Broadband Bonus, The: Estimating Broadband Internet's Economic Value
This paper attempts to estimate the extent of economic gains from broadband adoption in the U.S.
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.
- 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.