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Evidence of a Modest Price Decline in U.S. Broadband Services

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  • Evans, Lewis
  • Greenstein, Shane

Abstract

In this paper, we construct a price index for broadband services in the United States between 2004 and 2009. We analyze over 1500 service contracts offered by DSL and cable providers in the United States. We employ a mix of matched-model methods and hedonic price index estimations to adjust for qualitative improvements. In general, we find some evidence of a quality-adjusted price decline, but the evidence points towards a modest decline at most. Our estimates of the price decline range from 3% to 10% in quality-adjusted terms for the five-year period, which is faster than the BLS estimates for the last three years. These modest price declines look nothing like other parts of electronics, such as computers or integrated circuits, which raises many questions. The results also inform a range of policy discussions about US broadband services.

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Bibliographic Info

Paper provided by Regulation2point0 in its series Working paper with number 609.

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Date of creation: Jul 2010
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Handle: RePEc:reg:wpaper:609

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Web page: http://regulation2point0.org/

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  1. Shane Greenstein & Ryan C. McDevitt, 2009. "The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP," NBER Working Papers 14758, National Bureau of Economic Research, Inc.
  2. Savage Scott J. & Waldman Donald M., 2004. "United States Demand for Internet Access," Review of Network Economics, De Gruyter, vol. 3(3), pages 1-20, September.
  3. Gregory Rosston & Scott Savage & Donald Waldman, 2010. "Household Demand for Broadband Internet Service," Discussion Papers 09-008, Stanford Institute for Economic Policy Research, revised Feb 2010.
  4. Zvi Griliches & Iain Cockburn, 1995. "Generics and New Goods in Pharmaceutical Price Indexes," NBER Working Papers 4272, National Bureau of Economic Research, Inc.
  5. Ana Aizcorbe, 2006. "Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 485-496, July.
  6. Stranger, Greg & Greenstein, Shane, 2008. "Pricing in the shadow of firm turnover: ISPs during the 1990s," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 625-642, May.
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Cited by:
  1. Jeffrey T. Prince & Shane Greenstein, 2011. "Does Service Bundling Reduce Churn?," Working Papers 2011-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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