The Impact on Broadband Access to the Internet of the Dual OwnershipofTelephone and Cable Networks

In Portugal, the telecommunications incumbent offers broadband access tothe Inter- net, both through digital subscriber line and cable modem. Inthis article, we estimate the impact on broadband access to the Internetof the structural separation of these two businesses. We use a panel ofconsumer level data and a discrete choice model to estimate the priceelasticities of demand and the marginal costs of broadband access to theInternet. Based on these estimates, we simulate the effect on prices andsocial welfare of the structural separation. Our results indicate thatthe structural separation would lead to substantial price reductions.For broadband clients, on average, each household would save 3:37 eurosper month, or 14% of the current price levels. Overall, on average, eachhousehold would save 2:73 euros per month, or 14% of the current pricelevels. We test the robustness of our results in terms of: (i) theestimates of the demand elasticities, (ii) the strategic behavior of thefirms, and (iii) the market share estimates. There is no evidence of collusion.