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  5. Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access

  • Kyle Wilson
American Economic Journal: Microeconomics (Forthcoming)

Abstract

Government infrastructure investment may crowd out investment from private firms or induce them to invest preemptively. The tension between these effects underlies the policy debate over municipal provision of internet access. I estimate demand for broadband and combine these results with a dynamic oligopoly model of private and public firms’ entry and investment decisions. I simulate a ban on public entry and find that municipalities crowd out more private fiber-optic investment than they induce through preemption. I estimate that this ban decreases consumer surplus and municipal profits by $27 billion while increasing private profits by $23 billion over 10 years.

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