TPRC 2024: The 52nd Research Conference on Communications, Information and Inter

Link to paper
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4925783

Abstract:
This paper studies the construction and use of undersea internet cables. In our model, firms decide whether to invest in new cables and then country-level demand for data leads to flows across the cable network. Investment in any one market affects global data flows. We estimate this model using new data on cable construction and usage via moment inequalities. Decomposing growth in internet usage into growth in demand and improvements in the cable network shows that the latter is an important contributor. Our counterfactuals highlight the role of business stealing and network spillovers in generating an inefficient allocation of cables.