Rev Ind Organ (2011) 38:151–171
DOI 10.1007/s11151-011-9289-5
Market Power in US Broadband Services
Thomas W. Hazlett · Dennis L. Weisman
Published online: 20 March 2011
© Springer Science+Business Media, LLC. 2011
Abstract The US residential broadband market is commonly characterized as a
duopoly consisting of telephone carriers (digital subscriber lines) and cable TV oper-
ators (cable modems). The implication is drawn that market power obtains; this, in
turn, drives recommendations for new competition policy remedies. Yet, market power
cannot be directly deduced from market shares or price-cost margins. We develop
an economic analysis that examines both static and dynamic factors in consider-
ing market power, finding that fixed broadband providers do not appear to generate
supra-competitive returns. Public policies to regulate broadband providers should be
informed by these marketplace conditions.
Keywords Broadband · Efficiency · Market power · Telecommunications
JEL Classification K21 · K23 · L51 · L96
1 Introduction
There is an age-old tension in the political economy literature at the nexus between
static and dynamic efficiency. This tension was (and is) the central confusion in the
controversial and litigious implementation of the 1996 Telecommunications Act. To
wit, pervasive network unbundling may reduce retail price-to-cost margins, thereby
T. W. Hazlett (
B
)
Department of Economics and School of Law, George Mason University, 325 Hazel Hall,
3301 Fairfax Drive, Arlington, VA 22201, USA
e-mail: thazlett@gmu.edu
D. L. Weisman (
B
)
Department of Economics, Kansas State University, 246 Waters Hall, Manhattan, KS 66506, USA
e-mail: weisman@ksu.edu
123
@Phil_Robichaud
@deepthiw
@JoseServera