1 HOW TO ENGAGE IN BROADBAND POLICY AND REGULATORY PROCESSES RESEARCH ON SIGNIFICANCE OF BROADBAND/INTERNET SESSION 2, MARCH 7, 2014 PAYAL MALIK, Advisor, Economics, Competition Commission of India Views expressed here are personal and cannot be attributed to CCI
2 Objective To provide a brief overview of the various research studies that assess the impact/significance of Broadband (BB) Catalyst for economic and social development National income (GDP) Transformative impact on businesses and livelihoods
Broad Outline Cross-country Quantitative Research Country based Qualitative Research Conclusion
Why this research on research? Broadband is a General Purpose Technology (GPT) GPTs are technologies that enable new and different opportunities across an entire economy, rather than simply addressing one problem or one sector Three key characteristics: Pervasive use in a wide range of sectors Technological dynamism (inherent potential for technical improvements) General productivity gains as GPTs evolve, improve, and spread throughout the economy
Why this research on research? Huge investment in Broadband Infrastructure USA - USD 97.7 billion in broadband deployment China- USD 7.44 billion in broadband since 2009 Malaysia: USD 1.6 billion since 2009 Information key for efficient running of markets Information key for governments to design their social programmes Information key for democratising access to human knowledge
Broadband Economic Impact
7 Research Approaches Quantitative Techniques Input-Output Impact of broadband infrastructure deployment on output and employment generation within a country Multivariate Regression Techniques What is the contribution to GDP growth, productivity and employment? Micro perspective Contribution to business process efficiency and sales growth Qualitative Individual country or region based case studies
Cross Country Quantitative Research
9 Impact of Broadband on GDP growth Vary widely, from 0.25 to 1.38 per cent due to differing datasets and varying model specifications
Impact of Broadband on GDP growth
Developing Countries - Qiang (2009) World Bank study (Qiang 2009) 120 developing countries Hierarchy of impacts fixed being the lowest and broadband being the highest Impact is higher for developing countries However, the significance of the impact is greater for developed
Developing Countries - Qiang (2009) Impact of a ten per cent increase in penetration of selected ICTs on GDP per capita
OECD Czernich 2009 Studies 25 OECD countries for the period 1996-2007 Found that a 10 percentage-point increase in broadband penetration raises annual gdp growth by 0.9-1.5 percentage. Uses econometric techniques to separate the effects of Uses econometric techniques to separate the effects of broadband penetration from effects of diffusion of like mobile phones and computers.
European Union - Koutroumpis 2009 Koutroumpis (2009) studies the impact of broadband infrastructure on growth using data from the 15 European Union countries for the period 2003 to 2006 The results indicated a significant positive causal link especially when a critical mass of infrastructure is present. The average contribution to growth was 2.3% for high penetration countries as opposed to 08% for low penetration countries
European Union - Koutroumpis 2009
Latin America Katz, 2012 Uses data from 26 Latin American countries, for the period 2003 to 2009 Latin America and the Caribbean, on average, a 10 percent higher broadband penetration is associated with 3.19 percent higher GDP 2.61 percent higher productivity 67,016 new jobs
Consultancies Buttkereit et. al.(2009) estimated that a 10 percent increase in broadband household penetration delivers a boost to a country s GDP that ranges from 0.1 percent to 1.4 percent Buttkereit, Sören, et al (2009), Mobile broadband for the masses: regulatory levers to make it happen, McKinsey & Company. Study of OECD countries by Booz & Company found that among high-income countries, there is a strong correlation between average annual GDP growth and broadband penetration
Problems Very high levels of data aggregation do not account for the wide discrepancy between regions probably suggests an over-estimation of impact of broadband on GDP growth Institutional variables such as labour market regulation affect outcomes Van Reenen et. al. (2010): Inefficient labour market regulation offsets the productivity impact of ICTs by - 45%
Caveats Impact neither automatic nor homogeneous Concomitant public policies education, economic development and planning, science and technology Higher impact combined with stimulus of innovative businesses that are tied to new applications. Stronger productivity impact in sectors high transaction costs high labour intensity Impact on small and medium enterprises takes longer
Broadband, Employment and Job Creation Input-Output tables are a reliable tool for predicting investment impact total employment change throughout the economy resulting from the deployment of a broadband network. Direct jobs in creating broadband infrastructure Indirect and induced jobs created from this activity Additional jobs due to network externalities and spillovers. Static models reflecting interrelationship between economic sectors at a certain point in time
Broadband impact on job creation
Direct Impact
Externalities
Broadband and Network externalities New and innovative applications and services, such as telemedicine, Internet search, e-commerce, online education and social networking New forms of commerce and financial intermediation Mass customization of products Reduction of excess inventories and optimization of supply chains Business revenue growth Growth in service industries
The contribution of broadband externalities to employment comprises three simultaneous effects
Productivity Growth Increasing the information available to SMEs and information workers Complementary investments in other ICTs and skills Enabling business process re- engineering to improve the efficiency and management of labour intensive jobs Supporting the development of new more efficient business models
Country Specific Qualitative Studies
China Broadband and Dial Up China s dial-up and broadband Internet together may contribute a combined 2.5 percent to GDP growth for every 10 percent increase in penetration World Bank, Christine Zhen-Wei Qiang, 2009
Canada Rural broadband In 2005 Industry Canada commissioned a survey to be conducted in the rural areas of British Columbia regarding subscribers views of the significance of broadband access. More than 80 percent of all business respondents reported that absence of broadband would affect their businesses negatively Over 18 percent stated they could not operate their businesses without broadband
Germany Ultrafast Broadband Katz et.al. (2010) studies the economic impact of the German National Broadband Strategy found that investments in the network are expected to result in a contribution of EUR 18.8 billion to Germany s GDP between 2010 and 2014. By 2020, Germany s ultra-fast broadband network will contribute an additional EUR 14.6 billion in GDP. Katz et.al.(2010) : The impact of broadband on jobs and the German economy, Intereconomics,, Vol. 45, Iss. 1, pp. 26-34.
India Wireless Broadband Analysys Mason conducted a study in December 2010 on the deployment of wireless broadband in India Found that each percentage point increase in mobile broadband penetration could increase India s GDP by 0.11 percent (USD 3.8 billion) by 2015 If the Indian Government allocates an additional 5 MHz of 3G spectrum to each licensee, the broadband penetration rate would likely increase 3.3 percent translating into an additional 3.3 percent growth in GDP by 2015
Conclusion Research evidence is consistently pointing to the positive economic of broadband Data analysis also indicates that economic impact increases with broadband penetration Economic impact varies by region indicating that broadband deployment needs to be carefully coordinated with economic development policies (training, firm relocation, etc.) to maximize impact
Conclusion Broadband policies are critical to maximize the economic impact of technology (national broadband plans, competition policies, demand stimulation, alignment of taxation with development and technology objectives) Policy development needs to be based on rigorous Policy development needs to be based on rigorous economic analysis which requires an important effort in data generation
Requirement for Broadband Source: California Broadband Task Force 2008.
Coursera Massive Online Courses (MOC) DaphneKoller_2012G- 480p.mp4
36 Thank you payal.malik@gmail.com