Economic Policy

Revising the Record: Six Stylized Economic Facts About Pre-Covid US Residential Broadband Markets

Whitepaper
Journal of Information Policy
Journal of Information Policy

This article reviews available public data on the pre-COVID (2014–2018) residential broadband markets in the United States, and presents six data-driven stylized economic facts about these markets. Broadband was a significant household expenditure. There were very limited numbers of competing residential broadband Internet service providers (ISPs) in most local markets. Service prices have not decreased much over time. Quality competition seems quite important. There was very limited entry by new ISPs. Technological innovation in wireless drove much observed new entry.

In this article, we1 analyze a large, rich, and complex dataset to derive a set of data-driven “stylized facts"2 about U.S. residential broadband markets prior to the COVID pandemic of 2019. Documenting these facts is important: it currently seems quite possible that structural changes in economic and social activities triggered by COVID may have persistent effects on broadband demand and supply after the challenges posed by the pandemic have disappeared. Additionally, the relationship between market structure, prices, and service quality has been a focus of interest to the U.S. Congress, including the recent example of passage of the Broadband Data Act. Our goal is to better understand recent industry dynamics so new data-driven policies addressing improved broadband availability and service quality can be designed.

These facts highlight a potential divergence in the effects of local market structure on residential broadband service price and quality. Available data suggest, first, that nominal prices for residential broadband service plans in the United States have basically been flat, on average—unchanged over the last decade. The major dimension for competition among major broadband internet service providers (ISPs) seems to be improved service quality, particularly upgrades to download speeds. Second, within a relatively short time window, we document evidence of substantial entry and exit by firms within spatially disaggregated local markets. Third, both technological innovation and regulatory policy changes may have significantly lowered the costs of quality improvements; we observe substantial variation in quality within a cross-section of spatial locations over time.

Consumer gains due to broadband quality improvements are potentially very large.3 Internet access has become an essential resource for much of the US population. While in 2000 only 52% of U.S. adults acknowledged that they were Internet users, around 90% now do so (Pew Research Center, 2019). Smartphones, music, video, TV streaming services, and online news sources are now integrated into the rhythm of daily life. For example, Netflix subscribers on average spend more than one hour per day streaming that one source of content (Meadows, 2019). The proportion of U.S. adults who own a smartphone has increased rapidly from 35% in 2012 to 81% in 2018 (Pew Research Center, 2019). These trends in the United States are similar across groups with different income, education, and ethnicities, and are mirrored in other countries around our world. For these reasons, improvements in Internet service quality have the potential to bring large impacts on household welfare: most people now use the Internet, and they use it intensively.4 Using Federal Communications Commission (FCC) data, we analyze a rich panel dataset that covers all broadband services delivered to households by ISP, technology and maximum download speed for each of approximately six million populated US census blocks between December 2014 and December 2018. We describe trends in market structure, quality, and technology utilization within this five-year period.

The remainder of the article is organized as follows. Section I describes related literature; section II describes data sources and how we built our analytical dataset; section III provides background and analysis supporting six stylized facts about the U.S. residential broadband Internet service industry; and section IV presents conclusions.5

Research Topic
Economic Policy

Measuring Moore's Law: Evidence from Price, Cost, and Quality Indexes

Book Chapter
Measuring Moore's Law: Evidence from Price, Cost, and Quality Indexes

"Moore's Law" in the semiconductor manufacturing industry is the predictable evolution of a manufacturing technology platform that has continuously reduced the costs of fabricating electronic circuits since the mid-1960s. This chapter reviews how this progression delivered 20 to 30 percent average annual transistor manufacturing cost declines while it lasted. We review how other characteristics associated with smaller feature sizes created additional economic value, and assess their historical trends. These benefits pose special challenges for price and innovation measurement, and motivate quality adjustment methods when measuring semiconductor product prices. Empirical analysis reveals a slowdown in Moore's Law as measured by quality-adjusted prices for the highest volume products: memory chips, custom chip designs outsourced to foundries, and Intel microprocessors. We assess whether Intel microprocessor price trends might diverge from those of other semiconductor chips. A model of chip characteristics' effects on microprocessor performance is specified and tested in a structural econometric model of processor performance. A small set of characteristics explains 99% of variance across processor models' performance on common benchmarks. The diverse effects of changing characteristics on manufacturing costs create a rationale for their inclusion in hedonic price models separate from their demand-side effects on computer performance.

Research Topic
Economic Policy

China and the Supply Chain: A Comment on the June 2021 White House Review

Article, Refereed Journal
Institute for New Economic Thinking

In January 2013, the Obama White House released a White Paper on "National Strategy for Global Supply Chain Security: Implementation Update." It was a short document, only 22 pages, almost wholly focused on the security of transport — of ships, air freight, the mails — against terrorism and other threats. What traveled through the supply chain, and from where, does not appear to have been a major concern.

In June 2021, the Biden White House published a "100-day review" entitled "Building Resilient Supply Chains, Revitalizing American Manufacturing and Fostering Broad-based Growth." It is focused on a very different concept of what the "supply chain" is; the term now encompasses the entire spectrum of upstream production. The Biden review takes these up in four areas: semiconductors, high-capacity batteries, critical minerals, and pharmaceuticals.

One might ask, why these four areas and not others? There is no clear answer, and it may be that choice was mainly bureaucratic. The review was compiled from separate reports by four cabinet departments: Commerce, Energy, Defense, and Health and Human Services. Had the Department of Agriculture been asked, or the Department of Transportation, one might have gotten different choices. Petroleum comes to mind. Or natural rubber — the linchpin of World War II in the Pacific.

Research Topic
Economic Policy

President Biden announces key administration nominations

April 27, 2021
Today, President Joe Biden announced his intent to nominate the following individuals to serve in domestic and economic positions.

Why women are suffering the biggest career losses during the pandemic

April 5, 2021
If the trend continues, advocates warn it could wipe out decades of gains.

Inequality under globalization: State of knowledge and implications for economics

Article, Refereed Journal
Real World Economics Review

Co-authored with LBJ School postdoctoral fellow Jaehee Choi, this paper considers the state of knowledge of economic inequalities, measured within countries over the past half-century, and presents a consistent, dense global data set which (a) permits the ranking of about 150 countries by their level of pay or income inequality, (b) permits the calculation of a global time trend for the evolution of inequalities from 1963 to 2014, and (c) demonstrates the close relationship between movements of exchange-rates and movement of pay and income inequality in a wide range of countries, excepting only the largest. The chief implication for economic science is that distribution should be considered part of a global macroeconomics driven largely by financial conditions, rather than as a microeconomic topic determined in labor and product markets.

Research Topic
Economic Policy

We need a radically different model to tackle the COVID-19 crisis

Commentary
Defend Democracy Press (Delphi Initiative)

"Disaster capitalism is being tried, and the worst case is now the likely case," writes LBJ's James Galbraith. "But there is a scale beyond which disaster capitalism cannot go. At a certain point, the carnage becomes too great to neglect, impossible to avoid and lethal to overlook. At a certain point, ordinary people will stand up and refuse to be bullied any more. That point has not quite arrived; we are still in the mind-set of "getting back to normal," even as the pandemic continues."

Research Topic
Economic Policy

An Analysis of Title Insurance Data

Report
Xue Gao

Texas, along with other states where the government sets title insurance rates, has significantly higher prices than states that allow more competition. On a per-policy basis, Texas's decision to set prices and restrict innovation adds from $292 (in 2001 dollars) to $1,663 (in 2016 dollars) in costs for the average purchaser of title insurance policies of $1 million dollars or less. Our analysis indicates that the promulgation of rates in Texas is a strong determinant that explains the state's higher title-related charges.

Research Topic
Economic Policy

The Political Economy of Development: The World Bank, Neoliberalism, and Development Research

Book Review
Prince, H. (2016). Book Review: The Political Economy of Development: The World Bank, Neoliberalism and Development Research. Review of Radical Political Economics, January: 1-3. doi: 10.1177/0486613415623253

pReview on a set of essays on the gap between reality and policy developed by the World Bank./p

Research Topic
Economic Policy
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