Market Structure and Service Availability of Mobile Telecommunications in the U.S.

Abstract

Using a hand-collected dataset from 2005, this paper investigates the determinants of wireless service provision in specific geographic locations. Studying the wireless service availability in isolated towns provides useful insights into Universal Service Fund subsidies in high cost areas. We perform such analysis at the city level and uncover the entry determinants of wireless carriers that have been overlooked by existing county-level or metropolitan statistical area–level analyses. We find significant differences in entry probability in an MSA town relative to a rural town. Holding city characteristics at their mean, the marginal probability of at least three carriers providing services is 50% higher in an MSA town relative to rural town. Income, population, age distribution, local business prosperity and local infrastructure availability play important roles in determining wireless service provision. In one particular policy experiment, we find that a 10% increase in per capita income increased the probability that a rural town attracted additional wireless carrier by 3.8%.

Keywords: Telephony, Market Structure, Telecommunications, Universal Service

JEL Classification: L96, G21, R11, L86