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Broadband and the economy
United States
 
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Photo credit: Alamy

Economic stimulus to create jobs via broadband

The American Recovery and Reinvestment Act, enacted by Congress in February 2009, envisaged grants to be disbursed to implement broadband. A study attempting to estimate the jobs that could be generated as a result of these broadband provisions differentiated between, on one hand, jobs generated through capital spending in the form of grants allocated to unserved and underserved areas and, on the other hand, employment created as a result of network externalities caused once the infrastructure was deployed.

The study found that approximately 127 800 jobs could be created over a four-year period from broadband network construction. According to the analysis, the investment of USD 6.390 billion will generate 37 300 direct jobs over the course of the stimulus programme (estimated to be four years). In addition, the bill could generate 31 000 indirect jobs, and an additional 59 500 induced jobs.

Spill-over effects

In addition to network construction, the investment in broadband would trigger new jobs as a result of spill-over effects on the rest of the economy. The calculation of spill-over effects was performed by selecting those states in the United States where the percentage of residential households which have access to at least one broadband supplier (that is to say, primarily telco or cable) is 93 per cent or less. There are eighteen states that significantly lag behind the national average broadband penetration rate. While broadband in these states has been adopted by 47 per cent of households (or 21 per cent of the population), the United States average is 62 per cent (or 25 per cent of the population). The assumption used to estimate the network effects of the stimulus programme on employment was that the programme would deploy enough lines to allow these eighteen states to reach the national average, meaning that 3,928,000 broadband subscribers would be added to the existing base.

Job gains driven by network effects in the targeted regions result from three combined trends: innovation and the creation of new services; attraction of jobs (from either other United States regions or overseas); and productivity enhancement. The impact of innovation on the professional services sector was estimated by applying the ratio of productivity gains to the creation of new employment. Then this effect was applied to the economy of the targeted states as a whole. The impact of broadband on outsourcing operates in two directions: broadband can facilitate the attraction of new jobs; and it can enable the relocation of others to regions other than the one being targeted.

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Photo credit: AFP/HO/Ford

Three scenarios

Because of the uncertainty regarding the number of jobs that will be gained or lost, three scenarios were estimated: a pessimistic scenario; a baseline scenario; and an optimistic scenario. In addition, increased adoption of broadband has an impact on productivity because it is an enabler of more effi cient business processes. The estimates point to the following conclusions.

The deployment of broadband resulting from the stimulus programme is likely to have moderate direct employment effects (creating 37 300 jobs over a four year period). Indirect and induced multipliers are important, generating a total of 127 800 jobs over four years. A mid-range estimate of the effect of externalities on employment results in 136 000 jobs.

In sum, a USD 6.3 billion investment in broadband network deployment is likely to result in 263 800 jobs over the four years of the deployment of the programme.

 

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