United States internet penetration

Author： Madden Gary Coble-Neal Grant Savage Scott J.

ISSN： 1466-4291

Source： Applied Economics Letters, Vol.11, Iss.9, 2004-01, pp. : 529-532

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Abstract

United States (US) Department of Commerce data suggests a necessary precursor to the success of electronic commerce (e-commerce) is active engagement in Internet activities by the population at large. However, without empirical assessment it is difficult to determine the relative importance of the drivers of Internet access, and ultimately e-commerce development. This study provides empirical estimates of the factors that impact on Internet access. A statistical model relates US Internet host penetration to information processing costs (a proxy for the price of Internet access), income, technology change, and the size of the network. Model estimates suggest that affordable access to information technology and telecommunications, technology change, and the network externality are driving rapid Internet take-up. Endogenous Internet growth, generated by the network externality, becomes important to e-commerce retailers (e-tailers) as their potential market size increases with each additional subscriber to the Internet.