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Economic Impacts from Investments in Broadband

Broadband infrastructure is essential for the effective participation of businesses and organizations in today's economy. Research conducted by Strategic Networks Group (SNG), finds that the local economic growth and secondary investment enabled by broadband is 10 times the initial broadband investment and the contribution to Gross Domestic Product (GDP) is 15 times the initial investment. Broadband today is as vital as electrification was in the 1930's and increased participation in the digital economy results in economic and quality of life improvements.

Investments in broadband infrastructure strengthen regional economies by improving skills, competitiveness, and service delivery, thus enhancing the local business environment. Broadband provides communications and information-sharing capabilities that have trans-formative effects on business operations and relationships. Opportunities and additional value are created from new or improved products and services, the ability to create and leverage new business models, better management of resources, and increased operational efficiencies. The ‘playing field' is leveled between large vs. small, urban vs. rural, established businesses and entrepreneurs.

• For businesses of any size, broadband and e-business applications enable them to expand their market reach and revenue opportunities, improve service to customers, and become more competitive and profitable in the global economy. In particular, broadband delivers affordable e-business solutions for small and medium enterprises through hosted applications and Internet-based service innovations.
• For organizations of any size, broadband and e-business applications enable them to improve service, become more cost effective and continue to be effective in the face of increased service demand and shrinking budgets.
• For individuals and residences, broadband delivers services such as Internet telephony (VoIP), Internet connectivity, movies and IP TV, tele-health, as well as new opportunities such as being able to work from home.

The impacts from investments in broadband infrastructure and broadband-enabled applications are measurable and significant. The immediate effects from an investment in broadband are twofold. The first comes from the construction of the broadband infrastructure. The affected residents, businesses and organizations then invest in the skills, know-how, tools and facilities to take advantage of broadband and e-business solutions so they can more effectively participate in the digital economy. These secondary economic effects take longer, but have far greater impact as they improve productivity, competitiveness and quality of service on an ongoing basis.

The table below provides two examples of the economic impact of broadband investments (infrastructure and applications such as e-business, tele-medicine and remote learning) from studies conducted by SNG in Canada in 2004 and 2003. Broadband impact data on new revenues, reduced costs, and new jobs were collected directly from businesses and organizations. Investment in broadband increased the retention and expansion of existing businesses and organizations within the local area. As businesses became more profitable and competitive, they expanded, which increased local employment, local training, local spending and investment in facilities and equipment. These outcomes flow through to the rest of the local economy creating a multiplier effect from the initial broadband investment. Input-Output impact models were used to calculate the contribution to GDP:

Infrastructure investment in broadband provides a healthy return in its own right, even for relatively small and rural communities.

Broadband infrastructure construction has job impacts immediately in the local economy like typical shovel-ready investments. More significantly, as the table above shows, investment in broadband infrastructure increases the retention and expansion of businesses and organizations to a community or region. The positive effects from broadband infrastructure become even more important in times of economic uncertainty, especially for smaller, rural communities who often have less economic diversity and resilience to withstand the effects of an economic slowdown.

The availability of broadband gives enterprises, in smaller or rural communities, the options to expand their market reach and thereby becoming more efficient during difficult economic times. Individuals can use broadband find new opportunities, including supplemental education and skills training, out-of-region employment through tele-working / working from home, and from starting-up new businesses.

In parallel with addressing broadband gaps in coverage, capacity and quality of service, local businesses and organizations need to understand how to ‘connect the dots' and move having broadband towards effective participation in the digital economy. This involves promoting awareness of the benefits of broadband and e-business solutions with the follow-on of supporting implementations that benefit business operations and service delivery.

This often requires intensive engagement and repeated visits, however such a ‘grass roots' approach with individual businesses and organizations is needed for them to understand and apply the lessons of "best of class" e-business solutions and success models. Such local linkages are needed to show how investing in broadband infrastructure offers a significant and immediate economic lift to a community or region.

Addressing local broadband infrastructure gaps and accelerating adoption of e-business solutions are fundamental to promoting regional economic development that is built on competitive businesses and skilled human resources. Just like electrification in the '30s, broadband service (coverage, capacity and quality of service) is critical to the long term prosperity of communities and gaps need to be addressed, whether for un-served rural areas or under-served regions. Service providers that have not made investments in these regions during good economic time are even less likely to do so during an economic slowdown. Furthermore, just like during the electrification expansion of the 1930's, many municipalities do not have the financial or human resources to make the broadband investment.

In summary, investing in broadband infrastructure now can alleviate the challenges faced by communities and regions in the short term, while providing a positive impact on long term economic and community development.