Economic Incentive for Telecom Infrastructure Investment
In his recent State of the Union address, President Obama identified government investment in infrastructure as a key antidote to the U.S. economic doldrums. This is not a new concept. During the Great Depression, the Works Progress Administration spent $7 billion over a three year period to construct buildings, roads, parks, and bridges, bringing short-term jobs and long-term competitive advantage.
Nor is it strictly a U.S. strategy. During the recent downturn, multiple countries have started taking the same tack, but instead of dams and highways, they’re funding telecommunications network infrastructure.
According to a 2009 speech by Taylor Reynolds, an economist with the Organization for Economic Cooperation and Development (OECD), the numbers are impressive for countries both large and small:
|United States||US$7 billion|
Reynolds gave his presentation at a workshop entitled “Investing in Broadband Infrastructure for Economic Stimulus and Growth.” At the same workshop, organizers cited recent research by the World Bank that finds for every 10 percentage-point increase in the penetration of broadband services, developing countries can see an increase in economic growth of 1.3 percentage points.
Compelling Reasons for Investing
Juan Navas-Sabater, a Senior Telecommunications Specialist for the World Bank, also spoke on the value of broadband investment, citing multiple ways it helps economies recover. He noted that in downturns, entrepreneurship flourishes, pointing to the way South Korea boosted its vaunted broadband infrastructure after the Asian financial crisis in the 1990s, as well as to dot-com success stories, such as Skype.
Navas-Sabater also suggested that telecom infrastructure investment triggers other advantages: competitive pressure on telecom operators brings down the cost of not only consumer devices such as mobile handsets, but also the costs of communication. Major infrastructure investment frequently includes rollouts to rural areas as well, which increases those areas’ chances of sharing in economic recovery.
He also cited statistics from the Communications Workers of America stating that $5 billion in stimulus money would create almost 100,000 new jobs in the short term and almost 2.5 million jobs in the long term.
Part of a Multifaceted Action Plan
Will an economic boost inevitably follow telecom infrastructure investment? It’s not that simple, because such investment doesn’t live in a vacuum. According to a September 2010 report from the U.S. Government Accountability Office (GAO), countries need to follow up investment with other efforts. These efforts include:
- establishing plans and policies to guide deployment and provide leadership support
- providing government funding through public/private partnerships
- promoting competition
- implementing strategies to make broadband services more available and useful to consumers
- providing digital literacy training and consumer subsidies
- partnering with key stakeholders, such as local telecom service providers
Author Thomas Friedman was right: the world is flat, and telecommunications infrastructure is one of the things that’s flattening it. It’s giving developed nations the chance to boost their economies and move ahead, and giving developing nations the opportunity for a stronger competitive advantage. But to get the most out of their efforts, those countries must couple them with rational plans for competition and education.