Author: Heather Haught
Few researchers today would argue with the idea that broadband Internet and related information communication technologies contribute to economic growth. Research has demonstrated, for instance, that greater broadband penetration rates are associated withper capita GDP growth in a variety of countries including the United States, Germany, and Sweden (among others).1 A similar pattern has also been demonstrated at the state level.2
Research suggests that broadband Internet and related technologies may contribute to GDP through various pathways:3
1. Jobs needed to create and expand the network.
2. Business productivity increase – broadband Internet increases businesses’ productivity through the adoption of more efficient business processes (e.g., streamlining supply chains, inventory optimization) and accelerates innovation through the introduction of novel consumer applications and services.
3. Household adoption – the adoption of broadband Internet at home may drive increases in household income; reduce the cost of existing consumer goods and services; and have various other benefits whose link to GDP is less clear, such as greater access to entertainment, telehealth services, and public safety alerts.
A simplified depiction of the relationship between GDP and broadband deployment is outlined in the figure below.
Importantly, the impact of broadband Internet and related technologies is not uniform; rather, its impact differs depending upon the industry sector under consideration and existing penetration rates.2,4 Regarding the latter, some have argued that the impact of broadband on economic growth may only be significant once high penetration rates are achieved.5 Existing research seems to support this idea. It has been demonstrated, for instance, that countries with broadband penetration rates above 30 percent reap greater economic benefits from broadband than those with lower penetration rates.1 Additional research is needed to understand whether a similar pattern emerges at the state level and to identify whether penetration rates interact with other factors such as the speed of broadband service.
1Koutroumpis, P. (2009). The Economic Impact of Broadband on Growth: A Simultaneous Approach. Telecommunications Policy, 33, 471-485.
2Thompson, H., & Garbacz, C. (2008). Broadband Impacts on State GDP: Direct and Indirect Impacts. Paper presented at the International Telecommunications Society 17th Biennial Conference, Canada.
3Katz, R. (2012).The Impact of Broadband on the Economy: Research to Date and Policy Issues. In the International Telecommunications Union’s Broadband Series, p.1-119.
4Waverman et al. (2009)
5 Katz, R. L., Zenhäusern, P. & Suter, S. (2008). An evaluation of socio-economic impact of a fiber network in Switzerland. Polynomics and Telecom Advisory Services, LLC.