Broadband and Employment: Does Speed Matter?

Transcription

1 1 Bento J. Lobo, Ph. D., CFA First Tennessee Bank Distinguished Professor of Finance Broadband and Employment: Does Speed Matter? 8 November 2017 Economic Development Conference Fiber for the New Economy Atlanta, GA

2 Academic Research Perspectives 1. Macro-economic: analyzed the aggregate impact of broadband on economic development i.e. GDP growth, productivity and employment 2. Microeconomic: conducted at the firm level and emphasizes the contribution of broadband to business process efficiency and sales growth. 3. Qualitative: case study (usually of a community) as the primary analytical tool. 4. My previous approach has been a mixture of 2 and 3

3 THE REALIZED VALUE OF FIBER INFRASTRUCTURE IN HAMILTON COUNTY, TN Lobo (2015) Realized benefits (March 2015) Jobs Income $865- $1,321 million Realized benefits set to exceed projected net benefits and at a quicker pace Smart Grid 22% Consumer Surplus 5% Customer Savings 4% New Investments 30% Business Efficiency 24% Education 1% Healthcare 2% Taxes 4% Publicity 2% Telecommuting Venture Funds 1% 5%

4 Academic research has shown that broadband penetration has important economic impacts. Middleton (2013) argues that features other than penetration, such as speed and quality of service are also important determinants of the effects of broadband. Attention in the U.S. has shifted from expanding access to the internet towards improving the connections of users. FCC: only 1 in 4 U.S. households have access to state of the art technologies such as optical fiber which delivers the fastest symmetrical internet access. The National Broadband Plan (FCC, 2010) stipulates that 100 million households or more should have download speeds of at least 100 megabits per second (Mbps) and upload speeds of at least 50 Mbps. Academic studies on speed are sparse (Kongaut and Bohlin, 2017)

5 Our Focus To examine the effects of broadband speed on employment in the U.S. state of Tennessee 42 Metro ( Urban ), 53 Non-Metro ( Rural ) counties

6 Definitions Definition of broadband has evolved: 2000: download speed of 200 kilobits per second (kbps) or faster 2010: at least 4 Mbps downstream and at least 1 Mbps upstream Current: download speed of 25 Mbps or faster and upload speed of 3 Mbps or faster Our categories: Ultra-high-speed : at least 100 Mbps, including Gig High speed : at least 10 Mbps and up to 100 Mbps Low speed : less than 10 Mbps

7 Literature Review Rohman & Bohlin (2013): doubling the broadband speed (from 8.3 to 16.6 Mbps) contributed 0.3% to growth compared with the growth rate in the base year Gruber et al (2014): growth impact from moving up from basic broadband ( 0.75 Mbps); but the incremental speed impact appears to level off, i.e. going from 1 Mbps to 2 Mbps Mack (2014): speed affects firm presence in rural locations; agglomerative benefits of urban locations? Lapointe (2015): a 10 percent increase in households with access to fiber internet was associated with a 0.13 percent increase in total employment and a 0.10 percent increase in the number of firms Kongaut & Bohlin (2017): strong positive effects of broadband speed on GDP in a sample of OECD countries

8 Methodology Ubiquity makes broadband expected infrastructure and other factors become more influential drivers of economic growth. Broadband speed = proxy for other factors, such as agglomeration benefits? Linear or non-linear relationship between speed and economic impact? Endogeneity: reverse causality, missing variables Heterogeneity: industry effects; rural v urban Employment effects are ambiguous, a priori

9 Methodology Sample: 95 counties in the state of Tennessee Model: Two-way fixed effects or difference-in-difference model motivated by an endogenous growth model Period: 2011 to 2015 (N=475) Data: From the BLS and FCC

10 Preliminary Findings Fig 1. Tennessee - Average DL and UL Speed Tier Download Upload 50 to 100 Mbps to 10 Mbps

11 Preliminary Findings Download Speed Upload Speed Low High Ultra-High Low High Ultra-High 100 Gig 100 Gig

12 Preliminary Findings Table 1A. Private County Employment by Speed Tier Mean Median Max Min Full Sample (N=473) 23,653 6, , Urban (N=210) 44,750 10, , Rural (N=263) 6,809 4,814 39, County Speed Tier Low (N=35) 2,358 1,575 7, High (N=144) 12,736 4, , Ultra-high (N=294) 31,536 8, , H 0 : Low = High *** H 0 : High = Ultra-high ***

13 Table 1A. Private County Employment by Speed Tier Urban v Rural County Speed Tier Mean Median Max Min Urban Broadband and Employment: Does Speed Matter? Preliminary Findings Low (N=13) 3,482 1,689 7, High (N=40) 30,997 6, , Ultra-high (N=157) 51,670 14, , H 0 : Low = High *** H 0 : High = Ultra-high ** Rural Low (N=22) 1,693 1,005 3, High (N=104) 5,713 3,978 33, Ultra-high (N=137) 8,462 6,494 39, H 0 : Low = High *** H 0 : High = Ultra-high ***

14 Methodology Model ln Empt it Speed variables = β 0 + BB 1,it β 1 + BB 2,it β 2 + X it γ + δ t + δ i Based on MAD and MAU Population weighted Symmetry (not yet done) Control Variables Population, Education, HH Income, Age; Time & County fixed effects Estimated also for rural/urban areas + industries

15 Preliminary Findings Table 4. Incremental Effect of Speed on Employment: BB 1 (High Speed).0124* (.0077) BB 2 (Ultra-high Speed).0166** (.0080) Age.4506** (.1999) Income.0950 (.0672) Education (.0040) Population.9753*** (.2609) Full sample Rural Urban.0170* (.0101).0324*** (.0118).1878 (.2754).0523 (.0908) (.0056).5697 (.3801).0028 (.0115).0004 (.0102) *** (.3757).0861 (.1092) (.0051) 1.475*** (.2987) County FE Yes Yes Yes Year FE Yes Yes Yes

16 Preliminary Findings Industry Effects Positive Effects Service Producing Financial services Professional & Business services Education & Health Leisure & Hospitality Negative Effects Natural Resources Trade, transport, utility

17 What else is happening in academic research? Healthcare Civic Services Entrepreneurial ecosystems Consumer Surplus