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SciTech Watch: Broadband’s Economic Impact

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There has been much in the news lately about making broadband internet access available to more people, in part to derive economic benefits from broadband. A report published in September 2005 by the trade magazine Broadband Properties attempted to look at hard economic and census data to ascertain what, if any, benefits broadband internet has had on economic conditions.

After reviewing the available data sources the report begins by stating metrics that they could not measure:

* Changes in firms who adopt Broadband.
* Effects of Broadband adoption on employees and employment.
* Quality of a workforce.
* Reduction in unemployment.

The report concludes that Broadband Internet enhances economic activity. Data indicates that there is substantial positive impact on employment in ZIP codes where Broadband has been deployed. Property values as measured by rental rates were almost 7% higher in communities where Broadband was available. Broadband also increased the growth in the number of businesses in an area by almost one-half percent. Communities with Broadband also attracted a larger number of businesses in IT intensive sectors.

The study is limited by the fact that most of the economic data is derived from U.S. Census data and that data was collected in 2002. Further, statistics on broadband’s penetration into a geographic area is limited to state-level granularity instead of the desired ZIP code level.

Impact on Economic Variables in Broadband-Enabled ZIP Codes:

  • Employment (Jobs): Employment annual growth rate about 1% higher, 1998 – 2002.
  • Wages: No statistically measurableimpact observed in data by 2002.
  • Property Values: Housing rental rates over 6% higher in 2000.
  • Business Establishments: Almost 0.5% higher rate of growth in the number of establishments, 1998 – 2002.
  • Industry Mix: Over 0.5% increase in the share of establishments in IT-intensive sectors, 1998 – 2002. About 1% reduction in share of small establishments.

While this study was based on data collected early in the life cycle of Broadband it does confirm that there are economic benefits to having Broadband Internet in your community. Subsequent studies with data from the next Census should show a clearer picture of Broadband’s benefits.

The Broadband Properties’ article ia available from the magazine web site and the complete report in PDF form is available at the MIT Communications Futures Program web site.

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