Investment and Usage of the Subsea Internet Cable Network

Department of Economics and Decision Sciences

Speaker:  Jihye Jeon (Boston U)

Room T-014

Abstract :

This paper studies the construction and use of undersea internet cables and their role in shaping global data flows. We develop a structural model in which countries exchange data, and these data flows traverse the cable network. On the supply side, firms decide whether to invest in new cables, taking into account their impact on global data flows. We estimate this model using new data on cable construction and usage via moment inequalities. Our results show that improvements in the cable network are an important contributor to internet usage growth, comparable in magnitude to secular trends. Counterfactual analysis reveals that the observed network diverges from the social optimum, with the inefficiencies arising primarily from network spillovers rather than business stealing.

Joint work with: Marc Rysman