The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP

64 Pages Posted: 26 Feb 2009 Last revised: 11 Nov 2013

See all articles by Shane M. Greenstein

Shane M. Greenstein

Harvard University - Technology & Operations Management Unit; National Bureau of Economic Research (NBER)

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University; Duke Innovation & Entrepreneurship Initiative

Date Written: February 2009

Abstract

How much economic value did the diffusion of broadband create? We provide benchmark estimates for 1999 to 2006. We observe $39 billion of total revenue in Internet access in 2006, with broadband accounting for $28 billion of this total. Depending on the estimate, households generated $20 to $22 billion of the broadband revenue. Approximately $8.3 to $10.6 billion was additional revenue created between 1999 and 2006. That replacement is associated with $4.8 to $6.7 billion in consumer surplus, which is not measured via Gross Domestic Product (GDP). An Internet-access Consumer Price Index (CPI) would have to decline by 1.6% to 2.2% per year for it to reflect the creation of value. These estimates both differ substantially from those typically quoted in Washington policy discussions, and they shed light on several broadband policy issues, such as why relying on private investment worked to diffuse broadband in many US urban locations at the start of the millennium.

Suggested Citation

Greenstein, Shane M. and McDevitt, Ryan C., The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP (February 2009). NBER Working Paper No. w14758. Available at SSRN: https://ssrn.com/abstract=1349591

Shane M. Greenstein (Contact Author)

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University ( email )

100 Fuqua Dr
Durham, NC 27708
United States

HOME PAGE: http://www.ryanmcdevitt.com

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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