The Impacts of the Lifeline Subsidy on High-Speed Internet Access
This paper evaluates the impacts of the Lifeline subsidy on high-speed Internet prices, demand, and welfare. Results show that low-income households would require large price reductions to subscribe to basic broadband. Simulations of competition between cable and telephone firms show that the $9.25 subsidy lowers the prices for low-quality plans and incentivizes about 6 percent of low-income households to take up high-speed Internet. When firms price discriminate by charging different prices to low- and high-income households choosing the same plan, about 25 percent of low-income households enter the market and consume high-speed Internet. When the social planner sets prices and price discriminates, 68 percent of low-income households enter the market, and more higher-speed plans are consumed.
Mendez, Samara; Molnar, Gabor; and Savage, Scott J.
"The Impacts of the Lifeline Subsidy on High-Speed Internet Access,"
Journal of Law and Economics: Vol. 64:
4, Article 4.
Available at: https://chicagounbound.uchicago.edu/jle/vol64/iss4/4