Economic Impacts of Broadband

B roadband has been increasingly recognized as a service of general economic interest in recent years.1 Broadband’s economic significance can be put into context by referring to similar changes in other areas of infrastructure, such as road, rail, and electricity. Each of these infrastructure services transforms economic activities for citizens, firms, and governments; enables new activities; and provides nations with the ability to gain competitive and comparative advantages. Though many of these advantages were unforeseen when original investments were made, they quickly became an essential part of economic lifestyles and activities. A similar assumption about the expected transformative benefits of broadband on economic and social variables has led many governments to set ambitious targets for its deployment. In making a case for public policy on broadband, many studies have sought to identify and measure broadband’s economic benefits. Though some of these studies have found a positive relationship between broadband access and economic development, most of them have been restricted to developed economies and their firms and communities, and to qualitative arguments and case studies. This chapter attempts to fill the gap on the macroeconomic evidence of broadband’s impact, in both developed and developing countries. This chapter has three sections. The first reviews the literature on the economic impacts of broadband—by enhancing the knowledge, skills, and networks of individuals; raising private sector productivity; and increasing community competitiveness. This section also explores broadband’s role as an enabling technology in increasing investment payoffs in other sectors, transforming research and development (R&D), facilitating trade in services and globalization, and improving public services to enhance national business environments and competitiveness. The second section introduces a cross-country empirical model for analyzing broadband’s impacts on economic growth using data from 120 developing and developed countries. Undertaking this quantitative analysis can provide policy makers with an assessment of the potential benefits of broadband and its impacts on the overall economy. The final section summarizes key results and implications for developing countries. The main conclusion is that broadband has a significant impact on growth and deserves a central role in country development and competitiveness strategies. This chapter is not intended to debate the technological, regulatory, and content aspects of broadband or to analyze its social and political impacts—an important but complex issue often surrounded by controversies and subject to local cultural contexts. The awareness clearly exists in the academic literature and among industry leaders that broadband is associated with different classes of impacts, ranging from enhanced social networks and interactions to increased political activism and the spread of democracy through the grassroots organization of political movements and the spread and control of information. This broader Chapter 3