Market Power in U.S. Broadband Services

Abstract:     
The U.S. telecommunications industry has come under scrutiny amid concerns that regulatory policies have been too permissive. These concerns are perhaps most prominent in the residential broadband market where there is a perception that the “duopoly” between telephone carriers (DSL suppliers) and cable TV operators (cable modem services) has given rise to anti-competitive behavior. The presence of market power is a testable hypothesis that cannot be deduced solely from market shares or price-cost margins. We develop an economic analysis that incorporates both static and dynamic factors to examine the extant marketplace evidence. The data suggest that “duopoly” broadband providers do not generate supra-competitive returns. Public policies to regulate broadband providers should be informed by these market conditions.

Number of Pages in PDF File: 39

Keywords: antitrust, atomistic, Christine Varney, competition, efficiency, FCC, Federal Communications Commission, Herfindahl-Hirschman Index, ISPs, Internet service providers, James Bonbright, Joseph Schumpeter, Lerner index, 1996 Telecommunications Act, Ronald Coase, wireline

JEL Classification: K21, K23, L51, L96

working papers series