Assessing Broadband Policy Options: Empirical Evidence on Two Relationships of Primary Interest

The Biden Administration and the U.S. Congress are contemplating spending tens of billions of dollars on policy interventions to increase the deployment of broadband networks with the objective of increasing broadband adoption. While several proposals are on the table, it appears that there are two types of subsidies under consideration: (1) subsidies for new network deployment to unserved areas; and (2) subsidies for the construction and operation of government-owned networks in possibly already served areas for the purpose of reducing prices by increasing “competition.” Other policies to reduce price, including rate regulation, are also being considered. Though the “best” mixture of funding across the options presented here is a complex issue, much headway may be made by quantifying two empirical relationships: (1) the relationship between adoption and network availability; and (2) the relationship between adoption and broadband service price (i.e., the own-price elasticity of demand). Here I use data on broadband, adoption (for fixed services including cable, DSL, and fiber) and an index of broadband prices to estimate both relationships. Other things equal, the data suggest that a home newly-passed by a broadband network has a very high probability of adopting broadband, not unlike the average adoption rate (about 85%). Expanding broadband availability to unserved areas will have a potent effect on adoption. The data are much less encouraging about expanding adoption through pricing policies.