Does broadband really help economy?

It may seem like a foregone conclusion. Of course it does. But how much is the broadband factor in determining the growth of an economy?

This question is relevant to us since the only mega project happening in Malaysia today is the RM11 billion+ High Speed Broadband by Telekom. (The only other I can think of is Iskandar Malaysia development, but that’s a long term township development program). Out of that RM2.4 billion bill will be foot by the Government. So it’s our money being spent here and we need to be sure that it is spent wisely.

Extract of a study conducted by Oxford University and sponsored by Cisco. (chart by Malaysian Insider)

One thing for sure is that Internet services in Malaysia need to be improved. Just go through the blogs, forums or Facebook statuses and one will come across slow-internet-frustrations vented in capital letters and nasty symbols. Social critics like Lim Kit Siang and Malaysian Insider have quoted a study by the business school of Oxford University which ranked Malaysia a distant 48 out of 66 countries.

This state of affairs has been noted by our Government and to be fair to them, many initiatives have been taken. The HSBB project and issuance of new licenses to aspiring wireless broadband are some of them.

Sorry… let’s not divert from my original topic.

In an article in gigaom, John Chambers, CEO of Cisco, naturally agreed wholeheartedly:

The impact of broadband has been similar to that of the (USA’s) national highway system in the 1950s. Until then, our nation’s roads were slow and the quality was unpredictable, which hindered commerce and travel. The modern highway system made our country accessible and in the process, created new industries — transforming our economy and by extension, our society.

This view seemed to be confirmed by a new study released Tuesday by the Public Policy Institute of California. It concluded that employment grows faster in places where access to broadband has expanded. (Get copy of report here).

However, once you finished reading the report, you will see that some of the findings of that study are not so enthusiastic. In doing the study, Jed Kolko, an associate director at the PPIC and also author of the report, compared changes in several economic outcomes with the extent of broadband expansion.

Surprisingly, his research shows that expanded broadband availability has not increased the likelihood that workers telecommute, or have home-based businesses. Telecommuting is one key area always put forward by broadband-proponents. In reality, communication with workers by video is sophisticated and requires expensive hardware and much faster Internet connection. It can also be explained by the fact that corporate cultures discourage telecommuting.

Though the report found strong link between broadband expansion to population growth, it also points out that the average wage and the employment rate are unaffected by Internet expansion.

Broadband has a “probably causal” relationship to job growth, and it may bring other benefits, including better health information, educational opportunities and civic engagement, although those benefits are hard to measure and evidence is “quite limited”
Kolko said.

What a dampener. So what does means? There goes my dream of working in shorts from home with 20% raise?

Related articles

• Broadband Boosts Economic Development to a Point (gigaom.com)
• Canadian broadband is world-class: ISP-funded report (cbc.ca)
• Telekom expects HSBB project to boost GDP