Broadband Internet access is recognized as a critical component of our global communications infrastructure, and significant public policy reforms and proactive programs are in place and under consideration to ensure continued investment to make broadband services competitively available to all U.S. citizens. There is an on-going debate regarding whether there is a broadband digital divide, whether emphasis should shift from concern over service availability to usage (penetration), and whether markets or direct government interventions would most effectively promote broadband growth.
To date, these discussions have suffered from a lack of solid empirical data measuring the
economic impact of broadband. This is not surprising given the daunting data and methodological challenges with measuring the economic effects of information technology generally (e.g., the “Solow Productivity Paradox") and of broadband, in particular. Assembling good comparable data on the economic effects of IT is difficult, and on a microlevel (firm or community-level data), data sources are quite limited.17 The problem is further aggravated by the lack of appropriate data to measure the extent of broadband usage. The FCC's zip-code data on broadband availability since December 1999 offers the best publicly available community-level indication of the extent of national broadband deployment. Unfortunately, penetration data is only available at the state-level which we believe is too aggregated to offer reliable estimates of broadband's economic impacts.18 Finally, at this early stage in the growth of broadband and the inevitable lag in publishing reliable economic performance data, it has been too early to be able to produce empirically sound estimates of broadband's economic impacts. While it is still early, this paper offers some preliminary estimates utilizing the economic data in the biennial business Census from 2002 (the most recent date for which data is available). We match this with earlier Census data and with the FCC data on broadband availability to produce a panel data sample with which to identify potential impacts of broadband on economic activity (employment, wages,
and industry structure).
The analysis we present here supports the view that broadband access does enhance economic growth and performance. We find that between 1998 and 2002 (see Table 15), communities in which mass-market broadband was available by December 1999 experienced more rapid growth in (1) employment, (2) the number of businesses overall, and (3) businesses in IT-intensive sectors. In addition, the effect of broadband availability by 1999 can be observed in higher market rates for rental housing in 2000. This analysis is perforce preliminary because additional data and experience are needed to more accurately address this important question; however, the early results presented here suggest that the assumed (and oft-touted) economic impacts of broadband are both real and measurable.
There are several clear implications for policy-makers. First, all of those who have been spending their time worrying about promoting broadband should take comfort that their efforts are not in vain.
Second, while the initial evidence suggests that there are significant economic impacts, more research is needed to enhance the quality of these measures. An especially pressing problem is the need for better microdata on how broadband is being used and on the quality of broadband. The current definition of what constitutes broadband sets a pretty low threshold that does not adequately distinguish between services that are only marginally better than legacy dialup and real next generation broadband services that offer data rates of multiple MBps. Additionally, knowing that broadband is available is not as useful as knowing whether and how it is being used, or the state of broadband competition (which also will require better data on pricing and market shares). Such data is inherently sensitive to collect, and so conducting rigorous empirical analyses with which to inform public communications policy debates is challenging. Nevertheless, such work is important and needs to be done if we are to frame effective policy. Cross-national studies of broadband, more case studies, and multidisciplinary research that jointly considers technical, business, and policy issues are needed to understand this critical aspect of our global information infrastructure. The good news is that as researchers we anticipate having an important agenda of issues to address into the future.
Measuring Broadband’s Economic ImpactDo a little bit of searching and well look what we find!
