The role of Video on Demand in stimulating broadband adoption

Abstract

In this paper we study the role of Video on Demand services (VOD) as drivers of broadband adoption. While the research literature has highlighted the importance of digital content, such as applications and Internet platforms, as a driver of broadband adoption, no studies have yet explored the specific contribution of VOD. We developed a worldwide database of VOD services launch by country since 2012 (including Netflix, Amazon Prime, Apple TV+, Disney+, Paramount+, and HBO Max) and explored their contribution as contributors to broadband adoption during the period. To do so, we relied on several empirical specifications including instrumental variables to control for reverse causality between broadband adoption and VOD services availability. Our results confirm that VOD services have been a key contributor to the increase of broadband connectivity, also helping to narrow down the digital divide especially in developing nations. In addition, VOD service offers have been associated with the gradual increase in the purchasing of broadband higher speed plans. Finally, there is a significant and positive increase in consumer surplus associated with the launch of VOD offers. This evidence points to the impact of VOD services on the digital economy as a stimulus for consumer acquisition of broadband services and therefore as a contributor to the revenues of broadband service providers.