Gregory L. Rosston

The "State" of Universal Service

The introduction of competition forces regulators to address the historical practice of using of implicit cross subsidies to maintain uniformly low local telephone service rates. The Federal Communications Commission recently adopted rules to remove a portion of these implicit subsidies by adopting an explicit universal service program. This program, however, only addresses a small portion of the problem and leaves to the states problems associated with intrastate cross subsidies. In this paper we examine several alternative universal service programs that states may adopt. Overall, we find that universal service programs that base subsidy dollars on the cost of providing service have little effect on telephone penetration rates and result in large taxes, which distort market outcomes and drive those paying into the system from the network. Large universal service programs also cause competitive distortions. Furthermore, we find that cost-based mechanisms do an equally poor job when we use normative criteria, such as the effect the programs have on the distribution of income.

Household demand for broadband internet service

How much are consumers willing to pay for broadband service?

Household Demand for Broadband Internet in 2010

Abstract This paper uses data from a nationwide survey administered during late 2009 and early 2010 to estimate a random utility model of household preferences for broadband Internet service. Reliability and speed are important service characteristics: the representative household is willing to pay

An Insiders' View of FCC Spectrum Auctions

20 per month for more reliable service;

The long and winding road: the FCC paves the path with good intentions

45 for an improvement in speed from slow to fast; and

The Effect of Private Interests on Regulated Retail and Wholesale Prices

48 for an improvement in speed from slow to very fast. A representative household would be willing to pay

Local telephone rate structures: before and after the Act

79 per month for a fast, reliable Internet service. Internet valuations increase with experience, and there has been an estimated two- to three-fold increase in consumer surplus per household between 2003 and 2010. If experience causes increased valuation, targeted programs that educate households about the benefits from broadband, expose households to the broadband experience and/or directly support the initial take-up of broadband have potential to increase overall penetration in the United States.

Spectrum flexibility will promote competition and the public interest

After a long period of awarding spectrum licenses inefficiently, changes in the budget and budgetary process coupled with increases in the value of the spectrum for non-broadcast use led Congress to allow the Federal Communications Commission to award licenses through competitive bidding. Contrary to the perceived view of government bureaucracies as excessively cautious, the FCC used the newfound authority to adopt a novel approach to auction design—simultaneous multiple round auctions. The innovative auction design would not have been adopted without the successful collaboration between government economists and academic economists, who helped to formulate and refine the design so that decision makers at the FCC could be convinced that the novel technique was both superior and practical. The FCCs implementation of competitive bidding was not only rapid as mandated by Congress, but also much less costly than outside alternatives and allowed the integration of spectrum policy decisions and auction design. Experience from several auctions has led to a number of open questions and refinements. The FCC is trying to replicate the success with the original auction design by facilitating dialog between the agency and outside auction experts in order to address these issues.

The rise and fall of third-party high-speed access

This paper shows through several case studies that the Federal Communications Commission is having a difficult time moving toward more reliance on market forces. The case studies highlight the problems with a case-by-case approach to spectrum management rather than a wholesale change in policy. The paper then proposes a concrete method for moving toward much more market-oriented spectrum policy. It proposes a method of nomination and grant of additional flexibility and then a free entry system without barriers to entry. The gains in consumer welfare from such a move could be substantial.

Incentive auctions

This paper examines how regulators behave in markets when there is a tension between retail competition and cross subsidy. Using retail and wholesale prices from regional Bell operating company territories and price‐cost margins as a proxy for political influence, we find that private interests influence the structure of retail prices, especially favoring rural residential customers. Political influence also extends to wholesale access prices, although the magnitude of its effect is small. Federal high‐cost universal service payments to a state do not reduce prices in that state’s rural areas but instead lower urban business prices.