Study: Broadband does indeed help local economies

Broadband deployment likely causes employment growth, the study finds

U.S. broadband policy in recent months has been driven by a widely held assumption that the availability of broadband in an area will help improve the economy. A study released Wednesday puts some scholarship behind that assumption, with the author saying that broadband indeed has economic benefits.

Areas that moved from having no broadband to having between one and three service providers between 1999 and 2006 saw employment growth that was 6.4 percent higher than areas without broadband, said the study. In recent months, there's been "unprecedented" government support for broadband as an economic stimulus mechanism, said study author Jed Kolko, associate director and research fellow at Public Policy Institute of California.

Broadband has a "probably causal" relationship to job growth, and it may bring other benefits, including better health information, educational opportunities and civic engagement, although those benefits are hard to measure and evidence is "quite limited," Kolko said.

The U.S. Congress, in approving US$7.2 billion for broadband deployment in a huge economic stimulus package passed in early 2009, bought into the assumption that broadband has economic benefits. Kolko's study is one of just a few that have examined the economic benefits of broadband, said Sascha Meinrath, director of the Open Technology Initiative at the New America Foundation, a Washington, D.C., think tank.

"My gut tells me that broadband and economic development are linked," Meinrath said. "What's really important is what's missing from this equation is a systematic, econometric investigation to document what we suspect to be true."

While there's evidence that broadband has a positive economic benefit on the places it comes to, there's less evidence to suggest broadband has major economic benefits to individuals, Kolko said. Kolko's study, which examined broadband information from the U.S. Federal Communications Commission and employment information from the National Establishment Time-Series database, found little evidence of changes in employment rates or wages.

How can an area have an increase in employment, but see little change in the unemployment rate? When an area sees an increase in jobs, it can also see an increase in people moving to the area looking for those jobs, Kolko said. "As broadband helps expand the employment opportunities in a region, the labor supply expands there as well," he said.

The introduction of broadband to an area also doesn't seem to have a major effect on the number of workers who can telecommute, Kolko added.

The broadband-related economic growth "has an ambiguous effect on residents," he said. In some cases, broadband expansion may hurt some residents by driving up the cost of apartment rent while offering no additional employment opportunities, he said.

Policies encouraging broadband deployment are more "place-based" than people-based, like some other government infrastructure programs, Kolko said. "It may be a policy goal to help places ... even if that's not the most direct way to help individuals," he said. "It then begs the broader question of, do we help all places? If there are places that are less economically sustainable, is the strategy to support those places, or is the strategy to encourage those who can move to better opportunities to do so?"

While Kolko's study raises several questions about government policy, it's "hard to overstate" the importance of its findings, said Joanne Hovis, president-elect of the National Association of Telecommunications Officers and Advisors. Economic development is a major reason local governments look at broadband projects, she said.

"This kind of analysis and research is invaluable," she said. "If we had 50 significant economic studies ... that went through this kind of process, every city and town and county in America would build broadband, because there would no longer be a debate about the relationship between economic development and broadband."

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Grant Gross

IDG News Service
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