Investment, Subsidies, and Universal Service: Broadband Internet in the United States

Abstract

Access to the internet is critical for participating in modern society, and yet many Americans lack access to high-speed internet. A key objective of U.S. telecommunications policy is to promote policies that advance the availability of quality telecommunications services, with the goal of universal service. I develop a dynamic model of internet service providers’ entry, exit, and upgrade decisions. Estimating this model reveals the determinants of profits and variation in firms’ costs. I then use this information to simulate a variety of subsidy policies, and explore how the use of targeted subsidies can improve high-speed internet access.