Wednesday, July 4, 2007

The Effects of Broadband Deployment on Output and Employment

[This seems to be a reasonably well researched paper on the effects of broadband deployment on output and employment. Many previous studies on this topic tended to involve a lot of hand waving. I am a big believer in reduced regulation and that a truly competitive private sector market is the best solution to accelerate rollout broadband. However I remain skeptical of the intended purpose of the study when I see that the authors regularly consult for the big RBOCs and their conclusion is that "new regulatory policies not reduce investment incentives for these carriers". Many countries that are ahead of the US in terms of broadband penetration have concluded that some variant of structural separation is essential to promote broadband. I am think private sector led structural separation initiatives, without necessarily government regulation, is where things will naturally end up. As an example see

Thanks to Theodore Stout and Ross MacLeod for this pointer -- BSA]

Effects of Broadband Deployment on Output and Employment

The Power of Broadband

A new Brookings Institution study, by researchers Robert Crandall, William Lehr, and Robert Litan, takes a hard look at the economic effects of broadband deployment. While most casual observers would suspect that broadband deployment is a good thing, there are remarkably few empirical studies that detail its effects on output and employment. This new research indicates that broadband deployment does indeed have positive economic impacts. In fact, for every one percent increase in a state’s broadband penetration rates, employment increases at a rate of 0.2 to 0.3 percent per year. If these figures are aggregated to the national level, we find that this increase could lead to an additional 300,000 new jobs per year. Based on these early findings, the researchers recommend that state policymakers be more aggressive in terms of promoting competition in broadband services. This competition will help reduce costs, improve services, and further hasten deployment efforts.

Access the June 2007 Brookings Institution paper by Robert Crandall, William Lehr and Robert Litan.

"The finding of the strong link between broadband use and state-level employment has important policy implications, both on the demand-side and the supply-side. In particular, these results suggest that all levels of government should follow policies that encourage broadband competition, which will lead to lower prices and hence greater use. It should be noted, however, that increased use will require an expansion of supply, specifically greater investment by service providers in broadband infrastructure, which already is facing capacity constraints as new applications, such as video streaming, become ever more popular. It is critical, therefore, that new regulatory policies not reduce investment incentives for these carriers."