AN EXAMINATION OF THE RELATIONSHIP BETWEEN INTERNET SERVICE PROVIDER COMPETITION AND PRICES
Spencer, Michael Patrick
Computer and internet usage have increased exponentially in recent years. The internet has assumed a more important role in individuals’ lives, becoming a portal for education, information and communication. The internet has also become a medium for achieving social and economic policy goals, and the Obama administration has set out to ‘design policies to ensure robust competition and, as a result maximize consumer welfare, innovation and investment’. However technological innovation and deregulation have allowed internet service providers to accrue huge power over their market. There is considerable variation in the number of providers available to local consumers across the country, and variation in prices charged for connections. This thesis aims to use that variation and test the effect of internet service provider competition on the monthly price paid for fixed wireline high speed internet at the household level. Analyzing data from the Census Bureau and National Broadband Map we found a small, negative and statistically insignificant relationship between competition and prices. A one unit increase in the number of providers at the metropolitan level is associated with a 21-30 cents decrease in the monthly price paid for fixed wireline high speed internet.
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