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Innovation and the Evolution of Market Structure for Internet Access in the United States


  • Shane Greenstein

    (Kellogg School of Management, Northwestern University)


How and why did the U.S. commercial Internet access market structure evolve during its first decade? Commercial Internet access market structure arose from a propitious combination of inherited market structures from communications and computing, where a variety of firms already flourished and entrepreneurial norms prevailed. This setting nurtured innovative behavior across such key features as pricing, operational practices, and geographic coverage. Inherited regulatory decisions in communications markets had a nurturing effect on innovative activity. On-going regulatory decisions also shaped the market’s evolution, sometimes nurturing innovation and sometimes not. This narrative and analysis informs conjectures about several unique features of U.S. market structure and innovative behavior. It also informs policy debates today about the role of regulation in nurturing or discouraging innovation behavior.

Suggested Citation

  • Shane Greenstein, 2006. "Innovation and the Evolution of Market Structure for Internet Access in the United States," Discussion Papers 05-018, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:05-018

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    References listed on IDEAS

    1. Goldfarb, Brent & Kirsch, David & Miller, David A., 2007. "Was there too little entry during the Dot Com Era?," Journal of Financial Economics, Elsevier, vol. 86(1), pages 100-144, October.
    2. Gorman, Sean P. & Malecki, Edward J., 2000. "The networks of the Internet: an analysis of provider networks in the USA," Telecommunications Policy, Elsevier, vol. 24(2), pages 113-134, March.
    3. Tony H. Grubesic & Alan T. Murray, 2002. "Constructing the divide: Spatial disparities in broadband access," Papers in Regional Science, Springer;Regional Science Association International, vol. 81(2), pages 197-221.
    4. Strover, Sharon, 2001. "Rural internet connectivity," Telecommunications Policy, Elsevier, vol. 25(5), pages 331-347, June.
    5. Greenstein, Shane, 2000. "Building and Delivering the Virtual World: Commercializing Services for Internet Access," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 391-411, December.
    6. Hogendorn Christiaan, 2005. "Regulating Vertical Integration in Broadband: Open Access versus Common Carriage," Review of Network Economics, De Gruyter, vol. 4(1), pages 1-14, March.
    7. Eisner, James & Waldon, Tracy, 2001. "The demand for bandwidth: second telephone lines and on-line services," Information Economics and Policy, Elsevier, vol. 13(3), pages 301-309, September.
    8. Stanley Besen, 2001. "Advances in Routing Technologies and Internet Peering Agreements," American Economic Review, American Economic Association, vol. 91(2), pages 292-296, May.
    9. Downes, Tom & Greenstein, Shane, 2007. "Understanding why universal service obligations may be unnecessary: The private development of local Internet access markets," Journal of Urban Economics, Elsevier, vol. 62(1), pages 2-26, July.
    10. Benjamin M. Compaine & Shane Greenstein (ed.), 2001. "Communications Policy in Transition: The Internet and Beyond," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032929, January.
    11. Milton L. Mueller, 2004. "Ruling the Root: Internet Governance and the Taming of Cyberspace," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632985, January.
    12. Shane Greenstein & Jeff Prince, 2006. "The Diffusion of the Internet and the Geography of the Digital Divide in the United States," NBER Working Papers 12182, National Bureau of Economic Research, Inc.
    13. Greg Stranger & Shane Greenstein, 2007. "Pricing at the On-Ramp to the Internet: Price Indexes for ISPs during the 1990s," NBER Chapters,in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 197-233 National Bureau of Economic Research, Inc.
    14. Shane Greenstein, "undated". "Commercialization of the Internet: The Interaction of Public Policy and Private Choices," IPR working papers 00-11, Institute for Policy Resarch at Northwestern University.
    15. Lorrie Faith Cranor & Shane Greenstein (ed.), 2002. "Communications Policy and Information Technology: Promises, Problems, Prospects," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033003, January.
    16. Chris Forman, 2005. "The Corporate Digital Divide: Determinants of Internet Adoption," Management Science, INFORMS, vol. 51(4), pages 641-654, April.
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    Cited by:

    1. Christiaan Hogendorn, 2007. "Broadband Internet: net neutrality versus open access," International Economics and Economic Policy, Springer, vol. 4(2), pages 185-208, August.
    2. Shane Greenstein, 2011. "Nurturing the Accumulation of Innovations: Lessons from the Internet," NBER Chapters,in: Accelerating Energy Innovation: Insights from Multiple Sectors, pages 189-223 National Bureau of Economic Research, Inc.

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