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Stimulating Economic Growth with Broadband

August 30, 2011 - 1 Comment

By Howard Baldwin, Contributing Columnist

One of the toughest aspects of promoting new technology deployment and usage is finding meaningful facts to support its potential value to local business community stakeholders. While there are readily available estimates and forecasts, detailed analysis and actual payback examples are somewhat rare.

That’s especially true with new technologies such as broadband that require the concerted efforts of multiple parties — which can include government agencies, service providers, equipment manufacturers, and end-users — in order to deliver quantifiable results.

That doesn’t stop people from trying, of course. In 2008, Connected Nation, a U.S. non-profit organization devoted to expanding access to and usage of broadband Internet, postulated that a 7% increase in broadband utilization would result in a $134 billion economic boost nationally.

Frequently in estimates, the anticipated boosts initially come from job creation, especially in the actual deployment of broadband infrastructure. It’s more difficult to calculate the subsequent softer benefits — in terms of how users of broadband derive greater efficiency.

Calculating the Full Return on Investment

Nonetheless, earlier this year, that’s exactly what Connected Nation was able to demonstrate, with another, more-specific survey. It polled 9,650 businesses in 12 U.S. states to study their broadband usage and also attempt to quantify its value, by industry sector and business size.

Some of results are eye-opening: Broadband-connected businesses bring in approximately $200,000 more in median annual revenues than business without broadband ($500,000 vs. $300,000). Furthermore, businesses that subscribe to broadband and maintain a website (presumably for e-commerce) have median annual revenues of $700,000, $400,000 more than businesses that don’t have broadband at all ($700,000 vs. $300,000). That represents a significant return-on-investment for broadband connectivity and internet access.

The respondents to the survey also reported that Internet-connected businesses, in a wide variety of industries both expected and unexpected, earn revenue from online transactions. These included:

  • Agriculture and mining: 24% of revenues
  • Wholesale, warehouse, and transformation: 24% of revenues
  • High tech: 37% of revenues
  • Manufacturing: 49% of revenues

Other Compelling Business Benefits

Those polled also derived other business related benefits. Some 23% of survey respondents allow telework through broadband, which in turn helps companies promote themselves as being green. It also helps lower real estate costs, because they need less physical space to accommodate a full contingent of employees.

Other studies show that when given the opportunity to telecommute, employees are happier, which in turn lowers employee turnover.

These results indicate that where those aforementioned entities work together to support commercial applications, businesses then can extend their reach to help themselves; that is, by maintaining a broadband-based online presence, two things happen — they no longer restrict themselves physically, and they can respond to customers more efficiently.

This supportive environment creates a virtuous circle, in which investing in broadband gives businesses the ability to boost responsiveness, agility, and flexibility.

The telecom service providers, states, and municipalities that are investing in broadband find that by laying the foundation for communications, they are giving businesses the ability to build upon that essential infrastructure by creating new or better commercial applications.

Though confirmed by U.S. data, it’s a proven economic development strategy that should, theoretically, produce advancements and associated results anywhere in the world.

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  1. That's a very informative post.