Association for Public Policy Analysis & Management

Broadband Internet access may help to reduce disparities for minority, low-income, and rural households, but lack of competition among US broadband service providers in local markets may lead to high prices and low quality, which would decrease the attractiveness of household Internet access. The extent of competition among US broadband service providers has been a focus for scrutiny and policy debate since the beginning of the current century. The pessimistic view is that in most US residential areas, market structure is basically remains a duopoly: a sole local cable network competes in wired broadband against a sole DSL service network. The optimistic view, on the other hand, focuses on evident and highly visible examples of entry by new competitors, including resellers, innovative fixed wireless service providers, and new investments in high speed fiber connections. Which of these two conflicting perspectives best summarizes what is going on as competition has evolved in local US broadband markets? Layered on top of this question is the issue of whether the evolution of competition in local US broadband markets has differentially affected the broadband service choices available to low income and minority populations. Fortunately, we can now provide an empirical foundation for a data-driven answer to these questions.

To examine these issues, we construct detailed estimates of the distribution of competing residential fixed broadband internet service providers across US census blocks, characterize apparent shifts in the distributions of competing broadband ISPs at the national level, then test these distributions for evidence of statistically significant changes over time. In addition, we construct lower bounds on Hirschman-Herfindahl Indexes (HHIs) of local concentration. Our preliminary results suggest substantial variation in market concentration, both over time, and across both states and MSAs, during the 2014-2017 period. Census blocks with large low income and minority populations also seem to have experienced considerable variation in changes in market structure over time.

One key insight from our analysis is that the degree of spatial disaggregation is critical in arriving at sensible conclusions about numbers of competing ISPs relevant to consumer choices. Contrasts between urban and rural areas, and areas with substantial low-income and minority populations are very different when analyzed at the census tract level, vs. census block level. Switching from tracts to blocks reduces residential service provider counts by roughly 2 providers at most percentiles of their distribution. Rural census tracts (which are vastly larger, on average, than urban census tracts) generally appear to have more residential ISPs serving them, at equivalent percentiles of their distribution, than urban census tracts. But when much smaller census blocks are analyzed, and satellite ISPs dropped from the comparison, that conclusion is reversed—urban census blocks have greater numbers of ISPs serving them than rural census blocks, at most percentiles of their distributions.

The paper concludes with discussion of implications for broadband policy, especially as regards minority, low-income, and rural households.