Broadband Strategies Toolkit / 1. Building Broadband / 1.3 Why Broadband?

Why Broadband?

The Importance of Broadband for Development

1.3.1 Positive Impacts of Broadband

With the appropriate policies in place, broadband is a transformative platform that impacts the ICT sector as well as other sectors of the economy. While some may disagree on the precise economic and social benefits that can be attributed specifically to broadband, and may challenge the studies that have suggested a large impact, few argue against the fact that broadband has dramatically changed our personal lives, our businesses and our economies. Moreover, as an enabling ICT platform and potential GPT, broadband can facilitate growth and innovation in the ICT sector and throughout the economy, serving as a vital input for each sector that strengthens the economy as a whole. Broadband has the capacity to “contribute to virtually every sector in the economy through productivity gains.”* Christine Zhen-Wei Qiang, Broadband Infrastructure Investment in Stimulus Packages: Relevance for Developing Countries, info, Vol. 12 No. 2, p. 43 (2010), available at http://siteresources.worldbank.org/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/Resources/282822-1208273252769/ Broadband_Investment_in_Stimulus_Packages.pdf (last visited Jan. 18, 2011).

Even beyond productivity increases, broadband affects the economy in multiple ways, for instance, through job growth and improved quality of life. It is capable of facilitating micro- and macroeconomic growth by “accelerat[ing] the distribution of ideas and information and foster[ing] competition for and development of new products, processes, and business models.”* Nina Czernich, Oliver Falck, Tobias Kretschmer & Ludger Woessmann, Broadband Infrastructure and Economic Growth, CESifo Working Paper Series No. 2861 (Dec. 2009), available at http://ssrn.com/abstract=1516232 (last visited Jan. 20, 2011). Broadband impacts a country’s economic output and GDP in multiple ways by: 1) enhancing the role of human capital through easier acquisition of knowledge and technical skills; 2) improving the efficiency and productivity of enterprises; 3) increasing community competitiveness by attracting knowledge-based businesses; and 4) sparking new and innovative technologies, services, applications and business models.* Christine Zhen-Wei Qiang and Carlo M. Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband, GICT Dept. World Bank, pp. 36-395 (2009)Qiang and Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband (2009), pp. 36-39. The multiplier effect of broadband can drive GDP, productivity, and employment growth. However, policies that support the supply and demand elements of the ecosystem, as well as the absorptive capacity to develop broadband capabilities in other sectors, must all be in place in order to fully realize such benefits.

1.3.2 Impact of Broadband on Gross Domestic Product

Due to the potentially wide-ranging impacts of broadband, and its ability to provide easier access to information that increases efficiencies and productivity in the economy, it is unsurprising that increased use of broadband networks and services has been found to produce positive outcomes that reverberate throughout a country, particularly involving GDP. A frequently cited World Bank study found that low-income and middle-income countries experienced “about a 1.38 percentage point increase in GDP for each 10 percent increase in [broadband] penetration” between 2000 and 2006.* Christine Zhen-Wei Qiang and Carlo M. Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband, GICT Dept. World Bank, p. 45 (2009). See also Yongsoo Kim, Tim Kelly and Siddhartha Raja, Building Broadband: Strategies and Policies for the Developing World, GICT Dept. World Bank (Jan. 2010), available at http://siteresources.worldbank.org/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/Resources/282822-1208273252769/Building_broadband.pdf. The World Bank further found that the development impact of broadband on emerging economies is greater than for high-income countries, which “enjoyed a 1.21 percentage point increase in per capita GDP growth” per 10 percent increase in broadband penetration.* Qiang and Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband (2010), p. 45. The study also demonstrates that broadband has a potentially higher growth effect than other ICTs, including wireline telephony, mobile telephony and the Internet, as shown in Figure 1.2. The predominance of broadband may be unexpected considering that, over the last decade, mobile telephony has been the fastest growing ICT worldwide, with a 2010 global penetration rate of 76.2 out of 100 persons.* Qiang and Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband (2009), p. 45.

Figure 1.2. Growth Effects of Various ICTs on GDP

Source: Adapted from Qiang and Rossotto, Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband, p. 45.

The World Bank’s findings of broadband’s growth effects are supported by other independent studies. In a study noting the extensive benefits of broadband for emerging markets, management consulting firm McKinsey & Company estimated that “a 10 percent increase in broadband household penetration delivers a boost to a country’s GDP that ranges from 0.1 percent to 1.4 percent.”* Sören Buttkereit, Luis Enriquez, Ferry Grijpink, Suraj Moraje, Wim Torfs & Tanja Vaheri-Delmulle, Mobile Broadband for the Masses: Regulatory Levers to Make It Happen, McKinsey & Company (Feb. 2009), available at http://www.mckinsey.com/clientservice/telecommunications/Mobile_broadband_for_the_masses.pdf (last visited Jan. 18, 2011). Additionally, a study of OECD countries by global consulting firm Booz & Company found that among high-income countries, there is a strong correlation between average annual GDP growth and broadband penetration wherein “[c]ountries in the top tier of broadband penetration have also exhibited 2 percent higher GDP growth than countries in the bottom tier of broadband penetration.”* Roman Friedrich, Karim Sabbagh, Bahjat El-Darwiche & Milind Singh, Digital Highways: The Role of Government in 21st Century Infrastructure, Booz & Company, p. 4 (2009), available at http://www.booz.com/media/uploads/ Digital_Highways_Role_of_Government.pdf (last visited Jan. 18, 2011).

Although numerous studies have found a positive impact on economic growth, the estimate of its actual magnitude varies. For example, a ten percent increase in broadband penetration has been found to increase economic growth from a low of range of 0.24 percent to a high of 1.50 percent (Figure 1.3).

Figure 1.3. Impact on GDP of an Increase of 10 Percent in Broadband Penetration

Sources: Katz 2010;* Raul Katz, Stephan Vaterlaus, Patrick Zenhäusern and Stephan Suter, The Impact of Broadband on Jobs and the German Economy, Intereconomics: Review of European Economic Policy. Vol. 45, Issue 1, p. 2 (Jan. 2010), available at http://www.polynomics.ch/dokumente/Polynomics_Broadband_Brochure_E.pdf. Analysys Mason 2010;* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in India (2010), available at http://www.gsmamobilebroadband.com/upload/resources/files/AM_India_Final_Full_Report.pdf McKinsey 2010;* McKinsey, Fostering Economic and Social Benefits of ICT, The Global Information Technology Report 2009-2010, World Economic Forum.Qiang&Rossotto 2009;* Qiang and Rossoto, Economic Impacts of Broadband, 2009 Information and Communications for Development, World Bank (2009). and Czernich et al. 2009.* Czernich et al., Broadband Infrastructure and Economic Growth (2009), available at http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-12/cesifo1_wp2861.pdf

Notes: * Only includes Germany; ** Average of five country studies, including United Kingdom, Australia, New Zealand, Malaysia and a Middle Eastern country, from various sources 2003 and 2004, and Qiang and Rossotto 2009 study; *** Limited to mobile broadband impact in India; + Various countries, upper range applies to developing countries and lower range to developed countries; ++ Sample of 20 OECD countries.

While these studies provide important insight into the growth effects of broadband, data collection and further systematic research and analysis in this area are needed, particularly for developing countries. Currently, there is ample anecdotal evidence of the effects of broadband on economic growth, with some cases highlighted below. However, these cases provide only limited evidence of the impact that broadband has on the economy as a whole. It is also important to note that investment in broadband or policies fostering its deployment or adoption are unlikely to produce significant GDP gains without complementary investments or policies in other sectors, notably education, innovation, civic participation and health care. However, even with the implementation of appropriate policies, the impacts of broadband on growth in certain areas may be limited. For example, developing countries may be in less need of telemedicine to improve health outcomes and more in need of low-tech and inexpensive solutions, such as mosquito nets and de-worming pills.* Charles Kenny, No Need for Speed, Foreign Policy (May 16, 2011), available at http://www.foreignpolicy.com/articles/2011/05/16/no_need_for_speed?page=full. Additionally, despite providing a new educational resource, broadband can also create a new distraction if careful controls are not in place that limit Internet access to non-academic sites such as Facebook, YouTube and file-sharing websites.* Rodrigo Belo, Pedro Ferreiray and Rahul Telangz, The Effects of Broadband in Schools: Evidence from Portugal (July 8, 2010), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1636584.

Examples of the impact of broadband on economic growth around the world


The Australian Government is in the process of deploying the country’s largest-ever infrastructure project, the National Broadband Network (NBN). At a cost of up to AUD 43 billion (USD 41 billion) over eight years, the NBN is set to rollout a fiber network delivering broadband speeds of up to 100 Mbit/s to at least 93 percent of the population and wireless networks delivering speeds of 12 Mbit/s or more to those living in remote areas.* Dept. of Broadband, Communications and the Digital Economy, National Broadband Network—Overview (May 2010), available at http://www.nbn.gov.au/sites/all/files/pdf/National-Broadband-Network-Overview-fact-sheet.pdf (last visited Jan. 19, 2011). As the NBN is implemented, both the public and private sectors are researching the impact that the NBN is expected to have on economic growth.

One such study, completed in November 2010, reviewed the anticipated effects of the NBN up to the year 2020 based on the NBN’s rollout plan.* Dr. Ric Simes, Nicki Hutley, Susan Havyatt & Rebecca McKibbin, Australian Business Expectations for the National Broadband Network, Access Economics (Nov. 16, 2010), available at http://www.accesseconomics.com.au/publicationsreports/getreport.php?report=253&id=322 (last visited Jan. 18, 2011)). The results revealed that for 18 industries, the NBN’s impact would improve economic outcomes between 0.17 percent and 0.54 percent with an average of 0.43 percent across all industries.* Simes, et al., Australian Business Expectations for the National Broadband Network, p. 6 (2010). As Table 1.1 below shows, four industries—transportation, electricity, water and government services—will have more than 0.5 percent growth due to broadband. Interestingly, the communications industry is expected to gain 0.46 percent in output from broadband, which is less than the expected gain in the top six sectors. Despite these estimated gains, the authors of the study believed “they most likely underestimate the full impacts of applications, processes and business models that are only available with a high speed and quality service.”* Simes, et al., Australian Business Expectations for the National Broadband Network, p. 6 (2010). Overall, the benefits across all sectors help to demonstrate the significant network effects of broadband.

Table 1.1. Expected Impacts of the NBN on Output of Major Industries at 2020

Source: Simes, et al., Australian Business Expectations for the National Broadband Network, p. 6.

Industry % Change (most to least)







Government services


Finance and insurance






Communications 0.46



Other business services




Recreation and other services






Forestry and fishing


Other minerals


Processed foods


Primary agriculture


The study also surveyed 540 businesses across the 17 industry groups with annual revenues ranging from less than AUD 5 million to over AUD 1 billion, finding that 57 percent expected that the NBN will change the way they communicate with suppliers and customers while 55 percent believed that their online capabilities will definitely or likely be enhanced by the NBN.* Simes, et al., pp. 12-13 (2010).


Over the last several years, broadband access studies in Canada have focused on the importance of broadband for economic growth and development, particularly in rural areas. In 2005, for example, Industry Canada commissioned a survey to be conducted in the rural areas of British Columbia regarding subscribers’ views of the significance of broadband access. More than 80 percent of all business respondents “reported that absence of broadband would affect their businesses negatively” and over 18 percent stated “they could not operate their businesses without broadband.”* Julie Zilber, David Schneier, and Philip Djwa, You Snooze, You Lose: The Economic Impact of Broadband in the Peace River and South Similkameen Regions, Prepared for Industry Canada (2005), available at http://www.7thfloormedia.com/news/71 (last visited Jan. 19, 2011). Additionally, according to business owners’ self-reported figures, broadband increased productivity by 62 percent and there was “a majority indicating an increase in productivity of more than 10 percent.”* Zilber, et al., You Snooze, You Lose: The Economic Impact of Broadband in the Peace River and South Similkameen Regions, (2005). Overall, the study showed that, even prior to 2005, broadband had become a significant competitive factor for businesses in rural British Columbia.* Zilber, et al., You Snooze, You Lose: The Economic Impact of Broadband in the Peace River and South Similkameen Regions, (2005).

An earlier study on broadband investment, conducted in the township of Dundas, Ontario in 2003, showed that investment in fiber optic network infrastructure of CAD 1.3 million resulted in CAD 25.22 million “increase in GDP for Dundas County and CAD 7.87 million increase for the Province of Ontario,” as well as the creation of 207 new jobs.* Darrell M. West, An International Look at High-Speed Broadband, Governance Studies, Brookings Institution, p. 9 (Feb. 2010), available at http://www.brookings.edu/~/media/Files/rc/reports/2010/0223_broadband_west/ 0223_broadband_west.pdf (last visited Jan. 19, 2011). The researchers also found that the new fiber lines directly contributed to an additional CAD 3.5 million in provincial tax revenues and CAD 4.5 million in federal tax revenues.* West (2010), An International Look at High-Speed Broadband, p. 9.


Between 2010 and 2013, China’s network operators, China Unicom, China Telecom and China Mobile, are expected to invest an estimated CNY 62.billion (USD 9 billion) in the creation of a single fixed broadband access network providing speeds of 1 Mbit/s or more.* Judy Zhao and Levi Ruan, Broadband in China: Accelerate Development to Serve the Public, Value Partners, p. 2 (Mar. 2010), available at http://www.valuepartners.com/VP_pubbl_pdf/PDF_Comunicati/Media%20e%20Eventi/ 2010/value-partners-PR_100301_BroadbandInChinaZhaoRuan.pdf (last visited Jan. 19, 2011). These investments seem justified given the fast growth of the number of fixed broadband subscribers: it is expected to reach 182 million by 2013, which represents growth of nearly 77 percent between 2010 and 2013.* Zhao and Ruan, Broadband in China: Accelerate Development to Serve the Public (2010), p. 2.

Set against these figures, the impact of broadband on China’s GDP is anticipated to be substantial. As such, China’s “dial-up and broadband Internet together may contribute a combined 2.5 percent to GDP growth for every 10 percent increase in penetration.”* Zhao and Ruan, Broadband in China: Accelerate Development to Serve the Public (2010), p. 1.


Under Germany’s National Broadband Strategy, 75 percent of households are expected to have broadband access of at least 50 Mbit/s by 2014. By 2020, 50 percent of German households will have 100 Mbit/s access while another 30 percent will have 50 Mbit/s broadband access. A 2009 study on the economic impact of the National Broadband Strategy found that investments in the network are expected to result in a contribution of EUR 18.8 billion to Germany’s GDP between 2010 and 2014.* Raul Katz, Stephan Vaterlaus, Patrick Zenhäusern and Stephan Suter, The Impact of Broadband on Jobs and the German Economy, Intereconomics: Review of European Economic Policy. Vol. 45, Issue 1, p. 2 (Jan. 2010), available at http://www.polynomics.ch/dokumente/Polynomics_Broadband_Brochure_E.pdf (last visited Jan. 20, 2011). By 2020, Germany’s ultra-fast broadband network will contribute an additional EUR 14.6 billion in GDP.

The study further found that from an “incremental economic growth standpoint, network construction would yield additional value added of 33.4 billion Euros, while network externalities will result in additional 137.5 billion Euros.”* Katz, et al., The Impact of Broadband on Jobs and the German Economy (2010), p. 16.


A study released by Analysys Mason in December 2010 on the deployment of wireless broadband in India found that each percentage point increase in mobile broadband penetration in India could increase India’s GDP by INR 162 billion (USD 3.8 billion), or 0.11 percent, by 2015.* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in India, Discussion Document, Report for GSMA (Dec. 2010), available at http://www.analysysmason.com/About-Us/Offices/New-Delhi/Increase-in-broadband-penetration-by-1-will-contribute-INR162-billion-to-Indias-GDP-by-2015/ (last visited Jan. 19, 2011). The study further indicated that if the Indian Government allocates an additional 5 MHz of 3G spectrum to each licensee, the broadband penetration rate would likely increase 3.3 percent.* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in India (2010). This could result in an increase of INR 538 billion (USD 12.7 billion) of GDP, in addition to the case that no additional allocation is made, translating into an additional 3.3 percent growth in GDP by 2015.* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in India (2010).

The study also estimated significant improvements to other sectors within the wireless broadband ecosystem by 2015 regarding content, applications, service models and device categories:* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in India (2010).

    1. percent increase in the consumer/retail sector, including mobile advertising, entertainment and commerce.
    2. percent increase in the financial services sector, including mobile banking.
    3. percent increase in social services, including mobile learning, health and government.
Latin America and the Caribbean

A study of 24 countries in Latin America and the Caribbean found that, controlling for educational and developmental starting levels, a “1 percentage point in broadband penetration can generate 0.0178 percentage points in GDP growth” (i.e., 10 percent increase in broadband penetration results in 1.78 percent increase in GDP).* Dr. Raul L. Katz and Javier G. Avila, The Impact of Broadband Policy on the Economy, Proceedings of the 4thd ACORN-REDECOM Conference Brasilia May 14-15, p. 5 2010 (2010), available at http://www.acorn-redecom.org/papers/acornredecom2010katz.pdf (last visited Jan. 19, 2011). Based on this figure, it was estimated that the contribution of broadband to GDP growth throughout Latin America and the Caribbean was 3.4 percent between 2009 and 2010.* Katz and Avila (2010), The Impact of Broadband Policy on the Economy p. 5. The study also found that from 2007 to 2008, the growth of broadband access in Latin America and the Caribbean contributed between USD 6.7 billion and USD 14.3 billion to the economies, taking into account both direct and indirect effects.* Katz and Avila (2010), The Impact of Broadband Policy on the Economy p. 5.

South Africa

In July 2010, the South African Government issued the Broadband Policy for South Africa, which aims to provide 256 kbps download speed to 15 percent of the country’s households with broadband being within 2 km of the remaining households by 2019.* Dept. of Communications, Broadband Policy for South Africa, Government Gazette, No. 33377 (July 13, 2010), available at http://blogs.timeslive.co.za/vault/2010/07/14/south-africas-new-broadband-policy/ (last visited Jan. 20, 2011). A 2010 study by Analysys Mason reviewed the likely direct and indirect effects the broadband policy might have on South Africa’s economy, finding that wireless broadband is expected to increase the country’s GDP by 1.8 percent, or over ZAR 72 billion (USD 9.4 billion) by 2015.* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in South Africa, Report for GSMA (Nov. 2010), available at http://www.gsmamobilebroadband.com/upload/resources/files/AnalysisMasonSAReport.pdf (last visited Jan. 20, 2011). In addition, wireless broadband is expected to create about 28,000 new jobs directly, not including further jobs outside the communications industry.* Analysys Mason, Assessment of Economic Impact of Wireless Broadband in South Africa (2010).


A 2010 study of broadband in Thailand noted that even without a formal broadband plan or policy—the “business as usual” (BAU) path to broadband access (considering fixed and wireless connections with speeds of at least 256 kbit/s) would result in a broadband penetration rate of 17 out of 100 households.* Craig Smith, Meaningful Broadband 2.0 Report: Thailand 2015, Center for Ethics of Science and Technology on behalf of Chulalongkorn University Secretariat, pp. 34-36 (May 2010), available at http://www.stc.arts.chula.ac.th/MBR2.0-broadband-Thailand-2015.pdf. This is expected to add nearly 1 percent to the country’s GDP growth by 2015.* Smith, Meaningful Broadband 2.0 Report: Thailand 2015 (2010), p 34-36. The study notes that while “this increase will contribute marginally to Thailand’s economy, it represents a 50 percent to 60 percent lower broadband penetration rate than what we can expect from most other Asian peer nations by 2015,” which is likely to leave Thailand at a competitive disadvantage vis-à-vis its neighbors.* Smith, Meaningful Broadband 2.0 Report: Thailand 2015 (2010), p. 34.

The study noted that if a broadband plan is implemented that provides “meaningful broadband,” the penetration rate in Thailand may nearly double by 2015, with 80 percent of this penetration based on wireless broadband technologies.* Smith, Meaningful Broadband 2.0 Report: Thailand 2015 (2010), p. 36. Based on this broadband projection, mobile broadband “would drive new investments, expand the domestic economy, and bring a rise to GDP of as much as 2.4 percent per year, all other things being equal.”* Smith, Meaningful Broadband 2.0 Report: Thailand 2015 (2010), p. 40. As such, broadband has the potential to be a “meta-driver” of “overall macroeconomic growth, rather than merely a driver of ICT industries alone.”* Smith, Meaningful Broadband 2.0 Report: Thailand 2015 (2010), p. 40.

1.3.3 Broadband, Employment and Job Creation

Broadband enables job creation through three main channels: 1) direct jobs created to deploy the broadband infrastructure; 2) indirect and induced jobs created from this activity; and 3) additional jobs created as a result of broadband network externalities and spillovers.* Raul Katz, Estimating Broadband Demand and Its Economic Impact in Latin America (2009), available at http://unpan1.un.org/intradoc/groups/public/documents/gaid/unpan036761.pdf. Each of these channels includes the employment of unskilled, skilled and highly skilled workers. Direct jobs relate primarily to civil works and construction of broadband infrastructure, which involves more low-tech positions. Indirect and induced jobs require various levels of skilled workers. However, network-effects (i.e., spillover) jobs are mainly high-skill jobs requiring specific technical knowledge and education. Indeed, broadband spillover employment effects are not uniform. Instead, they tend to concentrate in service industries, such as financial services, health care, etc. It can also produce some effects in middle-skills jobs, such as in manufacturing, but usually related to the use of ICT, requiring ICT-skills.

Numerous studies have estimated the impact on broadband in each of these job creation categories for specific countries by calculating employment multipliers for each of the categories (Table 1.2). While these studies are country-specific and cannot be applied directly to other nations, they provide an estimate of the potential employment gains that could result from effective broadband development. A simple average of these estimates indicates that potential broadband job creation results in 2.78 indirect and induced jobs per direct broadband construction job created and 1.17 spill-over additional jobs created per direct job. This means that broadband can create between 2.5 and 3 additional jobs per direct broadband employment. Some studies have estimated the impact of broadband on the employment creation rate. For instance, Katz estimated that an increase of about 8 percentage points of broadband penetration in 12 Latin American countries could result in almost 8 percent increase on average over their employment rate.* Countries include Argentina, Brazil, Chile, Colombia, Ecuador, El Salvador, Mexico, Nicaragua, Panama, Peru, Uruguay and Venezuela.

Table 1.2. Estimated Broadband Employment Creation Multipliers

Sources: Katz 2009, citing Crandall el al. (2003),* Crandall et al., The Effect of Ubiquitous Broadband Adoption on Investment and the US Economy, Criterion Economics, Washington, DC (2003). Katz et al. (2008),* Katz et al., An Evaluation of Socio-Economic Impact of a Fiber Network in Switzerland, Mimeo, Polynomics and Telecom Advisory Services (2008). Atkinson et al. (2009),* Atkinson et al., The Digital Road to Recovery: A Stimulus Plan to Create Jobs, Boost Productivity and Revitalize America, the Information Technology and Innovation Foundation, Washington, DC (2009). Katz et al. (2009a),* Katz et al., Estimating the Economic Impact of the Broadband Stimulus Plan, Columbia Institute for Tele-information, Working paper (2009a). Libenau et al. (2009)* Libenau et al. The UK’s Digital Road to Recovery, LSE Enterprise and the Information Technology and Innovation Foundation (2009). and Katz et al. (2009b).* Katz et al., The Impact of Broadband on Jobs and the German Economy, Columbia Institute for Tele-information, Working paper (2009b).

Study Year Scope Type I Type II Network Effects

Crandall et al.




Katz et al.




Atkinson et al.





Katz et al.





Libenau et al.




Katz et al.





Average 1.56 2.78 1.17

Note: Type I (Direct + Indirect)/Direct; Type II (Direct + Indirect + Induced)/Direct

It should be noted that although broadband is likely to have overall positive effects on job growth, short-term job losses may result from broadband-enabled improvements in productivity due to process optimization and capital-labor substitution. Various studies have confirmed that broadband creates many more jobs than it displaces in the longer term. For example, the OECD has found that increased broadband penetration rates can significantly affect labor productivity; raising broadband penetration five percentage points has yielded an estimated 0.07 percent increase in labor productivity.* Broadband Commission for Digital Development, Broadband: A Platform for Progress, UN Millennium Development Goals Summit, New York, p. 15 (Sept. 19, 2010), available at http://www.broadbandcommission.org/report2.pdf. Similarly, Booz & Company found that “10 percent higher broadband penetration in a specific year is correlated to 1.5 percent greater labor productivity growth over the following five years.”* Roman Friedrich, et al., Digital Highways: The Role of Government in 21st Century Infrastructure (2009), p. 4. By simultaneously lowering the costs of doing business and increasing productivity, broadband can be instrumental in promoting the growth of enterprises.* Qiang and Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband (2009), p. 37.

As with broadband’s effects on GDP, further data collection and analysis are needed to confirm the positive impact that broadband has on employment growth. Yet, aside from the studies identified above, researchers focusing on various regions and outcome measures have reported more evidence of how broadband development has stimulated the job market.

A European Commission study found that broadband had a positive impact on employment in 2006 with a net creation of 105,000 jobs throughout Europe due to broadband deployment.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008), p. 6. A nationwide study in the United States examined how broadband deployment affects job creation, determining that the availability of broadband at a community level increased employment growth by more than 1 percent.* Katz and Avila, The Impact of Broadband Policy on the Economy (2010), p. 3. Another study focusing just on the state of Kentucky in the southern United States found that a 1 percentage point increase in broadband penetration increased employment by 0.18 points, with the increase ranging from 0.14 percent to 5.32 percent depending on the industry sector.* Raul L. Katz and Javier G. Avila, The Impact of Broadband Policy on the Economy, Proceedings of the 4thd ACORN-REDECOM Conference Brasilia May 14-15, 2010 (2010), available at http://www.acorn-redecom.org/papers/acornredecom2010katz.pdf (last visited Jan. 19, 2011).

In Malaysia, the Malaysian Communications and Multimedia Commission (MCMC) estimated in 2008 that achieving 50 percent broadband penetration by 2010 could increase the country’s GDP by 1 percent, as well as create 135,000 new jobs. The regulator further projected that by 2022, the number of jobs created would reach 329,000, again based on 50 percent broadband penetration rate.* Malaysian Communications and Multimedia Commission (MCMC), Broadband Fact Sheet, Press Release (May 2008), available at http://www.skmm.gov.my/index.php?c=public&v=art_view&art_id=326 (last visited Jan. 21, 2011). An evaluation of multiple studies showed that for “every 1000 additional broadband users, roughly 80 new jobs are created.”* Erik Almqvist, Social Net Benefits Of IPTV And BB Infrastructure Investments, IPTV World Forum MEA, Dubai (Nov. 1, 2010), available at http://www.ericsson.com/campaign/televisionary/content/pdf/regulation/7f16d52b-d310-4b4f-8a48-1f3fb7fb3c0b.pdf (last visited Jan. 21, 2011).

1.3.4 Broadband as a General Purpose Technology

The importance of broadband might only be fully realized once it is understood as a general purpose technology (GPT). While the notion of broadband as a GPT has been addressed only in recent discussions of broadband and development, as well as in government-funded stimulus plans, the concept of GPTs was introduced on a more general basis already in the 1990s. It includes three key characteristics:

  • Pervasive use in a wide range of sectors;
  • Technological dynamism (inherent potential for technical improvements); and
  • As GPTs evolve and improve, they spread throughout the economy, bringing about general productivity gains.* Timothy F. Bresnahan and Manuel Trajtenberg, General purpose technologies: “Engines of growth?” (1995).

In broad terms, GPTs are technologies that enable new and different opportunities across an entire economy, rather than simply addressing one problem or one sector. According to the OECD, GPTs “fundamentally change how and where economic activity is organized.”* OECD, Broadband and the Economy (2007), p. 8.. Common examples of GPTs include electricity, the internal combustion engine and railways.

Although the initial conception of GPTs did not include the ICT sector, later research has considered ICTs (with broadband as the enabling platform) through the lens of the GPT concept. This view of broadband as a potential GPT has also been embraced in publications from, or on behalf of, the World Bank, infoDev and the European Commission, as well as in academia.* See, for example, Christine Zhen-Wei Qiang and Carlo M. Rossotto, IC4D: Extending Reach and Increasing Impact, Chapter 3: Economic Impacts of Broadband, GICT Dept. World Bank, p. 35 (2009), available at http://siteresources.worldbank.org/EXTIC4D/Resources/IC4D_Broadband_35_50.pdf; infoDev/The World Bank, Building Broadband: Strategies and Policies for the Developing World at 4 (2010); infoDev, What role should governments play in broadband development? at 3 (2009); Dr. Martin Fornefeld, Gilles Delaunay, and Dieter Elixmann, The Impact of Broadband on Growth and Productivity at 7 (2009) available at http://ec.europa.eu/information_society/eeurope/i2010/docs/benchmarking/broadband_impact_2008.pdf; and S.K. Majumdar, O. Carare and H. Chang, Broadband adoption and firm productivity: evaluating the benefits of general purpose technology, Industrial and Corporate Change at 641 (2009) available at http://icc.oxfordjournals.org/content/19/3/641.full.pdf+html.

When taken holistically, broadband as a platform—coupled with services, applications, content and devices—has the potential to satisfy the three criteria mentioned above, so that it can be considered a GPT. First, broadband can be used as a key input in nearly all industries. Second, broadband has the potential for technological dynamism through the development of new technologies, as well as improvements to the capacity and speed of broadband systems. For example, the average global broadband (wireline and wireless) speed in mid-2011 was 2.6 Mbit/s, with the top 20 countries having average speeds of over 7.6 Mbit/s, which allows services and applications requiring higher bandwidth, such as streaming video, to develop and become accessible to users.* Om Malik, “Worldwide, broadband demand and speeds are zooming,” GigaOm, October 23, 2011, http://gigaom.com/broadband/worldwide-broadband-demand-speeds-are-zooming/. Third, broadband has the potential to enable and engender new organizational methods that result in more general increases in productivity. Global architecture firms, for example, may have offices around the globe, but team members working on a new building design no longer have to be in the same place or even the same time zone. By using broadband connections to share work products, the team can be completely decentralized.

As broadband’s potential as a GPT is realized, it becomes an enabler of technology-based innovation and growth throughout the economy by businesses and individuals, as well as by academic, governmental and other institutions. Businesses and individuals are able to use currently available broadband technologies and services to create entirely new applications and services in areas such as advertising, e-commerce, online video, social networking and financial services, including online banking and loans.* Katz, The Impact of the National Broadband Plan on Jobs (2010), p. 9. Innovation in these areas is important for the growth of new markets in developed economies and for the transfer of technology to emerging economies, which can benefit from e-services, such as mobile health and mobile banking.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008). Broadband-enabled services also allow the public sector to access new communities and regions, as well as deliver higher quality services more efficiently, including online education, telemedicine and civic participation. In the following several specific examples of how broadband can enable growth in and beyond the ICT sector in both developed and developing countries are provided. Five common themes are discussed: improved research and development efforts, reduction in business costs through cloud computing, improved productivity in the retail, services and manufacturing sectors, and improved outcomes in education and health care.

Research and Development throughout Economic Sectors

Broadband can have a particularly strong impact on research and development (R&D) leading to innovative technologies, as well as enabling new ICTs to lead to further innovations. Additionally, broadband may allow businesses to move more rapidly in the product development cycle from the idea stage to final product.* OECD, Broadband and the Economy (2008), p. 11. For example, a company could have teams in various locations around the world working on related portions of the same project, using broadband connectivity to provide seamless communication and information sharing (see Box 1.2).

Box 1.2. Examples of the Potential Impacts of Broadband on Innovation in R&D

Source: OECD, Broadband and the Economy (2008).

  • Enable instant sharing of knowledge and ideas
  • Lower barriers to product and process innovation via faster and less expensive communications
  • Accelerate start-ups
  • Improve business collaboration
  • Enable small business to expand their R&D and collaborate in larger R&D consortia
  • Reduce time from idea to final product
  • Foster greater networking
  • Promote “user-led innovation”

Increasing broadband penetration may also enable more than just large firms, governments and academic research institutions to develop innovative products. For example, Apple’s iPhone App Store has over 100,000 registered application developers, most of which are small companies.* Apple, Staggering iPhone App Development Statistics to be Unveiled at Inaugural App Exhibit at Macworld 2010, Press Release (Feb. 2, 2010), available at http://www.iphoneappquotes.com/press-staggering-iphone-app-development-statistics-unveiled-at-macworld.aspx. Since the App Store opened in 2008, Apple has paid app developers over USD 2.5 billion.* Christian Zibreg, “Apple Issues App Store stats: 425,000 Apps, 15B Downloads, $3.6B Revenue,” 9to5 Mac, July 7, 2011, http://9to5mac.com/2011/07/07/apple-issues-app-store-stats-15b-downloads-425000-apps-nearly-3-6b-revenue/.

Cloud Computing: Reducing Costs for Businesses

For enterprises of all sizes, the costs of IT infrastructure, including hardware, software, and technical support, can be significantly reduced with the adoption of cloud computing technologies. Cloud computing generally allows for instant access to and storage of applications and data via broadband connectivity. Currently, almost every traditional business application has an equivalent application in the cloud, which means that cloud services can effectively replace the more conventional, and typically more expensive, method of accessing and storing applications and data through software installed locally on one’s own computer or in-house server.* Nicholas G. Carr, The Big Switch: Rewiring the World from Edison to Google, W.W. Norton & Co., New York, p. 72 (2008). Additionally, cloud computing reduces or eliminates the need for on-site IT staff since these data processes are handled remotely. Other potential benefits of cloud computing for businesses include:* Qi Zhang, Lu Cheng and Raouf Boutaba, Cloud Computing: State-of-the-Art and Research Challenges, Journal of Internet Services and Applications (May 2010), available at http://www.springerlink.com/content/n2646591h5447777/fulltext.pdf.

  • Reduced need for up-front investment since cloud-computing is typically based on a pay-as-you-go pricing model;
  • Lower operating costs since the service provider does not need to provision capacities according to the peak load;
  • Easy access through a variety of broadband-enabled devices; and
  • Reduced business risks and maintenance expenses, as business risks (such as hardware failures) and maintenance costs are shifted to infrastructure providers, who often have better expertise and are better equipped for managing these costs and risks.

In 2011, Harvard Business Review Analytic Services conducted a global survey of nearly 1,500 businesses and other organizations on their current and planned use of cloud computing, as well as the perceived benefits and risks associated with cloud computing services.* Harvard Business Review Analytic Services, How the Cloud Looks from the Top: Achieving Competitive Advantage in the Age of Cloud Computing, Report Commissioned by Microsoft (May 2011), available at http://www.microsoft.com/en-us/cloud/tools-resources/whitepaper.aspx?resourceId=Achieving_Competitive_Advantage&fbid=nSj309bhGW3. The respondents were large companies: the average annual sales for 2010 for respondent companies were USD 1.3 billion and average company size was 3,280 employees. However, the respondents were from a wide range of sectors: 17 percent were in the IT sector; 12 percent were in professional services; and financial, manufacturing and government/nonprofit each represented 10 percent of the respondents. About 85 percent of respondents stated that their organizations will be using cloud computing tools on a moderate or extensive basis over the next three years in order to take advantage of the benefits of cloud computing, including improved speed and flexibility of doing business, lower costs and new avenues for growth, innovation and collaboration. Only seven percent of respondents stated that their businesses had been using cloud computing for over five years; however, these early adopters reported that real business value had already been created, including faster time to market, lower operation costs and easier integration of new operations.

In addition, cloud computing itself can provide for new business models and avenues for revenue. For example, Amazon, the largest U.S. online retailer, began offering cloud computing services to businesses and individuals in 2002 because the company had excess computing and storage capacity.* Nicholas G. Carr, The Big Switch: Rewiring the World from Edison to Google, W.W. Norton & Co., New York, pp. 74-75 (2008). In order to accommodate the busiest shopping week of the year in the United States, Amazon had to purchase a much larger amount of capacity than was required for the rest of the year. Rather than let the extra capacity go unutilized, Amazon began renting out its system to others, thereby becoming a “utility” for computing services.

Despite the promise of cloud computing as a source of substantial cost savings for enterprises, there are various issues that may limit its impact, particularly lack of access to broadband services. Cloud computing requires access to fast, reliable and affordable broadband in order to achieve its maximum functionality. In addition, cloud computing raises several network and data security concerns.* Harvard Business Review Analytic Services, How the Cloud Looks from the Top: Achieving Competitive Advantage in the Age of Cloud Computing, Report Commissioned by Microsoft (May 2011). Other significant concerns include reliability of the technology, lack of interoperability with existing IT systems and lack of control over the system.

Retail and Services Sectors

Particularly for the retail and services sectors (that is, customer relations averages 50 percent or more of a company’s activities), broadband can improve the ability to reach new customers and maintain contact with existing customers.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008), p. 75. As such, the ability to send multimedia email or use targeted online advertising to keep and attract customers can increase a company’s sales while using less capital and labor inputs than would be required for postal mailings or door-to-door sales calls. Broadband also enables self-service websites, such as online airline reservations or e-government services, as well as remote services such as online technical support and video conferencing.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008), p. 75. For example, broadband is essential for developing countries, particularly India, Mauritius, and China, which are the main off-shoring destinations for IT technical support and business process outsourcing.* Gartner, Gartner Identifies Top 30 Countries for Offshore Services in 2010-2011, Press Release (Dec. 20, 2010), available at http://www.gartner.com/it/page.jsp?id=1502714.

In addition, sophisticated services, enabled by broadband and the development of ICTs, have become not just a traded input for goods, but a final export for direct consumption.* Saurabh Mishra, Susanna Lundstrom, and Rahul Anand, Service Export Sophistication and Economic Growth. Policy Research Working Paper 5606, World Bank, p. 2 (2011) available at http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2011/03/22/000158349_20110322141057/Rendered/PDF/WPS5606.pdf Success stories such as call centers in Kenya, business consulting and knowledge-processing offices in Singapore, accountancy services in Sri Lanka, and human resources processing firms in Abu Dhabi are different forms of this phenomenon. Recent research has found that sophisticated service exports are becoming an economic driver of growing importance in developing countries and may be an additional channel for sustained high growth.* Saurabh Mishra, Susanna Lundstrom, and Rahul Anand, Service Export Sophistication and Economic Growth. Policy Research Working Paper 5606, World Bank, p. 4 (2011) The deployment and adoption of broadband also has the potential to provide an additional conduit for economic growth through service exports.

Manufacturing and Industrial Sectors: Supply-Chain Management

Broadband allows businesses to more efficiently manage their supply chains by automatically transferring and managing purchase orders, invoices, financial transactions and other activities.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008), p. 74. As with any information-based business activity, broadband can enable faster, more secure and more reliable processing than previously possible. Broadband connectivity saves processing and transfer time along the supply chain, and it can also substantially increase competitiveness by helping businesses reduce stock levels, optimize the flow of goods and improve the quality of final products.* Fornefeld, et al., The Impact of Broadband on Growth and Productivity (2008), p. 75. Since manufacturing and industrial sectors have been the main driver of overall economic growth in developing countries for the last 15 years, broadband is expected to play a vital role for them in improving productivity in these sectors and in ensuring the ability for companies to effectively compete in a global market.* United Nations Industrial Development Sector (UNIDO), UNIDO Releases Latest International Yearbook of Industrial Statistics, Press Release (Mar. 10, 2010), available at http://www.unido.org/index.php? id=7881&tx_ttnews[tt_news]=455&cHash=09cad462f0.

Education: Building Human Capital

In order to fully realize broadband’s potential for economic growth, it is necessary to have an educated workforce trained in the use of ICTs. Additionally, there is a self-reinforcing effect between education (and technological literacy in particular) and broadband adoption, since broadband can help improve fundamental educational outcomes, including learning how to better use broadband. For example, the services and applications available over broadband networks have been shown to improve basic educational performance in a review of 17 impact studies and surveys carried out at national, European and international levels by the European Commission.* Anja Balanskat, Roger Blamire and Stella Kefala, The ICT Impact Report: A Review of Studies of ICT Impact on Schools in Europe, European Schoolnet, p. 3 (Dec. 11 2006), available at http://ec.europa.eu/education/pdf/doc254_en.pdf. These studies found that broadband and ICTs positively impacted learning outcomes in math, science and language skills.* Anja Balanskat, et al., The ICT Impact Report: A Review of Studies of ICT Impact on Schools in Europe, European Schoolnet, p. 3 (Dec. 11 2006). In addition to facilitating basic skills, broadband improves the opportunities for those with ICT training; they generally have a higher chance of finding employment, as well as higher earning potentials.* UNCTAD, Trends and Outlook in Turbulent Times, Information Economy Report (2009), p. 57. Bridging the connectivity divide is critical to ensuring that today’s students—and tomorrow’s high-tech workforce—can take advantage of these benefits.

One way to expand access to broadband and ICTs in rural and remote areas is through the deployment of mobile education labs: vehicles fitted with broadband connectivity, computer equipment and learning facilities.* Ananda Samudhram, Building ICT Literate Human Capital in the Third World: A Cost Effective, Environmentally Friendly Option, Ascilite Sydney Conference, New South Wales, December 5-8, 2010 (2010), available at http://www.ascilite.org.au/conferences/sydney10/Ascilite%20conference%20proceedings%202010/Samudhram-poster.pdf. They allow educators to drive to various schools throughout the week. In addition, these mobile labs can provide ICT training for adults to improve digital literacy. As opposed to transporting children in rural areas to where broadband facilities exist or waiting until the network is built out to them, mobile facilities offer a more cost-effective way to reach rural populations.* Ananda Samudhram, Building ICT Literate Human Capital in the Third World: A Cost Effective, Environmentally Friendly Option (2010). The United Nations has noted the success of mobile schools in Mongolia, where 100 mobile “tent” schools have been introduced in 21 provinces, as well as in Bolivia.* United Nations, Millennium Development Goals: Goal 2 Achieve Universal Primary Education, United Nations Summit, New York, Sept. 20-22, 2010 (2010), available at http://www.un.org/millenniumgoals/pdf/MDG_FS_2_EN.pdf. Bolivia has implemented a bilingual education program for three of the most widely used indigenous languages, which has been expanded to include indigenous children in remote areas.* United Nations, Millennium Development Goals: Goal 2 Achieve Universal Primary Education (2010). In Morocco, the government implemented a program called NAFID@ to help over 100,000 teachers afford wireline or mobile broadband connections, which has allowed the teachers to receive training in the use of ICTs in the classroom, as well as to use e-learning programs and online libraries to improve class lessons.* Intel, Realizing the Benefits of Broadband, White Paper (2010), available at http://www.intel.com/Assets/PDF/Article/WA-323857001.pdf.

Health Care Sector

Health-based broadband applications and services are significantly improving health and medical outcomes around the world, particularly for patients in remote areas and those with limited mobility through e-health and mobile health (m-health) initiatives.* WHO, Global Survey for eHealth (2005) at http://www.who.int/goe/data/en/. Considering that there are fewer than 27 million doctors and nurses for the more than six billion people in the world—and only 1.2 million doctors and nurses in the lowest income countries—harnessing mobile technologies will be a valuable tool for healthcare practitioners to reach patients. As mobile broadband develops and spreads in developing countries, examples of the benefits are already becoming clear.* WHO, World Health Statistics 2010 at http://www.who.int/whosis/whostat/2010/en/index.html.

Although basic voice and data connections can be useful in improving health and medical care, broadband connectivity is necessary to capture the full potential of e-health services, including telemedicine that enables real-time audio and video communications between patients and doctors, as well as between healthcare providers. Improvements in telemedicine and other e-health initiatives rely on increasing bandwidth capacity, more storage and processing capabilities and higher levels of security to protect patient information.* ITU, Implementing e-Health in Developing Countries: Guidance and Principles (Draft), p. 11 (2008), available at http://www.itu.int/ITU-D/cyb/app/docs/e-Health_prefinal_15092008.PDF. As noted in Table 1.3, the U.S.-based California Broadband Task Force estimated that telemedicine will require speeds between 10 and 100 Mbit/s and high definition telemedicine will require broadband speeds of over 100 Mbit/s.* The State of Connectivity, Building Innovation through Broadband, Final Report of the California Broadband Task Force, 2008, p. 6. The current wireline and wireless infrastructure in most countries is insufficient to take advantage of the e-health opportunities in the digital economy. This is particularly important for developing countries where ensuring access to and adoption of wireline and wireless broadband networks would be particularly useful for including those who have been left out of more traditional healthcare models.

Table 1.3. Necessary Upstream and Downstream Speeds for Various Services and Applications

Source: California Broadband Task Force, The State of Connectivity, Building Innovation through Broadband, Final Report (2008).

This was the case in Rwanda where a three-phase e-health project was delayed due to lack of high-speed broadband connectivity.* Rodrigue Rwirahira, Rwanda: Better Health Care by Using ICT in Medicine, All Africa (Aug. 28, 2009), available at http://allafrica.com/stories/200908280497.html. The first phase of the initiative, which established an electronic data storage system that permitted sharing of patient information among three hospitals, was completed without delay. However, the final two phases involving video conferencing and a real-time telemedicine system were put on hold for a year until a broadband Internet connection could be established to connect the three hospitals with a fiber optic cable network.* Moses Ndahiro, RDB Forging Ahead with E-Health Development, The New Times (Sept. 20, 2010) at http://www.newtimes.co.rw/index.php?issue=13963&article=17756.

Box 1.3. Mobile Health Services in Nigeria

Source: Intel, Realizing the Benefits of Broadband (2010).E-government applications

In Nigeria, the government lacked sufficient public health information to efficiently allocate health care services to over 800 villages that lacked primary health care. A public-private partnership, Project Mailafia, was established to alleviate this situation. Project Mailafia sends teams of mobile health care providers to remote villages, where they treat patients and collect health data that support better public health decision-making and resource allocation. The mobile health workers collect the data on ruggedized netbooks, and transfer the data to area clinics. The clinics then upload the data to a central database using Worldwide Interoperability for Microwave Access (WiMAX) and Wi-Fi technologies.

E-government covers a broad range of applications that transform government processes and ways that it connects and interacts with businesses and citizens. This allows citizens to better participate in society and improves the efficiency, accountability and effectiveness of government programs and processes.* Nagy K. Hanna, Christine Zhen-Wei Qiang, Kaoru Kimura & Siou Chew Kuek, National E-Government Institutions: Functions, Models, and Trends, IC4D Report, World Bank (2009), available at http://siteresources.worldbank.org/EXTIC4D/Resources/5870635-1242066347456/IC4D_2009_Chapter6.pdf. Broadband is important for e-government as it provides the foundation for public administration networks that allow processes to flow more smoothly.* UNCTAD, Trends and Outlook in Turbulent Times (2009), p. 21. E-government can also help to drive demand for broadband.

Countries around the world are providing increasing access to online services, including the provision of basic services, the use of multimedia technology to promote two-way exchanges and consultation with citizens on public policy issues.* UN, United Nations E-Government Survey 2010: Leveraging E-Government at a Time of Financial and Economic Crisis (2010), pp. 76-77. Although the Republic of Korea, the United States, and Canada take the top three places in terms of number of online government services available, the UN found that several countries have made significant progress over the last two years, including Bahrain, Chile, Colombia and Singapore.* UN, United Nations E-Government Survey 2010: Leveraging E-Government at a Time of Financial and Economic Crisis (2010), p. 77. The UN also found that the use of mobile phones for e-government services, such as alert messages, applications or fee payments, are almost as popular in developing countries as they are in developed countries.* UN, United Nations E-Government Survey 2010: Leveraging E-Government at a Time of Financial and Economic Crisis (2010), p. 80.