A new study links gigabit-speed broadband to higher economic growth, concluding that communities with widely available gigabit access have per capita GDP that is 1.1 percent higher than communities with little to no availability of gigabit services.
Gigabit broadband is broadly defined as speeds reaching 1,000 Mbps, typically achieved by deploying fiber to the home (FTTH) or business. The new study, conducted by the Analysis Group and released by the Fiber to the Home (FTTH) Council (FTTH), was based on 55 communities in 9 states.
The 14 communities with widely available gigabit broadband enjoyed over $1 billion in additional GDP when gigabit broadband became widely available, says the study. The metropolitan study areas were all in the United States and ranged from Alabama to Oregon.
My first question about the study was how the communities were picked, so that we can be re-assured that the data was not a spurious correlation — for example, simply linking gigabit with areas that have naturally higher business activity. Analysis Group Principal David Sosa said the study carefully matched communities with and without gigabit and made an extra effort to isolate the effects of gigabit broadband by placing communities with similar characteristics in both the control and study groups.
“We did a good job of isolating the effects of gigabit services on economic output so that we can say within reason it was the availability of gigabit to which we can attribute the increase in economic output rather than the other way around,” said Sosa in a phone interview.
The study used data from the National Telecommunciations and Information Administration (NTIA) on gigabit access in Metropolitan Statistical Areas (MSAs).
It concludes that the economic gains were due to several factors, “including the direct effect of infrastructure investment and increased expenditures, as well as early shifts in economic activity (e.g., job creation and occupational changes) and productivity gains.” In one example, a recent gigabit project in Chattanooga, Tenn. has attributed 1,000 new jobs, increased investment, and “a new population of computer programmers, entrepreneurs and investors” to gigabit broadband, according to the study.
Analysis Group says its research is building on a broader body of work proving that broadband encourages economic activity. It cites Crandall & Jackson (2003), which concluded that the long run benefits of first generation broadband services may be a one percent or higher increment to GDP.
Other researchers investigating the economic effects of broadband include Ford and Koutsky (2006), who concluded broadband is likely to be a significant contributor to economic growth, based on evidence that economic growth doubled in a Florida city after an extensive broadband network was installed. The OECD (2007) has noted additional evidence from several firm-level studies for various OECD countries, including Sweden and the U.K., of the economic benefits of broadband.
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