Internet Services Demand and Supply - Coursework Example

Internet Services – Demand and Supply Introduction In the past few decades the use of the Internet has grown tremendously, and has become an integral part of human society. The invention of the Internet is without doubt one of the most important inventions in the previous century. Global communication facilitated by the Internet transmits instant news and information in every part of the world. The young people use the tool as easy access to information and knowledge, as well as communicating with friends through social networking sites. It has brought drastic change not only in the mode of business activities, but also communication. It has changed every aspect of human life from studying, working to shopping and socializing. Therefore Internet services have proliferated in every part of this world and its demand is growing every day. In all countries, the governments are increasingly emphasizing on promoting universal broadband services, i.e. supply of Internet services to 100 percent households. The focus is specifically on supply of high-speed Internet activity via big business houses to enhance global competitiveness. Due to increased infrastructure, urban areas enjoy economies of scale thus making it more convenient for Internet service providers to supply connection to all households. However, the same situation is not in rural areas and therefore broadband supply to all households is currently not possible (Galloway, 2007, p.641). Internet services in rural areas In this era of the Internet, it has become obvious that sound knowledge of Internet services can lead to success in business, education, research and other avenues. Therefore the demand of the Internet has become high even in rural areas and in every domestic household. The availability of Broadband (high-speed) services has brought revolutionary changes in the demand of Internet services. It is important that the supply of Internet remains equal in all areas. Prieger (2003) has surveyed and concluded that the supply of broadband services is not equal in all areas and there is low availability of the services in rural areas inhabited by poor and minority communities. The other result of this survey is that low supply of Internet in rural areas is due to the low demand in these areas because of market size and low knowledge of computers. A study has construed that broadband services will be unavailable in almost 12 percent of U.S. households because of lack of demand whose one contributory factor is the cost of Internet services (Prieger, 2003, p.347). According to simple regressions, the extent of Internet supply is limited in areas with high percentage of rural, minority and poor people. However, if the cost factor can be eliminated then it can be seen that other contributory factors of Internet demand largely disappear. There is also no major statistical evidence that says income of common people can be considered as major factor of determination of demand of Internet services. The key factor here is the cost of providing Internet broadband services. In urban areas, due to improved infrastructure and more usage of phone services than rural areas, the supply cost of broadband is low. This makes it convenient for service providers to supply Internet services in rural areas; hence household income is not the considerable factor here (Prieger, 2003, p.359). Moreover, in a developed country like UK, the rural population being considerably lower than urban population, the former does not guarantee high return on investments that need to be made on creating a next-generation broadband. Therefore, it is estimated that almost 33 percent of UK homes will not be supplied with fast broadband services from big internet providers without financial backing from the government. As recently in 2011, there has been an allocation of £ 363 m to develop the broadband services in rural areas of England and Scotland. This is however not considered as sufficient amount to bridge the supply gap between domestic broadband users and non-users. For instance, Berkshire which has been allocated £ 1.4 m is not likely to receive supply of fast broadband services because it consists of only 8 percent domestic users (Rural Broadband funding ready for England and Scotland, 2011). Household demand of Internet broadband service In America, as part of FCC (Federal Communications Commission), Rosston et al. (2010) have conducted a survey in 2009-2010 to determine the level of household consumer demand of different aspects of the Internet broadband service. A major consideration during this survey was consumers’ eagerness to pay for improved services of eight features of Internet service. The first three features constituted the most common ones like “cost, connection speed, and the reliability of the connection to the Internet” (Rosston, et al., 2010, p.ii). The rest of the five features were new characteristics that were to be introduced in the future Internet services. Some of the new activities included ability to connect from outside the house, easy downloading of high-definition movies, easy communication with health specialists, prioritizing certain downloads, and free videophone calls over the Internet. This survey has concluded that speed and reliability are the features for which households are mostly willing to pay more than other features. The participant households have eagerness to pay $ 20 per month more and $ 45-48 per month more for increased reliability and speed respectively. It has further been seen that this willingness of increased monthly payments increase in households having higher education, more income and more internet usage experience. For the other new Internet activities, households willingness to pay extra per month, ranged from $3 to $6. One major finding from this survey was that increased experience of internet usage substantially increases consumers’ demand for improved Internet services. Therefore, it is necessary that public and private policies focus on educating households on the importance and intricacies of Internet usage in order to ensure full delivery of Internet services in all regions of the U.S. (Rosston, et al., 2010, pp.iii-v). U.S. households As per a survey conducted in the year 1998 in the U.S., it was estimated that only around 26 percent of households were supplied with Internet services. Till the year 2000, a major proportion of these households used Internet through dial-up modems. Since then, there has been a rapid and steady increase of demand and supply of Internet broadband services in U.S. As per recent estimations, it has been seen that 4.5 percent of all households getting access to the Internet service use broadband services while 10 percent of total Internet users in U.S. use broadband services. Some major reasons for such growth in the demand of Internet services is the accessibility and marketing of cable modems and ADSL services. Moreover, in recent years there has been decline in the price of broadband services added by increased need of speed and bandwidth by domestic users (Rappoport & Taylor, 2013, p.2). There have been further observations from various survey results. Households with children are more likely to higher rates of Internet penetration than households without children. Moreover, households with higher number of members will also have more demand for Internet broadband services. Also, since demand for Internet is directly related to level of education, therefore, households with college going students have above average Internet penetration rates. Survey results also prove that richest households have four times more probability of Internet access than poorest households (Rappoport & Taylor, 2013, pp. 3-4). Demand of Internet in relation to cost of Internet is shown in the following figure :- Cost of Internet Demand Conclusion In the current century, the demand of Internet access in households has increased dramatically. The increase is more prominent in urban areas than rural areas because improved infrastructure in the former ensures low cost for Internet suppliers. The household demand for Internet broadband services depends on many factors amongst which accessibility is a major factor. However, level of education and choice of consumers also play significant contributory roles. References Galloway, L. (2007) Can broadband access rescue the rural economy? Journal of small business and enterprise development, 14(4), 641-653 Prieger, J.E. (2003) The supply side of the digital divide: is there equal availability in the Broadband Internet access market? Economic Inquiry, 41(2), 346-363 Rappoport, P. & L.D. Taylor (2013) Residential Demand for the access to the Internet, retrieved on October 21, 2013 from: http://www.colorado.edu/engineering/alleman/print_files/broadband_demand_PNR-Taylor-etcVol_II.PDF Rosston, G., Savage, S.J. & D.M. Waldman, (2010) Household demand for Broadband Internet Service, retrieved on October 21, 2013 from: http://siepr.stanford.edu/system/files/shared/Final_Rosston_Savage_Waldman_02_04_10__1_.pdf Rural Broadband funding ready for England and Scotland, (2011) BBC News, retrieved on October 21, 2013 from: http://www.bbc.co.uk/news/technology-14539380 Read More