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Verizon: FiOS Speeds Do Little for Economy or Education
Written by Dave Burstein   
Monday, 18 April 2011 18:26

Broadband's effects on the economy are so small even careful studies can't prove them. There's even less evidence that higher speeds - 100 meg FiOS versus 3 meg DSL - have major economic impact. There are plenty of reasons to deliver a buffalogreat Internet for (nearly) everyone, but John Bonomo of Verizon is right to say  "it's unfair to suggest that the absence of FiOS in Buffalo is hindering its economy, education system and neighborhoods." 

   When even Verizon isn't claiming big economic benefits it's time for people like Drew Clark to stop making unproven assertions like "broadband is a key driver of job creation and economic activity." Drew is a friend and a good reporter who needs to look again at the evidence. Nearly every credible scholar agrees the payoffs have been exaggerated.

   Bill Lehr of MIT is the latest to speak out, particularly important because his earlier work is frequently cited to make job claims. "The results from my earlier research found there was a positive impact on jobs and other metrics of economic growth associated with expanded broadband deployment. But, that was based on the first generation of broadband deployment and we are not talking about that at this point.... its presence may not create jobs.

The remaining places that do not have broadband are places that face many more challenges than just a lack of availability, and are not representative of the communities that provided initial evidence of broadband’s positive economic impacts. ... I think the problem of rural access to broadband is overstated. ... those who face no options will become even fewer." Bill referenced Jed Kolko's work I reported as Broadband economic impact: Probably good http://www.fastnetnews.com/dslprime/42-d/2425-broadband-economic-impact-probably-good Kolko found "Broadband expansion is associated with no change in average pay per employee and a decrease in median household income. Broadband expansion has no statistically significant relationship with the employment rate. ... the economic development benefits of broadband are ambiguous."

   Shane Greenstein, one of the best economists in this space, added "for most places I would not expect dramatic changes of any sort. Employment levels, wages, establishment size, and the specialization of economic activity should remain roughly in the same place. There is a brutal economic truth behind that forecast. Most economic decisions depend on a multitude of factors, and broadband is but one of many.
   Other key determinants of a region’s economy include its resource endowments (e.g., being naturally beautiful, endowed with minerals or forest, etc), the quality of its labor force (e.g., well-educated, etc), the specialization of its existing businesses (e.g., ranching, agriculture, tourism, etc., which has been determined over decades), and other facts, such as the nature of the vehicle traffic in the area (e.g., near a major highway or not). The presence or absence of broadband cannot change those factors, and cannot massively change long-term economic trends established over decades (e.g., prevalence of entrepreneurship, loyalty to a region or out-migration of youth, the ability of a regional economy to generate revenue through exporting to other parts of the country).

  "We would be flattered if we thought that FiOS could solve all of a community's problems," Verizon's Bonomo added. We all wish that were so. http://bit.ly/kTGLfP