Estimating the Impact of Low-Income Universal Service Programs

Daniel Ackerberg, David DeRemer, Michael Riordan (mhr21@columbia.edu), Gregory Rosston (grosston@stanford.edu) and Bradley Wimmer (bradley.wimmer@unlv.edu)
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Michael Riordan: Columbia University
Gregory Rosston: Stanford Institute for Economic Policy Research
Bradley Wimmer: University of Nevada, Las Vegas

No 12-016, Discussion Papers from Stanford Institute for Economic Policy Research

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 low-income households. Our results suggest that Linkup is more cost-effective than Lifeline and that auto-enroll policies are important, 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.

Date: 2013-04
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Related works:
Journal Article: Estimating the impact of low-income universal service programs (2014)
Working Paper: Estimating the Impact of Low-Income Universal Service Programs (2013)
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