The Impact of Submarine Cables on Internet Access Price, and the Role of Competition and Regulation

Joël Cariolle, Georges Vivien Houngbonon, Tarna Abdoul Hamid Silue and Davide Strusani

No 10840, Policy Research Working Paper Series from The World Bank

Abstract: Submarine cables enable international connectivity and are essential for high-speed internet access. This paper tests their potential to improve the affordability of internet access by supporting a price drop through cost savings or increased competition intensity. The empirical framework relies on a dataset that combines the capacity of submarine cables with price data on fixed and mobile internet across 150 countries over a decade. Using a two-way fixed effects estimator, the analysis finds that the expansion of submarine cables is associated with a statistically significant drop in the price of internet access, up to 14–21 percent, depending on the technology, for every doubling of the capacity of submarine cables, and with large regional disparities. These effects stem from cost savings in the short run and tend to decline over time, concomitant with a rise in domestic telecom market concentration. The analysis also finds that these effects can be enhanced by telecom regulations, especially de-jure independence of the regulator, and the regulation of network interconnection and access, shared telecom infrastructure, and competition from international players across the broadband value chain. The main findings are robust to alternative estimation strategies, including an instrumental variable and a staggered difference in differences.

Date: 2024-07-09
New Economics Papers: this item is included in nep-com, nep-ict and nep-reg
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