with stated-preference choice experiments of both Internet access and IP telephony. The results indicate that increasing awareness has the potential to dramatically increase the penetration of IP telephony. The results also indicate a great variability in price sensitivity across income groups for the choices of Internet access line and IP telephony. The fiber optic share is shown to change with a change in its own monthly usage charge, indicating that market share gains are possible through reduced usage fees.