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Understanding Why Universal Service Obligations May Be Unnecessary: The Private Development of Local Internet Access Markets

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Author Info
Tom Downes
Shane Greenstein

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Abstract

This study analyzes the geographic spread of commercial Internet Service Providers (ISPs), the leading suppliers of Internet access. The geographic spread of ISPs is a key consideration in U.S. policy for universal access. We examine the Fall of 1998, a time of minimal government subsidy, when inexpensive access was synonymous with a local telephone call to an ISP. Population size and location in a metropolitan statistical area were the single most important determinants of entry, but their effects on national, regional and local firms differed, especially on the margin. The thresholds for entry were remarkably low for local firms. Universal service in less densely-populated areas was largely a function of investment decisions by ISPs with local focus. There was little trace of the early imprint of government subsidies for Internet access at major U.S. universities.

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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0516.

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Date of creation: 2005
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Handle: RePEc:tuf:tuftec:0516

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Related research
Keywords: Internet; Universal service; Geographic diffusion; Telecommunications;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Goldfarb, Avi, 2006. "The (teaching) role of universities in the diffusion of the Internet," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 203-225, March. [Downloadable!] (restricted)
  2. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Theory," Econometrica, Econometric Society, vol. 52(3), pages 681-700, May. [Downloadable!] (restricted)
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  3. Mini, Federico, 2001. "The Role of Incentives for Opening Monopoly Markets: Comparing GTE and BOC Cooperation with Local Entrants," Journal of Industrial Economics, Blackwell Publishing, vol. 49(3), pages 379-414, September. [Downloadable!] (restricted)
  4. Allan Shampine, 2001. "Determinants of the diffusion of U.S. digital telecommunications," Journal of Evolutionary Economics, Springer, vol. 11(2), pages 249-261. [Downloadable!] (restricted)
  5. Thomas A. Downes & Shane M. Greenstein, 1996. "Understanding the Supply Decisions of Nonprofits: Modelling the Location of Private Schools," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 365-390, Summer. [Downloadable!] (restricted)
  6. Goolsbee, Austan & Klenow, Peter J, 2002. "Evidence on Learning and Network Externalities in the Diffusion of Home Computers," Journal of Law & Economics, University of Chicago Press, vol. 45(2), pages 317-43, October.
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  7. Emin M. Dinlersoz, 2004. "Firm Organization and the Structure of Retail Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(2), pages 207-240, 06. [Downloadable!] (restricted)
  8. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January. [Downloadable!] (restricted)
  9. Shane M. Greenstein & Mercedes M. Lizardo & Pablo T. Spiller, 1997. "The Evolution of Advanced Large Scale Information Infrastructure in the United States," NBER Working Papers 5929, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Augereau, Angelique & Greenstein, Shane, 2001. "The need for speed in emerging communications markets: upgrades to advanced technology at Internet Service Providers," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1085-1102, July. [Downloadable!] (restricted)
  11. Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September. [Downloadable!] (restricted)
  12. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
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  13. Shane Greenstein, . "Commercialization of the Internet: The Interaction of Public Policy and Private Choices," IPR working papers 00-11, Institute for Policy Resarch at Northwestern University.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gilbert E. Metcalf & Jongsang Park, 2005. "A Comment on the Role of Prices for Excludable Public Goods," Discussion Papers Series, Department of Economics, Tufts University 0524, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  2. Kolko, Jed, 2006. "Why Should Governments Support Broadband Adoption?," MPRA Paper 3363, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  3. Chris Forman & Avi Goldfarb & Shane Greenstein, 2009. "The Internet and Local Wages: Convergence or Divergence?," NBER Working Papers 14750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Darlene C. Chisholm & Margaret S. McMillan & George Norman, 2005. "Product Differentiation and Film Programming Choice: Do First-Run Movie Theatres Show the Same Films?," Discussion Papers Series, Department of Economics, Tufts University 0523, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  5. Yannis M. Ioannides & Adriaan R. Soetevent, 2005. "Social Networking and Individual Outcomes Beyond the Mean Field Case," Discussion Papers Series, Department of Economics, Tufts University 0521, Department of Economics, Tufts University. [Downloadable!]
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  6. Darlene Chisholm & George Norman, 2005. "When to Exit a Product: Evidence from the U.S. Motion-Pictures Exhibition Market," Discussion Papers Series, Department of Economics, Tufts University 0522, Department of Economics, Tufts University. [Downloadable!]
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