The broadband bonus: Estimating broadband Internet's economic value

Authors:
Shane Greenstein;Ryan C. McDevitt
Affiliations:
Kellogg School of Management, Northwestern University, 611 Leverone Hall, 2001 Sheridan Road, Evanston, IL 60208, USA;William E. Simon Graduate School of Business Administration, University of Rochester, Box 270100, Rochester, NY 14627, USA
Venue:
Telecommunications Policy
Year:
2011

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Abstract

How much economic value did broadband Internet create? Despite the importance of this question for national policy, no research has estimated broadband's incremental contribution to U.S. GDP by calibrating against historical adoption and incorporating counterfactuals. This study provides benchmark estimates for 1999 through 2006 and finds that broadband accounts for $28 billion of the $39 billion observed in 2006. Depending on the estimate, households generated $20-$22 billion of broadband revenue and approximately $8.3-$10.6 billion was additional revenue created between 1999 and 2006. Consumer surplus accounted for $4.8-$6.7 billion of this amount, which is not measured in GDP. An Internet-access Consumer Price Index would have to decline by 1.6-2.2% per year for it to reflect this unmeasured value. These estimates differ from existing benchmarks by an order of magnitude and relate to several policy debates.