41 Pages Posted: 26 Oct 2006
Date Written: September 2006
In Portugal, the telecommunications incumbent offers broadband access to the Internet, both through digital subscriber line and cable modem. In this article, we estimate the impact on broadband access to the Internet of the structural separation of these two businesses. We use a panel of consumer level data and a discrete choice model to estimate the price elasticities of demand and the marginal costs of broadband access to the Internet. Based on these estimates, we simulate the effect on prices and social welfare of the structural separation. Our results indicate that the structural separation would lead to substantial price reductions. For broadband clients, on average, each household would save 3:37 euros per month, or 14% of the current price levels. Overall, on average, each household would save 2:73 euros per month, or 14% of the current price levels. We test the robustness of our results in terms of: (i) the estimates of the demand elasticities, (ii) the strategic behavior of the firms, and (iii) the market share estimates. There is no evidence of collusion.
Keywords: Broadband, Structural Separation, Prices
JEL Classification: L25, L51, L96
Suggested Citation: Suggested Citation
Pereira, Pedro and Ribeiro, Tiago, Impact on Broadband Access to the Internet of the Dual Ownership of Telephone and Cable Networks (September 2006). NET Institute Working Paper No. 06-10. Available at SSRN: https://ssrn.com/abstract=940399 or http://dx.doi.org/10.2139/ssrn.940399
By Jed Kolko