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Speed 2.0. Evaluating access to universal digital highways

Ahfeldt, Gabriel M. and Koutroumpis, Pantelis and Valletti, Tommaso (2014) Speed 2.0. Evaluating access to universal digital highways. SERC Discussion Paper, SERCDP0161. Spatial Economics Research Centre, The London School of Economics and Political Science, London, UK.

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Identification Number: SERCDP0161

Abstract

This paper shows that having access to a fast Internet connection is an important determinant of capitalization effects in property markets. We combine microdata on property prices in England between 1995 and 2010 with local availability of Internet broadband connections. Rich variation in Internet speed over space and time allows us to estimate the causal effect of broadband speed on property prices. We find a significantly positive effect, but diminishing returns to speed. Our results imply that an upgrade from narrowband to a high-speed first generation broadband connection (offering Internet speed up to 8 Mbit/s) could increase the price of an average property by as much as 2.8. A further increase to a faster connection (offering speeds up to 24 Mbit/s) leads to an incremental price effect of an additional 1. We decompose this effect by income and urbanization, finding considerable heterogeneity. These estimates are used to evaluate proposed plans to deliver fast broadband universally. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong.

Item Type: Monograph (Report)
Official URL: http://www.spatialeconomics.ac.uk
Additional Information: © 2014 The Authors
Subjects: P Language and Literature > PN Literature (General) > PN1990 Broadcasting
Sets: Research centres and groups > Spatial Economics Research Centre
Date Deposited: 31 Jul 2014 14:18
Last Modified: 01 Aug 2014 09:29
Funders: Economic and Social Research Council, Department for Business, Innovation & Skills, Welsh Government
URI: http://eprints.lse.ac.uk/id/eprint/58592

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