Broadband Bonus, The: Estimating Broadband Internet's Economic Value
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ARTICLE SUMMARY
This paper attempts to estimate the extent of economic gains from broadband adoption in the U.S.
POLICY RELEVANCE
Industry estimates of broadband estimates are overstated; public support of broadband adoption is unlikely to produce economic gains on the scale claimed by lobbyists. Further, firms will probably invest in broadband infrastructure without significant public support.
KEY TAKEAWAYS
- Broadband was widely adopted in the United States between 1999 and 2006.
- In September 2001, 45 million households had dialup; 10 million had broadband Internet access.
- By March 2006, 47 million households had broadband, while only 37 million had dialup.
- Public support of broadband was adopted by 2005 and expanded in the 2009 “stimulus” act.
- When estimating the effect of policies supporting broadband adoption, it would be useful to know what sort of benefit can be expected to result from wider broadband usage.
- In 2006, the broadband share of measured economic output (GDP) was $28 billion; the total for all Internet access was $39 billion.
- Of this, $20-22 billion was associated with household use.
- The deployment of broadband increased measured economic output by $8.3-10.6 billion beyond what it would have been absent broadband. Additionally, consumers would have been willing to pay $4.8-6.7 billion more for broadband than they did. This is value not reflected in the measured economic output.
- Industry estimates of the contribution of broadband to the economy are hundreds of billions of dollars; this is almost certainly too high.
- It is very hard to measure the value of broadband’s spillovers. For example, Youtube relies on broadband to transmit videos to its audience; Youtube is wildly popular with viewers but because it is free for them, the value the viewers gain is not well-measured in economic data sets. Broadband Internet access certainly plays a role in generating this unmeasured value but how to place a value on this contribution is also a problem with not obvious solution.
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About Shane Greenstein
Shane Greenstein is the Martin Marshall Professor of Business Administration and co-chair of the HBS Digital Initiative. He teaches in the Technology, Operations and Management Unit. His areas of interest include: digital economy, information technology, networks, and technological innovation. Professor Greenstein is also co-director of the program on the economics of digitization at The National Bureau of Economic Research.
