Broadband Race: A Case Study on the Status of Connectivity in the United States (original) (raw)
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Competition in broadband provision and the digital divide
Handbook of research on global diffusion of …, 2008
This chapter examines the supply of DSL broadband by the incumbent local exchange company (LEC) in five U.S. states in the earlier years of deployment. Our empirical analysis shows that income, other demographics, and cost factors are important determinants of entry and availability. After controlling for other factors, the racial characteristics of the area do not affect DSL provision. Active competition in broadband from competitive LECs reduces deployment of DSL by the incumbent, but potential competition from competitive LECs has the opposite effect. Competition from cable companies also negatively influences the incumbent's decision to supply DSL. Our objective in gauging the importance of the various factors is to highlight the important drivers of broadband provision for policymakers.
Barriers to Entry Analysis of Broadband Multiple Platforms: Comparing the U.S. and South Korea
This paper compares barriers to entry in the broadband markets between the U.S. and South Korea. First, it explores economic conceptions of barriers to entry from the economics literature. Second, it speculates on how the conception of barriers to entry has been dealt with in the telecommunications industry. It clarifies the various industrial factors that could prevent, or make it difficult, to successfully enter the residential telecommunications market. Third, it introduces an analytical framework that can be adopted for evaluating the barriers to entry. Fourth, employing that framework, it examines the broadband markets in the U.S. and in South Korea, focusing on barriers to entry in multiple broadband access platforms. Both the U.S. and South Korea have shown greater barriers to entry in wireline broadband markets such as cable modem and DSL compared to wireless broadband when it comes to a facilities-based entry. South Korea has offered more opportunity to non-dominant ISPs as new entrants and thus, has been able to facilitate more vibrant competition nationwide. This paper concludes with an analysis of the barriers to entry for alternative broadband access platforms in residential high speed Internet services, more specifically, wireless access technologies, including other economic and policy factors in the US and South Korea. The sluggish progress of intermodal and intramodal market competition explains a part of the sluggish demand in the residential high speed Internet access market in the U.S., while the South Korean market was able to grow rapidly due to fierce competition in the market, mostly facilitated by the Korean government’s open access rule and policy choices more favorable to new entrants rather than to the incumbents. Furthermore, near monopoly control of the residential communications infrastructure by cable operators and telephone companies manifests itself as relatively high pricing and lower quality in the U.S. The more favorable terms from which the dominant providers have benefited, and government’s deregulation, may limit business opportunities for other Internet service providers.
Quality Competition in the Broadband Service Provision Industry
2014
We conduct an empirical analysis of quality competition between broadband Internet Service Providers (ISPs), using National Broadband Map data for 2011-2013 for almost a thousand local markets in California. We examine how incumbent ADSL firms respond to competition from CLECs and cable modem service providers. We use an important quality attribute, the downstream data rate, and estimate the strategic choice of quality for broadband ISPs. Our paper follows a static game theoretic approach to the profit maximization decision of a broadband provider that leads to a simple two-stage method of estimation of the structural parameters of the ISPs’ profit functions. The method accounts for both the strategic aspect of each firm’s quality decision, as well as the endogeneity problems inherent in the estimation problem. Our results include two main findings. First, ILECs improve the quality of their ADSL offerings when a cable player enters the market, and also when cable operators start to ...
Do Entry Conditions Vary over Time? Entry and Competition in the Broadband Market: 1999-2003
SSRN Electronic Journal, 2000
We extend Bresnahan and Reiss's (1991) model of local oligopoly to allow firm entry and exit over time. In our framework, entrants have to incur sunk costs in order to enter a market. After becoming incumbents, they disregard these entry costs in deciding whether to continue operating or to exit. We apply this framework to study market structure and competitive conduct in local markets for high-speed Internet service from 1999 to 2003. Replication of Bresnahan and Reiss's framework generates unreasonable variation in firms' competitive conduct over time. This variation disappears when entry costs are allowed. We find that once the market has one to three firms, the next entrant has little effect on competitive conduct. We also find that entry costs vary with the order of entry, especially for early entrants. Our findings highlight the importance of sunk costs in determining entry conditions and inferences about firm conduct.
Enhancing broadband penetration in a competitive market
Evolving Internet (INTERNET), …, 2010
In spite of the exponential growth of IP traffic, broadband market is suffering from a stagnation which limits Internet penetration and discourages investors/operators from deploying access infrastructures in sparsely populated areas because of low (or negative) rate of return and unsustainable operation costs. Although perfect competition is not a suitable model to describe Internet access market, the economic equilibrium between supply and demand curves in a competitive market can be used to discuss the issues of Internet penetration and infrastructure sustainability and to envisage new business models that could be applied to enhance them. This is the purpose of this paper.
Broadband Business Opportunities for Utility Based Firms in the New Era: Modeling the Competition
2009 Fourth Balkan Conference in Informatics, 2009
After the deregulation of the telecommunications market, municipalities and utility-based firms which own physical resources are capable of entering in this market. This study focuses on the broadband business field and provides a model for analyzing the new perspectives for new investors in the field. It integrates real options and game theory and considers price and quantity competition for various stages of the business game in order to find the optimal business strategy. Both techniques are based on quantitative analysis, while the complicated broadband business field requires a multi-criteria analysis including also qualitative thinking. The various business factors are integrated into a single utility function using the Analytic Hierarch Process. Finally, we discuss a real world case study in the specific business field.
2010
We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms' competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct.
Level of Access and Competition in Broadband Markets
Review of Network Economics, 2000
In this paper, we consider an unregulated incumbent who owns a broadband infrastructure and decides on how much access to provide to a potential entrant. The level of access, i.e., the network elements that are shared in the provision of competing broadband services, not only determines the amount of investment the entrant needs to undertake to enter the market, but also the intensity of post-entry competition. We consider an access scheme that determines an access level and an associated two-part tariff. We show that the equilibrium level of access is higher when the sensitivity of product differentiation to the level of access is lower, and when the marginal investment cost is higher. We also show that the unregulated incumbent sets a suboptimally low (high) level of access if the degree of service differentiation is sufficiently high (low).
Regulation and the Deployment of Broadband
2008
This study examines the impact of telecommunications regulatory policy on broadband service deployment. Using U.S. data covering all forms of access technology (chiefly DSL and cable modem) and all areas served by major carriers, we investigate the impact of state and federal regulation on broadband availability. Alternative regulation increases the probability of broadband availability, particularly for price caps. Unbundled network element (UNE) rates, the prices incumbent carriers charge to competitors for access to the local exchange network, also matter. Areas with lower UNE rates have a slightly higher probability of broadband availability. The effects of UNE rates on broadband deployment are largest where incentive regulation is in place. Our objective in examining regulatory factors is to highlight the role of incentive regulation and local telecommunications competition policy-policies used or available around the world-in stimulating broadband service deployment.
Open Access Rules and Equilibrium Broadband Deployment
Contributions to Economics, 2004
Investment in advanced communications infrastructure promises such tantalizing payoffs as accelerated economic growth and enhanced national competitiveness. Relatively little disagreement arises in policy debates that such benefits are possible-usually only their size and distribution across the population are at issue. Bitter disputes, however, have broken out over which path will lead the communications sector to deploy these technologies most expeditiously and equitably.