Out of Control Policy Blog

The Broadband Payoff

The private sector adds 293,000 jobs for each percentage point of broadband adoption, according to a new research paper by Brookings Institution economists Robert Crandell and Robert Litan and MIT research associate William Lehr.

The paper is available on the Internet Innovation Alliance Web site.

This study provides new estimates of the effects of broadband penetration on both output and employment, in the aggregate and by sector, using state level economic data correlated with FCC data on broadband penetration for the lower 48 states between 2003 and 2005.

The positive economic effect of broadband will surprise few, and this work represents one of the few papers to look at the link between broadband and economic growth.

What may surprise many, however, are the policy recommendations the authors make. They urge a light regulatory hand and urge lawmakers to let competition, which stands to deliver faster and more diverse broadband access platforms, to play out.

Here are some excerpts from the paper's conclusions:

"Obviously, states may elect to directly subsidize broadband adoption or deployment...but care should be given to ensuring that any such programs be implemented so as to be competitively neutral and consistent with market-based competition (avoiding the kinds of implicit subsidies associated with past efforts to regulate access networks)."

"The surest route to lower prices is provided by increasing competition in the delivery of broadband services. Federal reform and additional state-specific reforms have focused on reforming "video franchising" laws to reduce barriers to entry and investment by new service providers.

"Federal and state governments should actively seek to remove barriers to new infrastructure investment by incumbents and new entrants...Regulatory rules which unduly restrain provider pricing and service offerings threaten carriers' ability to recover their costs and hence the viability of on-going investment in infrastructure. For example, certain states and members of Congress have proposed so-called 'net neutrality' rules that would overly restrict carriers ability to offer differentiated services to address the needs of handling multimedia traffic and recovering the costs from meeting the diverse requirements of broadband consumers."

"Finally, there is one important way in which federal policy makers can and should expand both demand and supply of broadband services. That is to continue the process of increasing the amount of radio spectrum available for commercial uses and subject to flexible market allocation. Expansion of wireless services will both add to the competitive supply of broadband "bit paths" into homes and businesses and expand the range of complementary services that will further increase demand for broadband capacity."


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