Competition in Broadband Provision and the Digital Divide

Abstract

This chapter examines the supply of DSL broadband by the incumbent local exchange company (LEC) in five U.S. states in the earlier years of deployment. Our empirical analysis shows that income, other demographics, and cost factors are important determinants of entry and availability. After controlling for other factors, the racial characteristics of the area do not affect DSL provision. Active competition in broadband from competitive LECs reduces deployment of DSL by the incumbent, but potential competition from competitive LECs has the opposite effect. Competition from cable companies also negatively influences the incumbent’s decision to supply DSL. Our objective in gauging the importance of the various factors is to highlight the important drivers of broadband provision for policymakers.