Table Of ContentThe Economics of Information, Communication,
and Entertainment
The Impacts of Digital Technology in the 21st Century
James Alleman
Áine Marie Patricia Ní-Shúilleabháin
Paul N. Rappoport Editors
Demand for
Communications
Services - Insights
and Perspectives
Essays in Honor of Lester D. Taylor
The Economics of Information,
Communication, and Entertainment
The Impacts of Digital Technology
in the 21st Century
Series Editor
Darcy Gerbarg, New York NY, USA
For furthervolumes:
http://www.springer.com/series/8276
James Alleman
Áine Marie Patricia Ní-Shúilleabháin
Paul N. Rappoport
Editors
Demand for
Communications Services -
Insights and Perspectives
Essays in Honor of Lester D. Taylor
123
Editors
James Alleman PaulN.Rappoport
College ofEngineering and Applied Department of Economics
Science Temple University
Universityof Colorado—Boulder Philadelphia, PA
Boulder, CO USA
USA
Áine MariePatricia Ní-Shúilleabháin
Columbia InstituteforTele-Information
Columbia BusinessSchool
New York, NY
USA
ISSN 1868-0453 ISSN 1868-0461 (electronic)
ISBN 978-1-4614-7992-5 ISBN 978-1-4614-7993-2 (eBook)
DOI 10.1007/978-1-4614-7993-2
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Contents
Overview: The Future of Telecommunications,
Media and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Prologue I: Research Demands on Demand Research. . . . . . . . . . . . xv
Prologue II: Lester Taylor’s Insights . . . . . . . . . . . . . . . . . . . . . . . xxv
Part I Advances in Theory
1 Regression with a Two-Dimensional Dependent Variable. . . . . . . 3
Lester D. Taylor
2 Piecewise Linear L1 Modeling . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Kenneth O. Cogger
Part II Empirical Applications: Information and Communication
Technologies
3 ‘‘Over the Top:’’ Has Technological Change Radically
Altered the Prospects for Traditional Media? . . . . . . . . . . . . . . . 33
Robert W. Crandall
4 Forecasting Video Cord-Cutting: The Bypass of Traditional
Pay Television . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Aniruddha Banerjee, Paul Rappoport and James Alleman
5 Blended Traditional and Virtual Seller Market Entry
and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
T. Randolph Beard, Gary Madden and Md. Shah Azam
v
vi Contents
6 How Important is the Media and Content Sector
to the European Economy?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Ibrahim Kholilul Rohman and Erik Bohlin
7 Product Differences and E-Purchasing: An Empirical
Study in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Teresa Garín-Muñoz and Teodosio Pérez-Amaral
8 Forecasting the Demand for Business
Communications Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Mohsen Hamoudia
9 Residential Demand for Wireless Telephony . . . . . . . . . . . . . . . . 171
Donald J. Kridel
Part III Empirical Applications: Other Areas
10 Pricing and Maximizing Profits Within Corporations . . . . . . . . . 185
Daniel S. Levy and Timothy J. Tardiff
11 Avalanche Forecasting: Using Bayesian Additive Regression
Trees (BART) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Gail Blattenberger and Richard Fowles
Part IV Evidenced Based Policy Applications
12 Universal Rural Broadband: Economics and Policy. . . . . . . . . . . 231
Bruce Egan
13 Who Values the Media? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Scott J. Savage and Donald M. Waldman
14 A Systems Estimation Approach to Cost, Schedule,
and Quantity Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
R. Bruce Williamson
Part V Conclusion
15 Fifty Years of Studying Economics . . . . . . . . . . . . . . . . . . . . . . . 291
Lester D. Taylor
Contents vii
16 Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Áine M. P. Ní-Shúilleabháin, James Alleman and Paul N. Rappoport
Appendix: The Contribution of Lester D. Taylor
Using Bibliometrics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
Biographies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325
Overview: The Future of Telecommunications,
Media, and Technology
Introduction
This book grew out of a conference organized by James Alleman and Paul
Rappoport,conductedon10October2011inJacksonHole,Wyoming,inhonorof
the work of Lester D. Taylor. The conference lasted just one weekend, but the
papers are more durable.1
We begin with two Prologues; the first is written by Eli M. Noam. He focuses
on demand analysis for media and communication firms. He notes that demand
analysisintheinformationsectormustrecognizethe‘publicgood’characteristics
of media products and networks, while taking into account the effects of
interdependent user behavior; the strong cross-elasticities in a market; as well as
the phenomenon of supply creating its own demand.
Noam identifies several challenges. The first involves privacy concerns (since
companies do not want to share their data). In addition, research and analytical
data collection are falling behind. Third is the demonstrable lack of linkage of
economic with behavioral data. The fourth major hurdle consists in the lack of
bridges from the academic world of textbook theory involving consumer demand
to the practical empirical world of media researchers.
The second Prologue by Timothy Tardiff and Daniel Levy focuses more
narrowly on Lester Taylor’s body of work, in particular its practical applications
and usefulness in analyses of, and practices within, the ICT sector.
The remainder of this book is divided into four parts: Advances in Theory;
Empirical Applications; Evidence-Based Policy Applications; and a final Conclu-
sion. The contents of these Parts are discussed in detail below.
The book closes with an Appendix by Sharon Levin and Stanford Levin
detailing the contributions of Professor Taylor using Bibliometrics.
Ordinarily, Festschrifts only have contributions by the honoree’s students and
followers;however,thisbookisblessedbytwocontributionsbyProfessorTaylor.
1 Thanks are due to the Columbia Institute for Tele-Information (CITI), as well as to the
InternationalTelecommunicationsSociety(ITS)forsponsorship.ThanksarealsoduetoMohsen
Hamoudia(forsponsorshiponbehalfoftheInternationalInstituteofForecasters(IIF));Centris,
andtheauthorsforarivetingsetofpapersassummarizedabove,andascollectedherein/below.
ix
x Overview:TheFutureofTelecommunications,Media,andTechnology
The first is a seminal contribution to demand estimation when log–log
transformations are inappropriate because of the existence within the data set of
negative values. The second, serving as part of the Conclusion, provides insight
into economics from Taylor’s fifty-plus years in the field.
Advances in Theory
Lester Taylor develops a procedure for dealing with variables which cannot be
transformed into the traditional log–log in regression models. Rather, he suggests
representing such dependent variables in polar coordinates. In this case, two-
equationmodelscanbespecifiedwithestimationproceedingintermsoffunctions
involving sines, cosines, and radius vectors. Taylor’s approach permits general-
izationtohigherdimensions,andcanbeappliedincircumstancesinwhichvalues
of the dependent variable can be points in the complex plane.
Kenneth Cogger demonstrates how piecewise linear models may be estimated
withtheL1criterion(whichminimizesthesumofabsoluteerrors,asdistinctfrom
theordinaryleastsquares(OLS)criterion).HeintroducestheQuantileRegression
program,usingMixedIntegerLinearProgramming.IfanOLSprogramisdesired,
a Mixed Integer Quadratic Programming approach may prove useful.
Empirical Applications: Information and Communication
Technologies
Robert Crandall investigates the impact of recent changes in the Telecommuni-
cation, Media, and Technology (TMT) sector on participants in the traditional
mediasector.Hefocusesonempiricalevidenceonhowchangesinequipmentand
access to media have affected consumers’ time management. He examines the
effects of the profound changes taking place in the TMT sector on the economic
prospectsofthevarietyoffirmsengagedintraditionalcommunicationsandmedia.
Crandall demonstrates that while market participants may currently recognize the
threats posed to traditional media companies, the disruptions have been relatively
modest thus far—and have had little apparent effect on the financial market’s
assessment of the future of media companies.
AniruddhaBanerjee,PaulN.Rappoport,andJamesAllemanreportoneffortsto
forecast the effect of consumer choices on the future of video cord-cutting. This
chapter presents evidence on household ownership of OTT (Over the Top)-
enablingdevicesaswellassubscriptiontoOTTservices;thispaperalsoforecasts
the effects of both phenomena upon traditional video. This chapter also examines
how consumers’ OTT choices are determined by household geo-demographic
characteristics, device ownership, and subscription history. Ordered logit regres-
sions are used to analyze and forecast future choices of devices and services, and
Overview:TheFutureofTelecommunications,Media,andTechnology xi
to estimate switching probabilities for OTT substitution by different consumer
profiles.
T.RandolphBeard,GaryMadden,andMd.ShahAzamfocusuponanalysisof
blended ‘bricksandclicks’firms,aswell asonvirtualfirmslacking anypresence
offline. Their study utilizes a data set of small Australian firms, and examines the
relationship between the strategic motivation for entry, and the results of entry.
Utilizing abivariate ordered probitmodel with endogenousdummy variables, the
endogeneityoffirmstrategicgoalsandimplicitestimatesoftheparametersofthe
post-entry business is analyzed. Their study finds that the goal of the firm
materially affects subsequent performance: firms entering to expand their market
size ordinarily succeed, but those entering to reduce costs do not. Blended firms
enjoy no strong advantages over pure online entrants.
Ibrahim Kholilul Rohman and Erik Bohlin focus upon the media and content
sub-segments of the Information and Communication Technology (ICT) sector—
asdefinedbytheOECD—andintandemwiththeISICclassificationofthesetwo
components. The media and content sector—by these definitions—consists of the
printing industry, motion pictures, video and television, music content, games
software,andonlinecontentservices.Theauthorsaimtomeasurethecontribution
of the media and content sector in driving economic output in the European
economies,andtodecomposethechangeofoutputintoseveralsources.Thispaper
aims to forecast the impact of a reduction in price on national GDP. The main
methodology in this study is the Input–Output (IO) table. The study reveals that
thepriceelasticityofmediaandcontentsectorstoGDPisapproximately0.17%.
The impact varies across countries, but France, Sweden, and Norway were found
to have the higher elasticity coefficients. It found that price reductions mainly
affects the financial sector, together with manufacturing of ICT products besides
the media and content sectors themselves.
Teresa Garín-Muñoz and Teodosio Pérez-Amaral demonstrate key determi-
nantsofonline shoppinginSpain.Theymodelhow socio-demographicvariables,
attitudes, and beliefs toward internet shopping affect both the decision and usage
of online shopping. In this chapter, three different samples of internet users are
definedasseparategroups:thosewhopurchaseonline(buyers);thosewholookfor
information online but purchase in stores (browsers); and those who do not shop
online at all (non-internet shoppers). Logit models are used to select the useful
factors to assess the propensity to shop online.
Donald J. Kridel focuses upon residential demand for wireless telephony as it
continues to grow at a dramatic rate. His chapter analyzes the residential demand
for wireless telephony using a sample of surveyed US households. Using a large
data set with over 20,000 observations, Kridel estimates a discrete-choice model
for the demand for wireless telephony. Preliminary elasticity estimates indicate
that residential wireless demand is price-inelastic.
Daniel S. Levy and Timothy J. Tardiff focus upon pricing and maximizing
profits within corporations. Their chapter addresses examples of how particular
businessesestablishpricesandimproveprofitability.LevyandTardifffocusupon
issues identified in Lester Taylor’s research such as theoretical and practical
