Does broadband help the economy?



One of the bigger public policy questions in recent years in regards to infrastructure and technological growth is “Does broadband help the economy?” Questions of this sort are extremely complex and difficult to answer. Besides definitional problems like “what does 'help the economy' mean?” establishing a causal relationship in economic matters is usually extremely difficult. Nonetheless, what thought and research has been done into this matter strongly suggests that, yes, broadband services do help the economy.

Some recent reports have looked specifically into the question. For example, a 2009 report issued by the Information Technology and Innovation Foundation predicts that by the year 2020, the United States could see an almost four-fold increase in telecommuting if broadband services continue to be widely adopted. According to their numbers, this would lead, by itself, to a 5% reduction in vehicle traffic – which, on a nationwide scale, would represent a huge savings in road maintenance and fuel costs, the other environmental benefits aside. On a personal level, these savings would translate into increased discretionary income, one of the most reliable stimulators of economic growth.

There was another recent study conducted by the Public Policy Institute of California that looked more closely at economic indicators than any previous study. They found that there is a positive relationship between the expansion of broadband service in an area and economic growth. They also provided some specific numbers. For example, they found that the introduction of broadband providers into an area that previously had none was associated with 6.4% higher employment growth between the years 1999 and 2006. They also found that during a previous period, 1992-1999 there was 3.5% employment growth in areas adding broadband. As applications utilizing broadband were limited during most of the 1990s, this may suggest an accelerating effect – that the more broadband applications exist, the more benefits come from adopting broadband services.

The report does acknowledge, however, that these gains are not universal. They noted that the Internet and broadband services can create competition against some traditional fields of business, such as traditional stores and live entertainment. However, they only found “weaker relationships” between broadband services and employment growth in these industries, suggesting any harm being done by broadband was also being mitigated by other boosts. In short, while establishing causal relationships is difficult, what research has been done strongly links broadband expansion and economic benefits.

Finally, it also seems worth mentioning that this answer also appears to have the weight of history behind it. Communication technologies have always been one of the drivers of human innovation and economic revolution. Few people today, if any, would seriously argue that the movable-type printing press, the telegraph, the telephone, or radio and television have not been major factors in economic growth for humanity. Whenever a new invention has come about that allows people to communicate more easily, quickly, and reliably with each other, economic success has come in its wake. There seems to be little credible reason to believe that broadband would somehow be the exception to this trend. In more recent history, one could also point to the astounding growth of South Korea from a mostly-rural backwater to one of the strongest economies in Asia in just a few decades, growth that is widely attributed to their enthusiastic embrace of telecommunications services.

In conclusion, there seems to be little doubt that, yes, broadband services do help the economy. While its specific impact will always be a matter of debate, there is very little reason to doubt that it is, at the very least, a strong contributing factor to modern economic growth.

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