The Tragedy of the Last Mile: Congestion Externalities in Broadband Networks

Jacob Malone (), Aviv Nevo () and Jonathan Williams ()
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Jacob Malone: University of Georgia, Department of Economics
Aviv Nevo: University of Pennsylvania, Department of Economics
Jonathan Williams: University of North Carolina - Chapel Hill, Department of Economics

No 16-20, Working Papers from NET Institute

Abstract: We exibly estimate demand for residential broadband accounting for congestion externalities that arise among consumers due to limited network capacity, as well as dynamics arising from nonlinear pricing. Our high frequency data permits insight into temporal patterns in usage across the day that are impacted by network congestion, and how usage responds to efforts to mitigate congestion. To estimate demand, we build a dynamic model of consumer choice and rely on variation in the timing of network upgrades and nonlinear pricing to identify the model. Using the model estimates, we calculate the welfare changes associated with different economic and technological solutions for reducing congestion, including peak-use pricing, throttling connectivity speeds, and local-cache technologies.

Keywords: demand; broadband; congestion; peak-use pricing (search for similar items in EconPapers)
JEL-codes: L11 L13 L96 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-09
New Economics Papers: this item is included in nep-com, nep-ict, nep-ind, nep-mkt, nep-net, nep-pay and nep-reg
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