The Timing of Broadband Provision: The Role of Competition and Demographics

Abstract

We examine the supply of DSL broadband by the incumbent local exchange company (LEC) in five U.S. states in the earlier years of deployment. Our empirical analysis shows that income, other demographics, and cost factors are important determinants of entry and availability, and thus, the supply side of the digital divide. After controlling for other factors, the racial characteristics of the area do not affect DSL provision. Demand-side factors explain possible redlining in the region studied, and there is no need for policies aimed at overcoming discrimination on the part of the provider. Our objective in gauging the importance of the various factors is to highlight the important drivers of broadband provision for policy makers. We conclude that policies to accelerate the narrowing of the broadband digital divide must either focus on the demand side of the market or increase the firms' profitability of entering less desirable areas.