A new report from consulting firm Deloitte found a strong positive broadband economic impact but questions current subsidy programs. Those programs should not aim for overly ambitious and more costly broadband speeds because doing so might prevent promising new technologies from gaining critical mass, the authors argue.
The latter finding is sure to be unpopular in some circles, as there are many people who argue that broadband deployments should aim to maximize speeds so that networks don’t have to be repeatedly upgraded. And in its research about broadband’s economic impact, Deloitte itself is quite critical of previous government broadband subsidy programs that have aimed too low.
The researchers note for example that as the FCC continues to revise the broadband speed definition, the number of Americans who don’t have service available to them has remained about the same, despite billions of dollars a year spent on subsidies – a finding that some would say means the commission should have aimed higher.
Broadband Economic Impact
What Deloitte seems to be arguing for is what some would call a “happy medium” and others would call a “middle of the road” approach.
The researchers developed economic models using publicly available information on broadband availability, gross domestic product, employment, household density and other factors. Among other things, the models showed that a 10-percentage point increase in broadband penetration in 2016 would have resulted in more than 806,000 additional jobs in 2019, or an average annual increase of 269,000 jobs.
The model also showed that adding 10 Mbps to average download speeds in 2016 would have resulted in about 139,400 new jobs in 2019, or about 46,500 additional jobs per year.
The broadband economic impact report goes on to say, however, that the model showed that the rate of job growth slowed as speeds continue to increase. The gain in jobs from 50 to 100 Mbps is more than the gain in jobs from 100 to 150 Mbps — and according to Deloitte, “this finding is significant, as it suggests that diminishing returns should be considered when evaluating future speed mandates.”
The report includes a case study about Alger County in Michigan’s sparsely populated upper peninsula. The report notes that in 2012, 84% of the population in the county had access to broadband based on the then-current 3 Mbps/ 768 kbps definition. But in 2017, only 74% had access to broadband based on the newer 25/3 Mbps definition, even though providers serving the county received $26.7 million in Universal Service Fund support in 2017 and 2018, about $3,500 per household.
The take-away from this case study, according to the researchers, is that “money to address broadband availability is not the sole answer to closing the digital divide.”
Additional factors for consideration, the authors said, include “addressing affordability issues in terms of both broadband service and devices (PCs, smartphones, Wi-Fi access points, and gateways).”
Rather than advocating subsidies aimed at broadband affordability, however, the authors point to “attaining meaningful competition between providers” as a means of achieving “the lowest reasonable price to maximize both investment and adoption.”
That idea doesn’t seem to flow logically from another comment the authors made about Alger County just a few sentences earlier, however – that “the costs associated with network deployment and limited market competition provide little incentive to upgrade and expand advanced connectivity services.”
“Fixed wireless 5G access and satellite broadband are current examples of technologies that cannot yet meet a 250/25 Mbps threshold in most geographies but offer potential cost and rapid deployment advantages versus fixed-line solutions,” the authors wrote in the broadband economic impact report. “Overly stringent mandates on speed thresholds run the risk of ruling out these innovations before they gain a market foothold.”
I suspect Telecompetitor readers will have something to say about that, and about the authors’ thoughts on competition for high-cost areas.