The Impact of Submarine Cables on Internet Access Price, and the Role of Competition and Regulation
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.
Main Authors: | , , , |
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Format: | Working Paper biblioteca |
Language: | English en_US |
Published: |
Washington, DC: World Bank
2024-07-16
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Subjects: | DIGITAL ECONOMY STRATEGY, SUBMARINE CABLE, PRICE CONTROLS, COMPETITION ECONOMICS, REGULATORY IMPACT ASSESSMENT, DECENT WORK AND ECONOMIC GROWTH, SDG 8, TELECOMMUNICATIONS, INDUSTRY, INNOVATION AND INFRASTRUCTURE, SDG 9, |
Online Access: | http://documents.worldbank.org/curated/en/099223207092441042/IDU1cabee90a10d73147681a3421d7461517cbab https://hdl.handle.net/10986/41874 |
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Summary: | 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. |
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