Estimating the Impact of Low-Income Universal Service Programs

44 Pages Posted: 28 Jun 2013 Last revised: 25 Apr 2015

See all articles by Daniel Ackerberg

Daniel Ackerberg

University of Michigan at Ann Arbor

David DeRemer

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Michael H. Riordan

Columbia University

Gregory L. Rosston

Stanford Institute for Economic Policy Research

Bradley S. Wimmer

University of Nevada, Las Vegas - College of Business - Department of Economics

Date Written: June 1, 2013

Abstract

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasimaximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for low-income households. Our results suggest that Linkup is more cost-effective than Lifeline and that auto-enroll policies are important, which calls into question a recent FCC 2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Suggested Citation

Ackerberg, Daniel and DeRemer, David and Riordan, Michael H. and Rosston, Gregory L. and Wimmer, Bradley S., Estimating the Impact of Low-Income Universal Service Programs (June 1, 2013). US Census Bureau Center for Economic Studies Paper No. CES-WP- 13-33, Available at SSRN: https://ssrn.com/abstract=2286294 or http://dx.doi.org/10.2139/ssrn.2286294

Daniel Ackerberg (Contact Author)

University of Michigan at Ann Arbor ( email )

701 Tappan
Ross Business School R3418
Ann Arbor, MI 48109
United States

David DeRemer

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

Michael H. Riordan

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Gregory L. Rosston

Stanford Institute for Economic Policy Research ( email )

Landau Economics Building
579 Serra Mall at Galvez St.
Stanford, CA 94305-6015
United States

Bradley S. Wimmer

University of Nevada, Las Vegas - College of Business - Department of Economics ( email )

4505 S. Maryland Parkway
Las Vegas, NV 89154
United States

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