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Estimating the impact of low-income universal service programs

Daniel Ackerberg, David DeRemer, Michael H. Riordan, Gregory L. Rosston and Bradley S. Wimmer

International Journal of Industrial Organization, 2014, vol. 37, issue C, 84-98

Abstract: This policy study uses U.S. Census microdata to evaluate how subsidies for universal telephone service vary in their impact across low-income racial groups, gender, age, and home ownership. Our demand specification includes both the subsidized monthly price (Lifeline program) and the subsidized initial connection price (Linkup program) for local telephone service. Our quasi-maximum likelihood estimation controls for location differences and instruments for price endogeneity. The microdata allow us to estimate the effects of demographics on both elasticities of telephone penetration and the level of telephone penetration. Based on our preferred estimates, the subsidy programs increased aggregate penetration by 6.1% for households below the poverty line. Our results suggest that automatic enrollment programs are important and that Linkup is more cost-effective than Lifeline, which calls into question a recent FCC (2012) decision to reduce Linkup subsidies in favor of Lifeline. Our study can inform the evaluation of similar universal service policies for Internet access.

Keywords: Telecommunications; Universal service; Subsidies; Demand estimation (search for similar items in EconPapers)
JEL-codes: H20 L00 L50 L96 L98 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Estimating the Impact of Low-Income Universal Service Programs (2013) Downloads
Working Paper: Estimating the Impact of Low-Income Universal Service Programs (2013) Downloads
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DOI: 10.1016/j.ijindorg.2014.07.009

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Handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:84-98