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Evidence of a Modest Price Decline in Us Broadband Services

40 Pages Posted: 12 Jul 2010  

Shane M. Greenstein

Harvard University - Technology & Operations Management Unit; National Bureau of Economic Research (NBER)

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University; Duke Innovation & Entrepreneurship Initiative

Date Written: July 2010

Abstract

In this paper, we construct a price index for broadband services in the United States between 2004 and 2009. We analyze over 1500 service contracts offered by DSL and cable providers in the United States. We employ a mix of matched-model methods and hedonic price index estimations to adjust for qualitative improvements. In general, we find some evidence of a quality-adjusted price decline, but the evidence points towards a modest decline at most. Our estimates of the price decline range from 3% to 10% in quality-adjusted terms for the five-year period, which is faster than the BLS estimates for the last three years. These modest price declines look nothing like other parts of electronics, such as computers or integrated circuits, which raises many questions. The results also inform a range of policy discussions about US broadband services.

Suggested Citation

Greenstein, Shane M. and McDevitt, Ryan C., Evidence of a Modest Price Decline in Us Broadband Services (July 2010). NBER Working Paper No. w16166. Available at SSRN: https://ssrn.com/abstract=1636596

Shane M. Greenstein (Contact Author)

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University ( email )

100 Fuqua Dr
Durham, NC 27708
United States

HOME PAGE: http://www.ryanmcdevitt.com

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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