The Transformation of Broadband Demand: From Discretionary Service to Essential Infrastructure (2010-2024)

TL;DR

This study analyzes 15 years of European broadband demand data, revealing a shift from price-sensitive to essentially price-inelastic demand, indicating broadband's transition from a discretionary service to an essential infrastructure.

Contribution

It provides empirical evidence of broadband becoming a necessity, showing demand elasticity converging to zero across regions and highlighting the importance of income-relative pricing measures.

Findings

Demand elasticity decreased to near-zero by 2024

Price changes no longer significantly affect broadband adoption

Income-relative prices consistently show significant effects

Abstract

Has broadband become a necessity good immune to price changes? Using a 15-year panel of 33 European countries (2010--2024) and two-way fixed effects with Driscoll--Kraay standard errors, we document a fundamental transformation in broadband demand. Pre-COVID, Eastern Partnership countries exhibited highly elastic demand ($\varepsilon = -0.61$, p$<$0.001) -- a 10\% price reduction increased subscriptions by 6\% -- while EU countries showed moderate elasticity ($\varepsilon = -0.12$, p$<$0.05). By 2020--2024, both regions converged to near-zero elasticity, with price changes having no detectable effect on adoption. Crucially, placebo tests reveal this transformation began in 2015, not 2020, indicating a decade-long digital integration process rather than a COVID-19 shock. We further demonstrate that price measurement critically affects inference: income-relative prices (as \% of GNI) yield significant results in 100\% of specifications, compared to only 25\% for PPP-adjusted prices. These findings have immediate policy relevance: as broadband transitions from discretionary service to essential utility, policy emphasis must shift from affordability subsidies to universal infrastructure deployment.