Policy Deterrence: Strategic Investment in U.S. Broadband

Can firms influence policy through investment? Using 2010--2019 U.S. broadband deployment and state policy data, we find that large internet service providers expand capacity more in electorally competitive counties. Greater large-provider capacity in swing counties is associated with fewer subsequent entry- and investment-facilitating policies, especially rights-of-way accommodations that reduce deployment barriers faced by smaller providers. To interpret these patterns, we develop a model in which a large firm's capacity can reduce the policymaker's gain from intervention. In the model, policy deterrence raises the large firm's market share and can reduce total deployment.