Broadband Competition Important for Spurring Investment

Broadband Competition Important for Spurring Investment

Wallsten Presents Study at TPRC Conference

Contact: Amy Smorodin
(202) 828-4405

October 4, 2010 – The number of wireline providers in an area has an impact on broadband speeds available, illustrating that competition is important for stimulating investment in networks, explain Scott Wallsten and Colleen Mallahan in “Residential Broadband Competition in the United States,” a white paper drafted for the Federal Communications Commission’s Omnibus Broadband Initiative. Wallsten discussed their findings yesterday at the 38th Research Conference on Communication, Information and Internet Policy, sponsored by TPRC.

The paper, authored by Wallsten, TPI Vice President for Research and Senior Fellow, and Mallahan, Senior Analyst at Compass Lexecon, uses data on residential broadband subscribership and speeds to explore broadband competition in the U.S. and, specifically, the effects of competition on speeds, penetration and prices. The authors concede that while a lack of good data makes evaluating broadband competition difficult, some general conclusions can be reached.

Specifically, the authors deduce from their analysis that “DSL, Cable, and fiber speeds are each significantly higher where there is more than one provider than when there is only a single provider.” They continue, “Interpreted causally, this suggests that competition is important in spurring investment, which is consistent with the round of wireline upgrades currently underway.”

Wallsten and Mallahan also suggest there is evidence of a negative correlation between the number of providers available in an area and the monthly price for consumers. However, lack of sufficient data makes it difficult to conclude with certainty how such factors as product bundles and special promotions impact the analysis.

The authors conclude their study illustrates a need for better data on availability and prices. “Going forward, recommendations contained in the National Broadband Plan will help remedy these data deficiencies, making more thorough analyses possible,” they state.

The paper was drafted while both authors were involved in the FCC’s creation of the National Broadband Plan. The study is available on the SSRN website.

The Technology Policy Institute

The Technology Policy Institute is a research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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