Quality Competition at the Competitive Margin in US Residential Broadband Markets

42 Pages Posted: 29 Jul 2019 Last revised: 19 Sep 2019

See all articles by Kenneth Flamm

Kenneth Flamm

University of Texas at Austin - Lyndon B. Johnson School of Public Affairs

Pablo Varas

University of Texas at Austin, Department of Economics

Date Written: July 26, 2019

Abstract

This paper investigates the effects of local market structure on residential broadband service quality. Using data from multiple sources, we build a rich panel data set covering all broadband services available, by ISP, technology and maximum advertised download speed for each of approximately six million populated U.S. census blocks between December 2014 and December 2017. In contrast with the previous literature, we utilize highly disaggregated data, control for evolving government subsidies to underserved census blocks, employ individual provider quality measures rather than market-level indexes, and relax strong statistical and economic assumptions maintained in prior work. We estimate causal effects by constructing a novel set of plausibly exogenous instruments exploiting spatial technological variation among incumbent and entrant broadband ISPs. These allow us to identify the effects of entry of new ISPs on service quality for residential customers in spatially disaggregated local markets. Preliminary results suggest that these effects can be substantial, and that intramodal competition (across broadband service technologies) is a primary competitive margin driving improvements in maximum U.S. residential broadband speeds. We find that entry or exit by wireline competitors in census blocks containing only incumbent wireline competitors has essentially no impact on maximum download speeds offered by wireline ISPs. By contrast, entry or exit by wireless competitors in census blocks containing other wireless incumbents is associated with large changes in maximum download speeds offered by wireline ISPs.

Suggested Citation

Flamm, Kenneth and Varas, Pablo, Quality Competition at the Competitive Margin in US Residential Broadband Markets (July 26, 2019). Available at SSRN: https://ssrn.com/abstract=3427582 or http://dx.doi.org/10.2139/ssrn.3427582

Kenneth Flamm (Contact Author)

University of Texas at Austin - Lyndon B. Johnson School of Public Affairs ( email )

2300 Red River St., Stop E2700
PO Box Y
Austin, TX 78713
United States
512-471-8952 (Phone)
512-471-1835 (Fax)

Pablo Varas

University of Texas at Austin, Department of Economics ( email )

Austin, TX
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
44
Abstract Views
156
PlumX Metrics