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The Tragedy of the Last Mile: Congestion Externalities in Broadband Networks

Author

Listed:
  • Jacob Malone

    (University of Georgia, Department of Economics)

  • Aviv Nevo

    (University of Pennsylvania, Department of Economics)

  • Jonathan Williams

    (University of North Carolina - Chapel Hill, Department of Economics)

Abstract

We exibly estimate demand for residential broadband accounting for congestion externalities that arise among consumers due to limited network capacity, as well as dynamics arising from nonlinear pricing. Our high frequency data permits insight into temporal patterns in usage across the day that are impacted by network congestion, and how usage responds to efforts to mitigate congestion. To estimate demand, we build a dynamic model of consumer choice and rely on variation in the timing of network upgrades and nonlinear pricing to identify the model. Using the model estimates, we calculate the welfare changes associated with different economic and technological solutions for reducing congestion, including peak-use pricing, throttling connectivity speeds, and local-cache technologies.

Suggested Citation

  • Jacob Malone & Aviv Nevo & Jonathan Williams, 2016. "The Tragedy of the Last Mile: Congestion Externalities in Broadband Networks," Working Papers 16-20, NET Institute.
    • Handle: RePEc:net:wpaper:1620
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    File URL: http://www.netinst.org/Williams_16-20.pdf
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    References listed on IDEAS

    as
    1. Greenstein, Shane & McDevitt, Ryan C., 2011. "The broadband bonus: Estimating broadband Internet's economic value," Telecommunications Policy, Elsevier, vol. 35(7), pages 617-632, August.
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    3. Gregory L. Rosston & Scott J. Savage & Bradley S. Wimmer, 2013. "Effect of Network Unbundling on Retail Prices: Evidence from the Telecommunications Act of 1996," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 487-519.
    4. Anja Lambrecht & Katja Seim & Bernd Skiera, 2007. "Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs," Marketing Science, INFORMS, vol. 26(5), pages 698-710, 09-10.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    demand; broadband; congestion; peak-use pricing;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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