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The Impacts of the Lifeline Subsidy on High-Speed Internet Access

Samara Mendez, Gabor Molnar and Scott J. Savage

Journal of Law and Economics, 2021, vol. 64, issue 4, 745 - 782

Abstract: This paper evaluates the impacts of the Lifeline subsidy on high-speed Internet prices, demand, and welfare. Results show that low-income households would require large price reductions to subscribe to basic broadband. Simulations of competition between cable and telephone firms show that the $9.25 subsidy lowers the prices for low-quality plans and incentivizes about 6 percent of low-income households to take up high-speed Internet. When firms price discriminate by charging different prices to low- and high-income households choosing the same plan, about 25 percent of low-income households enter the market and consume high-speed Internet. When the social planner sets prices and price discriminates, 68 percent of low-income households enter the market, and more higher-speed plans are consumed.

Date: 2021
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Handle: RePEc:ucp:jlawec:doi:10.1086/714504