Broadband

Broadband can have a positive impact on the local economy, but the effects are likely to vary across types of firms, workers and areas.

Evidence review

This review considered more than 1,000 policy evaluations and evidence reviews from the UK and other OECD countries. It found 16 impact evaluations that met the Centre’s minimum standards.

Effects are not always positive, are not necessarily large, and may depend on complementary investments by firms. Service industries and skilled workers may benefit more than manufacturing industries and unskilled workers.

What the Evidence Showed

  • Extending broadband to an area can affect firm productivity, number of businesses, and local labour market outcomes (such as employment, income and wages).
  • These effects are not always positive, are not necessarily large, and may depend on complementary investments by firms (for example, training workers, or reorganizing sales strategy or supply chains to take advantage of faster internet connections).
  • Effects can vary across different types of industries and workers with service industries and skilled workers possibly benefiting more than manufacturing industries and unskilled workers.
  • The economic effects of broadband tend to be larger in urban areas (or close to urban areas) than in rural areas.

Where there was lack of evidence

  • Most studies look at the effect of broadband provision. Only two studies compare broadband adoption with provision. It is hard to generalize conclusions from these two studies but they do suggest that the effects of adoption and provision may differ.
  • Only two studies look at the effects on profits and sales – one shows a positive effect (for US farms), but the other shows zero effect (for firms in East Yorkshire).
  • Only one study looks at the effects on property prices - showing a positive effect on domestic property prices.
  • We have surprisingly little evaluation evidence of broadband’s impact on working patterns – one study finds that broadband positively affects female labour force participation; another study, however, finds no net effects on working at home, telecommuting or operating a home-based business.
  • We only found three high quality evaluations of specific broadband policies (voucher schemes, direct public provision or public/private partnerships).
  • Costs are rarely addressed in the studies reviewed. Only one paper attempts a cost-benefit analysis.
  • We have no studies that evaluate the kind of SME-targetted voucher scheme currently running in the UK.
  • It would be very useful to know more about the relative effects of indirect v direct provision (ie, voucher schemes for services v direct investment infrastructure). The UK is funding both approaches at the moment.
  • There is a lack of evidence in other areas of internet technology such as the effect of wifi networks, and fast mobile internet. Future evaluations in this area would greatly improve the evidence base.

Below are some key points for policymakers to consider. You can also learn about our methodology and how to get the most out of our reviews by reading our guide.

Lessons

  • Broadband, like many ICTs, is a ‘disruptive’ technology that creates winners and losers, and has spillover effects across local boundaries. It is not a silver bullet for local economic development.
  • There is evidence that broadband has positive local economic impacts, but some of these may be due to in-migration. Existing households may not be the biggest beneficiaries.
  • Broadband seems to benefit skilled workers more than low- or un-skilled workers.
  • The effects of adoption and provision may differ. More work needs to be done to understand whether and how to encourage adoption and productive business use.
  • Rural areas may need to subsidise broadband provision but the economic benefits of doing so will not be as large as for urban areas.

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