Download full paperThis paper investigates the effects of changes in market structure on residential service quality in local U.S. broadband markets. Our analysis focuses on identifying the causal effects on quality of entry (or exit) by firms using both legacy and non-legacy broadband network technologies.
We analyze a very large and highly disaggregated census block-level data set we have constructed using Federal Communication Commission (FCC) data on residential broadband services deployment in populated U.S. census blocks between December 2014 and December 2018. We employ a difference-in-differences framework combined with both spatial fixed effects and spatial instrumental variables. The latter econometric tools are used to address unobserved market heterogeneity and concerns about significant error in measured ISP counts for fixed wireless ISPs.
Preliminary results suggest that exit (or entry) by a legacy provider has large impacts on available service quality in local broadband markets. Contrary to expectations, entry by new fiber ISPs seems to have had only small impacts on available quality. Entry by a fixed wireless ISP appears to have had a negative impact on maximum available download speeds offered by incumbent legacy ISPs. Economic explanations for these results are discussed and evaluated. We establish that (i) both fixed wireless and fiber ISPs compete in sets of speed tiers that are distinct from those offered by legacy ISPs, and (ii) price competition (as opposed to quality competition) appears to be more intense in markets with fixed wireless and fiber entry.
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