Document Type

Preprint

Publication Date

6-1-2024

Journal / Book Title

Information Economics and Policy

Abstract

Two federal programs in the United States subsidize internet access for rural healthcare providers, namely, Healthcare Connect Fund (HCF) and the Telecom Program. HCF uses a subsidy mechanism that strongly incentivizes healthcare providers to shop for faster or cheaper internet. Telecom does not incentivize shopping. Theoretically, this predicts that HCF must achieve faster or cheaper internet than Telecom. I empirically test this question and find that Telecom subsidy recipients pay 132-179% more than HCF subsidy recipients on similar internet plans. Evidence point to Telecom's poor incentive design as the root cause. Eliminating this price gap would save American taxpayers $143 million annually. The findings highlight the power of program design, showcase the unintended consequences of misaligned incentives, and encourage policymakers to thoroughly examine program features, the impact on consumer behavior, and the effect on competition and market outcomes.

DOI

10.1016/j.infoecopol.2024.101082

Published Citation

Rabbani, Maysam, Dollars and megabits: a comparative analysis of Telecom and Healthcare Connect Fund (November 26, 2023). Available at SSRN: https://ssrn.com/abstract=4372621 or http://dx.doi.org/10.2139/ssrn.4372621

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