[Here are two interesting pointers on how the Internet has emerged as a key engine for economic growth. Thanks to Rob Tai from a posting on Google policy blog and Dan Murphy –BSA]
Economic Impacts from Investments in Broadband
Broadband infrastructure is essential for the effective participation of businesses and organizations in today's economy. Research conducted by Strategic Networks Group (SNG), finds that the local economic growth and secondary investment enabled by broadband is 10 times the initial broadband investment and the contribution to Gross Domestic Product (GDP) is 15 times the initial investment. Broadband today is as vital as electrification was in the 1930's and increased participation in the digital economy results in economic and quality of life improvements.
Investments in broadband infrastructure strengthen regional economies by improving skills, competitiveness, and service delivery, thus enhancing the local business environment. Broadband provides communications and information-sharing capabilities that have trans-formative effects on business operations and relationships. Opportunities and additional value are created from new or improved products and services, the ability to create and leverage new business models, better management of resources, and increased operational efficiencies. The ‘playing field' is leveled between large vs. small, urban vs. rural, established businesses and entrepreneurs.
• For businesses of any size, broadband and e-business applications enable them to expand their market reach and revenue opportunities, improve service to customers, and become more competitive and profitable in the global economy. In particular, broadband delivers affordable e-business solutions for small and medium enterprises through hosted applications and Internet-based service innovations.
• For organizations of any size, broadband and e-business applications enable them to improve service, become more cost effective and continue to be effective in the face of increased service demand and shrinking budgets.
• For individuals and residences, broadband delivers services such as Internet telephony (VoIP), Internet connectivity, movies and IP TV, tele-health, as well as new opportunities such as being able to work from home.
The impacts from investments in broadband infrastructure and broadband-enabled applications are measurable and significant. The immediate effects from an investment in broadband are twofold. The first comes from the construction of the broadband infrastructure. The affected residents, businesses and organizations then invest in the skills, know-how, tools and facilities to take advantage of broadband and e-business solutions so they can more effectively participate in the digital economy. These secondary economic effects take longer, but have far greater impact as they improve productivity, competitiveness and quality of service on an ongoing basis.
The table below provides two examples of the economic impact of broadband investments (infrastructure and applications such as e-business, tele-medicine and remote learning) from studies conducted by SNG in Canada in 2004 and 2003. Broadband impact data on new revenues, reduced costs, and new jobs were collected directly from businesses and organizations. Investment in broadband increased the retention and expansion of existing businesses and organizations within the local area. As businesses became more profitable and competitive, they expanded, which increased local employment, local training, local spending and investment in facilities and equipment. These outcomes flow through to the rest of the local economy creating a multiplier effect from the initial broadband investment. Input-Output impact models were used to calculate the contribution to GDP:
Investment and Impacts of Broadband Infrastructure Case example from investment in community broadband infrastructure Case example from investment in e-learning, tele-medicine and broadband infrastructure
Initial Investment in broadband infrastructure by government $10 million $10 million
Leveraged Investment (i.e. first round effect) from other sources (private sector, other levels of government, etc.) $116 million $101 million
Total Investment $126 million $111 million
Contribution to GDP from Total Investment $164 million $150 million
Contribution to Total Employment* 2,100 4,800
Contribution to Taxes*
(State and Federal) $61 million $32 million
*Note – impacts on Total Employment and Taxes vary according to the types of jobs created and investments made. Adapted from a study conducted by SNG in 2003 for Department of Trade & Industry, United Kingdom. Adapted from a study conducted by SNG in 2004 for Industry Canada.
Infrastructure investment in broadband provides a healthy return in its own right, even for relatively small and rural communities. Broadband infrastructure construction has job impacts immediately in the local economy like typical shovel-ready investments. More significantly, as the table above shows, investment in broadband infrastructure increases the retention and expansion of businesses and organizations to a community or region.
The positive effects from broadband infrastructure become even more important in times of economic uncertainty, especially for smaller, rural communities who often have less economic diversity and resilience to withstand the effects of an economic slowdown. The availability of broadband gives enterprises, in smaller or rural communities, the options to expand their market reach and thereby becoming more efficient during difficult economic times. Individuals can use broadband find new opportunities, including supplemental education and skills training, out-of-region employment through tele-working / working from home, and from starting-up new businesses.
In parallel with addressing broadband gaps in coverage, capacity and quality of service, local businesses and organizations need to understand how to ‘connect the dots' and move having broadband towards effective participation in the digital economy. This involves promoting awareness of the benefits of broadband and e-business solutions with the follow-on of supporting implementations that benefit business operations and service delivery. This often requires intensive engagement and repeated visits, however such a ‘grass roots' approach with individual businesses and organizations is needed for them to understand and apply the lessons of "best of class" e-business solutions and success models. Such local linkages are needed to show how investing in broadband infrastructure offers a significant and immediate economic lift to a community or region. Addressing local broadband infrastructure gaps and accelerating adoption of e-business solutions are fundamental to promoting regional economic development that is built on competitive businesses and skilled human resources.
Just like electrification in the '30s, broadband service (coverage, capacity and quality of service) is critical to the long term prosperity of communities and gaps need to be addressed, whether for un-served rural areas or under-served regions. Service providers that have not made investments in these regions during good economic time are even less likely to do so during an economic slowdown. Furthermore, just like during the electrification expansion of the 1930's, many municipalities do not have the financial or human resources to make the broadband investment.
In summary, investing in broadband infrastructure now can alleviate the challenges faced by communities and regions in the short term, while providing a positive impact on long term economic and community development.
[From Google Policy Blog..]
With news of bankruptcies and bailouts dominating the headlines recently, it's easy to lose sight of one of the bright spots in our economy: the Internet. In an incredibly short amount of time the Internet has emerged as a key driver of economic growth, creating millions of American jobs that generate hundreds of billions of dollars in economic activity.
… According to Harvard Business School professors John Deighton and John Quelch, the Internet is responsible for 3.1 million American jobs and $300 billion in economic activity spread throughout the United States. As Professors Deighton and Quelch put it, the web "has created unprecedented opportunities for growth among small businesses and individual entrepreneurs."
As the report makes clear, it's difficult to overstate the social and economic benefits of the Internet on the United States. Unlike any other platform in history, it has empowered entrepreneurs to start new businesses and connect with customers around the world, and has provided users with access to unprecedented amounts of information.
We think it's important for policymakers to understand the social and economic benefits of the Internet. That's why I was happy to see IAB also announce this afternoon the launch of the Long Tail Alliance, a group of small independent online businesses working to educate policymakers about the benefits of online advertising and to advocate against burdensome restrictions that would damage the Internet economy. In conjunction with the release of the new study, a group of Long Tail Alliance members representing 25 Congressional districts and 13 states took a maiden voyage to Washington to tell Congress their story. Check out some of what they have to say at "I Am the Long Tail."
WASHINGTON, D.C. (June 10, 2009) – Interactive advertising is responsible for $300 billion of economic activity in the U.S., according to a new study released today by the Interactive Advertising Bureau (IAB). The advertising-supported Internet represents 2.1% of the total U.S. gross domestic product (GDP). It directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs. A total of 3.1 million Americans are employed thanks to the interactive ecosystem. These are the key findings of the first-ever research to analyze the economic importance, as well as the social benefits, of the Internet.
“This is the first time anyone has undertaken a comprehensive analysis of the size and scope of the Internet economy and measurement of its economic and social benefits,” said Professor Deighton, the Harold M. Brierley Professor of Business Administration at Harvard Business School, and an author of the study. “I am convinced the results of this study will prove useful for business leaders, legislators and the educational community.”
“This study underscores that the Internet ecosystem is generating an increasing level of economic activity in every corner of the nation,” said Professor Quelch, the Lincoln Filene Professor of Business Administration at Harvard Business School and a co-author of the study.
The study looks at the entire interactive marketing ecosystem, which includes:
• The ad-supported Internet, narrowly defined as the content and usage supported by an estimated $23.4 billion of Internet advertising in 2008
• E-mail, the cornerstone of lead generation and customer care for many companies
• Enterprise websites, the Web sites that businesses, large and small, develop and maintain for communication.
Among some of the other important findings:
• Small businesses have thrived as a result of the Internet:
o There are more than 20,000 Internet-related small businesses in the U.S. that provide a variety of services such as web hosting, ISP services, web design, publishing, and Internet-based software consulting. Many of these businesses have 10 or fewer employees.
• Internet-related employment is particularly important to certain areas of the country but exists in every one of the 435 U.S. Congressional Districts. Some Congressional Districts have more than 6,000 Internet-related employees.
• Interactive advertising has substantially reduced what consumers have to pay for access to the Internet and for e-commerce products and services. In addition to its financial contribution to the U.S. economy, the Internet has produced large social consequences as an infrastructure and platform, providing American society comprehensive qualitative benefits that include:
o Universal access to an almost unlimited source of information
o Increased productivity (output per unit of capital or labor, or increased consumer utility at a lower cost)
o Innovation in business practices, consumer behavior, commerce and media
o Empowerment of entrepreneurs to start small businesses, find customers and grow
o Environmental benefits derived from saving natural resources lowering pollution through the reduced use of petroleum-based fuels and paper
Bill St. Arnaud
- Bill St. Arnaud is a consultant and research engineer who works with clients around the world on a variety of subjects such as next generation Internet networks and developing practical solutions to reduce CO2 emissions such as free broadband and dynamic charging of eVehicles. He is an author of many papers and articles on these topics and is a frequent guest speaker. For more details on my research interests see https://www.researchgate.net/profile/Bill_Arnaud