High-speed data connections, or broadband, are critical to the economy. Our work on broadband covers a wide range of topics, including the digital divide, wireline and wireless provision, spectrum, net neutrality, competition, and more.
On March 12, 2009 TPI Vice President for Research and Senior Fellow Scott Wallsten testified before the House Energy and Commerce Committee, Subcommittee on Communications, Technology, and the Internet on reforming the universal service high cost fund. Subsidies from the high-cost fund to rural telecommunications providers have increased from $1.7 billion in 1999 to nearly $5 billion today. Wallsten recommended moving from the current inefficient system to one that awards subsidies through competitive bidding. Such reverse auctions for universal service have been used successfully in other countries and could reduce subsidies and benefit consumers.
Accurate measurement of digital divides is important for policy purposes, but existing methodologies and data have limited our ability to examine the issue. James Prieger and Wei-Min Hu compare the performance of alternative methods using a large dataset on DSL subscription, paying particular attention to whether women, blacks, and Hispanics catch up to others in broadband adoption. Duration analysis, which sheds light on how groups progress along adoption curves, reveals the most useful information about digital divides and how they change over time. Policymakers can use the information to identify groups for which a divide is widening rather than closing. Their results support the collection of broadband statistics in panel form, where the same households are followed over time.
Professor Shane Greenstein, Elinor and Wendell Hobbs Professor at the Kellogg School of Management, Northwestern University, estimates that broadband adds about $10 billion per year in new GDP and another $5 billion in unmeasured consumer surplus. These are large effects, but smaller than some previous estimates. The reason for the difference is that most studies attribute all gains from the Internet to broadband, rather than just the gains that came from upgrading to broadband from dialup. Professor Greenstein’s research, based on the economics of new goods, will help give policymakers a more accurate estimate of the benefits of broadband subsidies. Professor Greenstein will discuss his findings at our event this Friday on Capitol Hill.
Kellogg School of Management Professor Shane Greenstein estimates that broadband adds about $10 billion per year in new GDP and another $5 billion in unmeasured consumer surplus. These are large effects, but smaller than some previous estimates. The reason for the difference is that most studies attribute all gains from the Internet to broadband, rather than just the gains that came from upgrading to broadband from dialup. Professor Greenstein’s research, based on the economics of new goods, will help give policymakers a more accurate estimate of the benefits of broadband subsidies.
How best to include broadband in an economic stimulus package depends, in part, on understanding two critical issues: how broadband affects economic growth, and how the credit crisis has affected broadband investment. In particular, one might favor aggressive government intervention if broadband stimulates growth and investment is now lagging. Alternatively, money might be better spent elsewhere if the effects on growth are smaller than commonly believed or private investment is continuing despite the crisis.
The debate of the so-called ?net neutrality? has been under the spotlight in the US for many years, whereas many believed it would not become an issue in Europe. However, over the past few months the need to revise the current regulatory framework to encourage investment in all-IP networks has led to greater attention for net neutrality and its consequences for investment and competition. After the Commission adopted a ?light-touch? approach to the issue at the end of 2007, the European Parliament has started to reconsider the issue, and it is reportedly considering a move towards more pro-neutrality rules. This paper summarises the main issues at hand in the net neutrality debate and the views expressed by advocates and opponents of the neutrality principle. The problem is described from a multi-sided market perspective, stressing the role of network operators as intermediaries in the ?layered? architecture of all-IP networks. Finally, the paper discusses whether the European regulatory framework and its interaction with ex post competition policy are likely to solve many of the concerns of net neutrality advocates without any need for ad hoc regulation; and whether currently proposed solutions are likely to prove welfare-enhancing and conducive to a better regulatory environment for future e-communications.