Speed 2.0. Evaluating Access to Universal Digital Highways

Gabriel Ahlfeldt, Pantelis Koutroumpis and Tommaso Valletti

SERC Discussion Papers from Centre for Economic Performance, LSE

Abstract: This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. We combine microdata on property prices in England between 1995 and 2010 with local availability of Internet broadband connections. Rich variation in Internet speed over space and time allows us to estimate the causal effect of broadband speed on property prices. We find a significantly positive effect, but diminishing returns to speed. Our results imply that an upgrade from narrowband to a high-speed first generation broadband connection (offering Internet speed up to 8 Mbit/s) could increase the price of an average property by as much as 2.8%. A further increase to a faster connection (offering speeds up to 24 Mbit/s) leads to an incremental price effect of an additional 1%. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.

Keywords: Internet; property prices; capitalization; digital speed; universal access to broadband (search for similar items in EconPapers)
JEL-codes: H4 L1 R2 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-eur, nep-ict and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Speed 2.0: Evaluating Access to Universal Digital Highways (2017)
Working Paper: Speed 2.0: evaluating access to universal digital highways (2017)
Working Paper: Speed 2.0 - Evaluating access to universal digital highways (2016)
Working Paper: Speed 2.0 - Evaluating Access to Universal Digital Highways (2015)
Working Paper: Speed 2.0. Evaluating access to universal digital highways (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:sercdp:0161

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