Net Neutrality & Investment

By Bruce Mehlman

Last week, Entropy Economics released a detailed report on the effects net neutrality would have on jobs. After examining the official comments submitted to the FCC, Entropy found that those who could be counted as “Net Neutrality Skeptics” directly employ 1,440,021 people. “Net Neutrality Supporters,” meanwhile, only employ 148,936 — a difference of 10 to 1.

The Entropy report also looked at the amount of Capital Expenditures for skeptics and supporters, and the result was even more startling. From an article at Digital Society by the report’s author, Bret Swanson (who is also an IIA Broadband Ambassador):

We have often noted the communications sector’s important capital investment role in the U.S. economy. In 2008, U.S. info-tech capital investment totaled $455 billion, or 43% of all U.S. non-structure investment. The communications service providers alone invest $65 billion or more annually. Among companies filing FCC comments, the Net Neutrality Skeptics invested $189 billion over the last three years, compared to $18 billion for the Net Neutrality Supporters. Two of the nation’s largest infrastructure investors, AT&T and Verizon, each have more employees than all the Net Neutrality Supporting companies combined.

Net neutrality supporters often dismiss the effect new regulations will have on private investment. But as the Entropy report makes clear, discouraging private investment from net neutrality skeptics would have a chilling effect on the U.S. economy. And with the FCC’s own estimates for the cost of a national broadband plan reaching as high as $350 billion, a reduction in private investment could put the goal of bringing broadband to everyone out of reach.

Broadband Fact of the Week

By IIA

More than one-fourth of 150 internships posted on UrbanInterns.com, a site that connects small businesses with part-time workers, are labeled virtual, where the work typically involves researching, sales, marketing and social-media development.

Jonnelle Marte, “An Internship From Your Couch,” Wall Street Journal. September 29, 2009.

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E-Commerce on the Rise

By Brad

The New York Times reports that, despite the chilly economy, online retail continues grow:

In its State Of Retailing Online 2009 report, Forrester Research reported that the vast majority of Web retailers were not only profitable in 2008 - in a recession - but also that their overall level of profitability grew.

The e-commerce market is expanding, due to a combination of factors. One is that consumers are no longer afraid to buy things online, as they once were. Also brick-and-mortar businesses are migrating more of their operations online. We also have technology advances to thank: better recommendations technology, social media, the emergence of mobile commerce.

Not surprisingly, as e-commerce grows, competition grows along with it:

Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com.

In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.

Broadband Fact of the Week

By IIA

The [Obama] administration says the broadband stimulus program will create 260,000 new jobs and will stimulate the economy by increasing business’ productivity.

David Goldman, “Broadband stimulus bids ‘overwhelming’,” CNNMoney.com. August 18, 2009.

More facts about broadband.

Investment is Key

By Bruce Mehlman

Updated research from both the Information Technology and Innovation Alliance and former FCC Commissioner Harold Furchtgott-Roth helps shed new light on just how important investment in the broadband industry is for America’s economy.

Despite differences in methodology, both ITIF and Furchtgott-Roth find that a reduction in investment of just 2 percent by the broadband service industry would mean the loss over over 24,000 jobs. Make that reduction 5 percent, and the loss in jobs leaps to between 47,000 and 78,000 jobs. And a 10 percent drop would mean over 100,000 jobs.

Each year the broadband services sector invest roughly $60-$80 billion — or 80 percent of the Information, Communications and Technology sector investment. With unemployment in America hovering around 10 percent, job losses would be disastrous for our economy. Which is why broadband policies need to ensure that investment in America’s broadband infrastructure is strongly encouraged to continue.

Broadband Fact of the Week

By IIA

Consumers receive benefits from broadband valued at $32 billion annually.

Mark Dutz, Jonathan Orszag, Robert Willig, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households,” CompassLexecon and the Internet Innovation Alliance. July 2009.

More facts about broadband.

Full Steam Ahead

By Brad

Times may be tough, but that doesn’t mean Internet use is slowing down. New numbers from TeleGeography reveal that even in a worldwide recession, Internet traffic is up 79% over last year, with Eastern Europe, South Asia, and the Middle East leading the charge.

IIA Video: Wireline and Wireless Networks

By IIA

Craig Moffett, Senior Analyst of Sanford Bernstein (and an IIA Broadband Ambassador), discusses the long-term economic advantages of building wireline networks over wireless network. Moffett addresses the advantages of both systems for different applications and different user bases.

IIA Video: Broadband, Economics & Education

By IIA

Debbie Goldman, Telecommunications Policy Director for Communications Workers of America, discusses the perspective of telecommunications workers and the economic and education benefits of broadband for all Americans.

You’ve Come a Long Way, Baby

By Brad

Given the current winterly economic climate, businesses looking to cut costs are turning to videoconferencing more than ever. Thankfully, the technology is making the switch from travel to monitors easier than ever:

Plagued by fuzzy images, out-of-sync lips and bulky equipment, videoconferencing has a spotty track record. But now, the technology has matured to the point where it’s often more practical—and affordable—to move digital bits instead of bodies.

Accenture figures it saved more than $25,000 in travel costs by holding just one recent virtual meeting. The firm has 36 videoconferencing rooms spread across its locations and plans to install 14 more this fall. The move will save millions of dollars and hours of tiring travel for its workers.

“It’s a big win for me at home,” said Borerro, a mother of two who lives in Leonia. “I’m definitely planning more telepresence meetings in the area I lead.”

You can learn more about the benefits of videoconferencing and telework in the IIA Broadband Fact Book.

Talking Broadband with Orszag

By IIA

Leroy Jones, Jr. of the site Technical Jones interviewed Jonathan Orszag for his “Talking Technology” podcast. The topic: the findings in Orszag’s study “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households.”

Check out the podcast.

Boosting the Economy Through Broadband

By Bruce Mehlman

Cisco’s High Tech Policy blog points to a World Bank report released earlier this month on broadband’s impact on economies. Among the findings:

• A 10-point increase in broadband connections translates into a 1.3-point increase in economic growth.

• Mobile networks, now 4 billion connections strong, rule data distribution.

• The vast majority of new mobile customers will be found in developing countries over the next few years.

Right now, only portions of the World Bank report are available online. But there’s also a data tool available so you can experiment with crafting your own reports.

The Rewards of Logging On

By admin

Consumers, regardless of their financial situation, prize broadband. In fact, a study conducted by former Clinton NEC advisor Jonathan Orszag has found that consumers are using this technology to reap $30 billion dollars in benefits annually.

The report predicts those gains will increase as more people adopt broadband and more applications become available. Today, consumers use the Internet for buying and selling, accessing news and information, social networking and managing financial activities, among other pursuits. Future broadband-enabled technologies will dramatically increase health care applications and make election processes run smoother. Users will be able to access smart power grids via broadband, to help them monitor and reduce their energy usage.

Orszag’s research also showed that unemployed and retired households value broadband just as much as the employed and students.

Between 2001 and 2008, U.S. broadband households jumped from 10.4 million to 66.6 million, while dial-up users dropped from 44.2 million to 10.5 million. Homes with no Internet access at all numbered only about half that total, at 39.7 million.

And it’s only a matter of time before these households themselves discover the benefits of broadband.

IIA Guest Blog: Mark Dutz

By IIA

Our third, and final, guest post from the authors of the report “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households.”

Broadband as a household necessity: Data on households’ actual choices in the market are consistent with recent survey results

An April 2009 national survey by the Pew Research Center’s Social & Demographic Trends project asked what familiar household appliances Americans can’t live without. There were some striking re-evaluations, no doubt at least in part triggered by the belt-tightening effects of the recession. The proportion of Americans that considers a dishwasher or a cable or satellite TV as a necessity has dropped sharply since 2006, with dishwashers dropping 14 points with just 21 percent of Americans now rating it as a necessity, and cable or satellite TV dropping 10 points with just 23 percent rating it as a necessity. On the other hand, the public judgment about high-speed Internet actually increased, with 31 percent of Americans now considering it as a necessity, up from 29 percent in 2006.

This shift in consumer perceptions towards increasingly viewing broadband as a household necessity, based on what 1,003 Americans replied in telephone interviews, has now been confirmed and amplified by the Dutz-Orszag-Willig study, based on a much larger data set: the market choices of roughly 30,000 different heads of households, covering the type of Internet service (no home Internet, dial-up versus broadband connection) and the prices paid in the top 100 metropolitan regions across the U.S. over the period 2005 through 2008. Based on these data, the study finds that households are increasingly less willing to alter their broadband purchases in response to change in the broadband price.  This is what economists refer to as the “own-price elasticity of broadband”, and it actually progressively declines over time, from -1.53 in 2005 to -0.69 in 2008.  In other words, in 2005 a 10 percent rise in the overall price of broadband would have led to a 15.3 percent decline in the quantity demanded, but by 2008, a 10 percent rise in the price of broadband would lead to only a 6.9 percent decrease in the quantity of broadband demanded. This result indicates that broadband is progressively being perceived by those who are using it as a household necessity!

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF). Your can also read posts by study authors Jonathan Orszag and Robert Willig.

IIA Guest Blog: Robert Willig

By IIA

The Big Picture: Broadband’s Economy-wide Benefits

In our recent paper, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households,” we find that household consumers receive roughly $32 billion of net benefits from the use of fixed-line broadband at home, up significantly from $20 billion in 2005. Since household broadband use has generated the majority of broadband revenues, focusing on household consumer surplus is certainly the most appropriate starting point for estimating the economy-wide benefits from broadband. Indeed, we are particularly proud of our use of both survey methods and demand estimation with different recent data sets to derive robust and consistent detailed measures of the contribution of home broadband to consumer welfare.

However, to fully understand the bigger picture, in terms of economy-wide welfare gains generated by broadband, it is important to take into account not just the impact of fixed-line broadband on household users but also the impact of wireless broadband services on all consumers, the impact on the economy from broadband use by businesses, and the impact on the economy from the business of providing broadband and broadband-related services. Taken together, it is clear that the overall benefits to the economy from broadband are significantly greater than the direct benefits experienced by households of $32 billion per year.

Wireless broadband, when used by both home-connected users and individuals with no home Internet connection, is valued because it facilitates similar benefits as those from home broadband, and also allows users to be mobile while offering extra services pertinent to mobile users. Without doubt, many Americans with mobile wireless service view it as a complement to home connectivity, adding value on top of that already received from their home connection. In addition, an increasing number of households with no home connection are using wireless broadband as a substitute for home broadband connectivity, thereby receiving all broadband value from their wireless connection. Certainly, these benefits of broadband to the economy are additional to the ones we have measured. For a recent discussion of some of these benefits, see “Accelerated Wireless Broadband Infrastructure Deployment: The Impact on GDP and Employment.” 

Many business users of both fixed-line and wireless broadband services generate significant increases in productivity from the use of broadband. A portion of these productivity gains are net benefits that are additional to the ones we have measured. As business users compete against each other, the forces of competition impel the pass-along of a significant portion of these productivity gains to households, whether in the form of innovative new products or lower prices for existing products. The remainder of these benefits, in the form of producer surplus and profits, will accrue directly to the stakeholders of these firms.

Finally, the provision of broadband services and value-added services via broadband to all households and businesses (as opposed to their use) also generates benefits in the form of producer surplus and profits. These benefits do not accrue to households in their capacity as users, but rather to all the stakeholders of the companies that have invested to provide broadband and value-added services.

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF).

IIA Guest Blog: Jonathan Orszag

By IIA

Broadband Adoption: New Study Sheds Additional Light on Existing Survey Findings

Our study of the consumer benefits from home broadband connectivity provides a detailed breakdown of the demographic characteristics of home broadband users. It is helpful to compare our results, based on roughly 30,000 households per year across the top 100 metropolitan regions across the United States, over the period 2005 through 2008, with the results of the periodic surveys of the Pew Research Center’s Internet & American Life Project (see here and here). The Pew results are based on telephone surveys of 2,253 adults in April 2009, and 2,251 adults in April-May 2008.

The results are broadly similar. The population subgroups that have below average broadband adoption rates are:

• Low-income Americans: According to the Pew surveys, respondents living in households with annual household income of $20,000 or less saw broadband adoption grow from 25 to 35% between 2008 and 2009. Our comparable 2008 figure for households with annual household income of $25,000 or less was 41%.

• Senior citizens: Broadband adoption grew from 19 to 30% among adults ages 65 or older. Our comparable 2008 figure was 43%, statistically significantly lower than boomers (ages 45-64) at 69%, and younger households at 81-84%.

• High-school graduates: Among adults whose highest level of education is a high school degree, adoption grew from 40 to 52%. Our comparable 2008 figure was 38% for adults with less than a high school diploma.

• African Americans: Broadband adoption grew at a below average rate, increasing from 43 to 46%. Our comparable 2008 figure was 57%, statistically significantly lower than Latino/Hispanics at 74% and whites/Caucasians at 70%.

What’s new in our findings on this topic?

• Given our larger sample size for each year, we separately break out Asians (South and South-East Asians) as a distinct race/ethnicity subgroup: 82% of Asians had adopted broadband by 2008.

• For employment, we find that the likelihood of adoption increases with employment, with retired households being below average, and with subsequent higher levels of connectivity for the unemployed and part-time employed, and the highest levels of adoption by the full-time employed. Interestingly, we also find that people appear unwilling to cut their broadband even when they lose their jobs, based on their need for connectivity. This is reflected in the significant jump upwards in the use of job board and career information sites during the economic downturn.

• Finally, we provide important comparisons between patterns of adoption and patterns of valuation of home broadband.

The full Orszag-Willig-Dutz study, “The Substantial Consumer Benefits of Broadband Connectivity for U.S. Households” is available here (PDF).

Broadband Fact of the Week

By IIA

30 percent of US consumers view their broadband connection as the service they are ‘least likely to cut if forced to trim their spending during the current economic downturn.’ [Household Telecom Spending and the Economic Crisis: A Consumer Survey, conducted by Pike & Fischer]

— Sean Buckley, “Leggo my broadband line!” Telecommunications Online. May 13, 2009.

More facts about broadband adoption.

Advertising Boom

By Brad

A new report from the Interactive Advertising Bureau, has released some numbers showing the Internet’s effect not just in advertising revenue, but in jobs:

Interactive advertising is responsible for $300 billion of economic activity in the U.S., according to a new study released today by the Interactive Advertising Bureau (IAB). The advertising-supported Internet represents 2.1% of the total U.S. gross domestic product (GDP). It directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs. A total of 3.1 million Americans are employed thanks to the interactive ecosystem.

Check out the IAB’s full report.

New Advertising Frontiers

By Brad

Ad Age has a great story on a small pizza joint, a twitter feed, and a boom in business:

Naked Pizza, a New Orleans healthful-pizza shop that’s hoping to go national—Mark Cuban is a backer—has been marketing itself via the microblogging service. And recently it has started to track Twitter-spurred sales at the register. In a test run April 23, an exclusive-to-Twitter promotion brought in 15% of the day’s business.

“Every phone call was tracked, every order was measured by where it came from, and it told us very quickly that Twitter is useful,” said Jeff Leach, the restaurant’s co-founder. “Sure, there’s the brand marketing and getting-to-know-you stuff. ... But we wanted to know: Can it make the cash register ring?”

Given Twitter’s reach, ease of use (just 140 characters—no need to sweat ad copy!), and unbeatable price (free) it could very well turn into an advertising gold mine for businesses.

Broadband Fact of the Week

By IIA

A 7% increase in broadband adoption could result in:

- $92 billion through 2.4 million jobs created or saved annually
- $662 million saved per year in reduced health care costs
- $6.4 billion per year in mileage savings from unnecessary driving
- $18 million in carbon credits associated with 3.2 billion fewer lbs of CO2 emissions per year in the U.S.
- $35.2 billion in value from 3.8 billion more hours saved per year from accessing broadband at home
- $134 billion per year in total direct economic impact

Connected Nation. “The Economic Impact of Stimulating Broadband Nationally.” February 2008.

More facts about broadband and the economy.