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Estimating the Impact of Low-Income Universal Service Programs

Author

Listed:
  • Daniel A. Ackerberg

    (University of Michigan)

  • David R. DeRemer

    (ECARES)

  • Michael H. Riordan

    (Columbia University)

  • Gregory L. Rosston

    (Stanford Institute for Economic Policy Research)

  • Bradley S. Wimmer

    (University of Nevada, Las Vegas)

Abstract

This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasi-maximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for low-income households. Our results suggest that Linkup is more cost-effective than Lifeline and that auto-enroll policies are important, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Suggested Citation

  • Daniel A. Ackerberg & David R. DeRemer & Michael H. Riordan & Gregory L. Rosston & Bradley S. Wimmer, 2013. "Estimating the Impact of Low-Income Universal Service Programs," Discussion Papers 12-016, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:12-016
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    References listed on IDEAS

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    Cited by:

    1. Samara Mendez & Gabor Molnar & Scott J. Savage, 2021. "The Impacts of the Lifeline Subsidy on High-Speed Internet Access," Journal of Law and Economics, University of Chicago Press, vol. 64(4), pages 745-782.
    2. Julian Hidalgo & Michelle Sovinsky, 2023. "Internet (Power) to the People: How to Bridge the Digital Divide," CRC TR 224 Discussion Paper Series crctr224_2023_461, University of Bonn and University of Mannheim, Germany.
    3. Jayakar, Krishna & Park, Eun-A, 2019. "Reforming the lifeline program: Regulatory federalism in action?," Telecommunications Policy, Elsevier, vol. 43(1), pages 67-75.
    4. Rosston, Gregory L. & Wallsten, Scott J., 2020. "Increasing low-income broadband adoption through private incentives," Telecommunications Policy, Elsevier, vol. 44(9).
    5. Thomas S. Conkling, 2018. "Crowd‐Out or Affordability? The Lifeline Expansion's Effect on Wireless Service Spending," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 37(2), pages 357-383, March.
    6. Thomas S. Conkling, 2020. "Compliance and competition with heterogeneous service providers: the federal Lifeline program," Journal of Regulatory Economics, Springer, vol. 57(1), pages 74-104, February.

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    More about this item

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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