Evidence of a Modest Price Decline in US Broadband Services

Shane Greenstein, Ryan C. McDevitt

NBER Working Paper No. 16166
Issued in July 2010
NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

In this paper, we construct a price index for broadband services in the United States between 2004 and 2009. We analyze over 1500 service contracts offered by DSL and cable providers in the United States. We employ a mix of matched-model methods and hedonic price index estimations to adjust for qualitative improvements. In general, we find some evidence of a quality-adjusted price decline, but the evidence points towards a modest decline at most. Our estimates of the price decline range from 3% to 10% in quality-adjusted terms for the five-year period, which is faster than the BLS estimates for the last three years. These modest price declines look nothing like other parts of electronics, such as computers or integrated circuits, which raises many questions. The results also inform a range of policy discussions about US broadband services.

A non-technical summary of this paper is available in the December 2010 NBER Digest.  You can sign up to receive the NBER Digest by email.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w16166

Published: Greenstein, Shane & McDevitt, Ryan, 2011. "Evidence of a modest price decline in US broadband services," Information Economics and Policy, Elsevier, vol. 23(2), pages 200-211, June. citation courtesy of

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