Broadband Access in the EU: An Assessment of Future Economic Benefits

Posted: 4 Jan 2013

See all articles by Harald Gruber

Harald Gruber

European Investment Bank

Pantelis Koutroumpis

Oxford Martin Programme of Technological and Economic Change; University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Imperial College Business School

Date Written: January 3, 2013

Abstract

Broadband adoption and its applications have been found to affect economic growth, innovativeness, political representation and individual welfare. As such, network infrastructures are now central in the political agenda with modern economies largely dependent on the vast spillover effects of information services. The European Commission has set out its targets to improve the Union’s infrastructure by 2020 and provide high quality services to all citizens. This effort entails a front-loaded high-risk investment – both in terms of technology uncertainty and the rate of adoption – making it unlikely to materialize without significant subsidies. In this paper we attempt to estimate the net benefits of the implementation of the Broadband Digital Agenda. Using a structural model we first estimate the broadband infrastructure returns for the period 2005-2011, differentiating the impact of broadband by levels of adoption and speed while taking into account the effects of reverse causality and extensive heterogeneity. We further extrapolate the individualized returns by country using different scenarios of implementation. In doing so, we utilize the most detailed sample on the total infrastructure cost requirements depending on demography, technology choice and network reuse. Effectively we monetize the conceptual policy goals, acknowledging the degrees of uncertainty within this attempt. We finally estimate the required investment and subsidies by country and the cumulative and net gains by different implementation approach.

Keywords: broadband, economic growth, digital agenda

JEL Classification: O11, L96, O47

Suggested Citation

Gruber, Harald and Koutroumpis, Pantelis, Broadband Access in the EU: An Assessment of Future Economic Benefits (January 3, 2013). Available at SSRN: https://ssrn.com/abstract=2195914

Harald Gruber

European Investment Bank ( email )

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Pantelis Koutroumpis (Contact Author)

Oxford Martin Programme of Technological and Economic Change ( email )

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University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

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Imperial College Business School ( email )

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