Fibre and productivity

A study [ pdf, 368KB] by a New Zealand policy research firm is calling into question billions of dollars of government stimulus for upgrading broadband connections to fibre.

In a paper called The Need for Speed: Impacts of Internet Connectivity on Firm Productivity, researchers at Motu Economic and Policy Research claim to provide the first firm-level estimates of the degree of productivity gains sourced from upgraded internet access.

We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. … Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type.

Translation? The study finds a productivity benefit associated with a firm being connected to an ‘always on’ internet connection, but it could not show a benefit associated with higher speeds.

The implication? Billions of dollars are being spent by some governments on a belief that upgraded infrastructure is necessary to improve national economic productivity. Some governments, perhaps impatient with the pace of natural evolution of network development, are imposing structural separation or even nationalization of access infrastructure.

This study appears to affirm the benefit of ensuring universal access to a broadband connection; the challenge is in demonstrating a benefit from government intervention in broadband network upgrades.

If the Motu study is really the first to study the impact of broadband upgrades, one would hope that a fraction of the billions of tax dollars being spent around the world will fund econometric research to make sure that it is a worthwhile investment.