Broadband Toolkit: Public Provision

What is it and what does it aim to do?

Public provision involves government funding for the construction of broadband internet, either through direct provision or public-private partnerships (PPPs). Both types of provision are commonly carried out at the municipality level.

For direct provision, the government establishes a municipally or state-owned company that builds the necessary infrastructure and often provides broadband services. In this case, the costs are entirely borne by the public sector. In contrast, with PPPs, broadband expansion is outsourced to private companies. Costs are shared between public and private entities depending on the extent to which the private company owns the infrastructure and provides services.

How effective is it?

The sub-national evidence suggests that public provision is effective at increasing firm and household adoption at the local level. Three out of four sub-national studies find positive effects on adoption. Only one of these three looked at broadband adoption by firms.

The cross-country evidence is more mixed. Of the three cross-country studies, one finds a positive effect, one finds no effect and one finds a negative effect. This set of more mixed results might be explained by the fact that direct provision tends to be done locally, so may be hard to pick up using national-level data.

Evidence from one study suggests that PPPs are more effective at increasing household adoption when the government retains ownership of the infrastructure and when countries are starting from low levels of broadband penetration. Another study finds greater effects on household adoption when public provision is combined with public education and digital literacy programmes, compared to public provision alone.

The evidence is inconclusive on the effect of public provision (PPPs or direct provision) on internet speed or price. The only study to consider them finds a negative effect of public provision on speed (fibre optic share) and no effect on price.

Evidence from one study of firms in rural Italy suggests that public provision (a PPP) may have a positive effect on firm sales and value added but has no effect on employment.

Evidence from one Norwegian study suggests that public provision increases wages and employment of skilled workers, but decreases wages and has no effect on employment for unskilled workers.

Our  Broadband Evidence Review also examines economic outcomes such as value added and employment for both public and private provision. Overall, the evidence on the effect of public provision is based on too few studies to allow a meaningful comparison of differences in effectiveness relative to private provision.

How secure is the evidence?

This toolkit summarises the available ex-post (i.e. after introduction) evaluations of the effect of public provision of broadband. The majority of the existing literature uses case study approaches or qualitative interview techniques, often involving small numbers of participants to assess the impacts of broadband provision. This toolkit does not consider this evidence. Instead, we focus on evaluations that identify effects which can be attributed, with some degree of certainty, to the support provided. (More details and discussion of our inclusion criteria are covered in the annex.) We found 8 evaluations that meet our minimum evidence standards. There are four sub-national studies that examine five different programmes, three in the US, one in Italy and one in Norway. There are three cross-country studies that look at public provision across OECD countries. No studies evaluating UK policies or support mechanisms met the evidence standards for inclusion in this toolkit.

Is public provision cost effective?

Two of these studies provided information that allowed figures for cost effectiveness in terms of pound spent per additional household broadband connection.

The first study examines the US BTOP programme (which includes direct provision policies as well as others), which disbursed £3.6 billion to 289 projects. The programme benefits suggest that the BTOP programme involved a cost of £404 per additional household subscription.

The second study evaluates the US Community Connect programme run in three rural communities. The programme made use of both direct provision and PPPs. In one community the programme had no effect, so the programme was not cost-effective. In the remaining two communities the cost per additional broadband subscription was £791 and £5,091, respectively. The far larger cost for the second community is a result of weaker impacts for a smaller number of households, combined with similar programme costs.

Overall, these two studies suggest that the cost effectiveness of public provision may vary quite substantially depending on both the impact and scale of the programme.

The studies do not help to determine the cost effectiveness of direct provision relative to PPPs. However, it is important to note that PPPs are not necessarily a cheap option. In many cases they require considerable public investment plus additional private investment, meaning that the social costs may be just as high as with direct provision.

Things to consider

  • What are realistic policy aims for public provision? The evidence suggests that public provision may increase both household and firm adoption. Evidence from our Broadband review shows that household broadband takeup may have positive effects on house prices, female labour market participation, employment, firm growth, and economic growth. Household adoption is also strongly linked to firm adoption. Increasing adoption may also be desirable for other reasons (if fast internet access for all is seen as a right, or if spreading access to particular communities is a priority).
  • Should public provision be implemented together with complementary policies? Evidence from two studies support the idea that public provision may be more effective when combined with skills programmes. One study finds that public provision only has employment and wage benefits for skilled workers. A second study finds greater effects on household adoption when public provision is combined with public education and digital literacy programmes.
  • When designing a PPP, should the government retain ownership of the broadband infrastructure or not? Evidence from one study suggests that PPPs are more effective at increasing household adoption of broadband when the government (instead of a private company) retains ownership of the infrastructure. However, government ownership of infrastructure comes at a higher public cost than private ownership, so it is unclear whether this approach is cost-effective.
  • What should be considered when deciding which local areas to target with public provision programmes? One study finds that public provision is most effective in countries with low levels of existing broadband penetration. This could imply that regions with low levels of broadband penetration will benefit more from provision programmes. Consistent with this, a second study suggests that there are cases where public provision may crowd out private investment. Accordingly, public provision may avoid crowding out if it is undertaken in areas where private infrastructure investment is not profitable for private telecoms companies (for example, some rural communities). However, while this kind of policy targeting may be most effective in increasing adoption per se, our broadband review suggests that the further impact on economic growth may be lower in such areas than other areas.

Other broadband tools

Local loop unbundlingPublic and consumer incentives

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