Horizontal Ownership Concentration and Broadband Investment: Evidence and Implications

Abstract

Horizontal ownership concentration and its consequences is an extraordinarily important contemporary topic. Yet, outcomes evidence is slim. Based on historical data, this retrospective analysis has assessed the impact of horizontal acquisitions on communications infrastructure investment, using broadband technology adoption for the local exchange company population in the United States telecommunications industry as the evaluated case. These entities have engaged in a series of acquisitions of other horizontal company owners, and sector ownership has become concentrated, with a few firms controlling the bulk of the sector’s assets. Based on a battery of test procedures, to establish the robustness of results, the evidence indicates that horizontal ownership diffusion and concentration has been causally associated with materially-significant lower broadband deployment, and dominant firms have adopted almost half less broadband technology relative to the average deployment of such infrastructure. Additional tests using alternative ownership concentration measures support the main results. The results support the idea that spread of horizontal ownership is associated with competition softening and its consequences for acquired firms to behave in ways that could deter entry and compromise competitors’ businesses.