Quantifying the Economic Impact of Closing the Digital Divide

NEW YORK, May 3, 2021 /PRNewswire/ —

Key takeaways

  • Additional broadband coverage, adoption, and speed is accretive for incremental growth of U.S. jobs and GDP, making the case for investment
  • A 10 percentage-point increase in broadband penetration in 2016 would have resulted in more than 806,000 additional jobs in 2019, or an average annual increase of 269,000 jobs.
  • More than 875,000 additional U.S. jobs and $186 billion more in economic output would have occurred in 2019 had there been a 10 percentage-point increase in broadband access in 2014.
  • Adding 10 Mbps to average download speeds in 2016 would have resulted in 139,400 additional jobs in 2019; however, the analysis also indicates diminishing returns with the rate of job growth slowing as speeds continue to increase.

Why this matters
The COVID-19 pandemic forced much of the U.S. population to trade classrooms, offices and conference rooms for at-home screens. Many Americans were left stranded by inadequate or unaffordable access to internet connectivity or mobile devices. This reality has resulted in a pivotal moment for the U.S. economy, with financial prosperity, educational opportunities and personal/professional productivity, depending on reliable, affordable and fast internet connectivity for all. More than $100 billion of infrastructure investment has been allocated by the U.S. government over the past decade to address this issue; however, the digital divide still presents a significant gap.

Deloitte today released a new report titled, “Broadband for all: charting a path to economic growth,” that uses economic models to evaluate the relationship between broadband and economic growth. It proposes a geographic segmentation that distinguishes the specific needs of different under-served geographies, better reflecting their unique challenges. The report also provides insights into the benefits associated with various broadband speeds and adoption rates in order to optimize economic and social benefits, while reducing inefficiencies.

Investment doesn’t always equate to outcomes
Optimism over the past 10 years that billions of private and public investment in underserved geographies for broadband access and adoption would help close the digital divide has waned as outcomes have often disappointed. Previous programs increased the number of people with access to the FCC’s definition of broadband by less than 1% (<1%; 1.6 million people) between 2014 and 2019, partially as a result of the changing definition of broadband. The report notes:

  • Between 2010 and 2020, federal programs including USAC and Rural Digital Opportunity Fund, among others, spent approximately $107 billion.
  • In 2014, the last year of the 4 Mbps downlink benchmark, 16 million Americans (approximately 5% of the U.S. population) did not have broadband services that met that standard.
  • In 2019, after five years and approximately $54 billion, 14.4 million Americans did not have broadband that met the new FCC speed threshold (25 Mbps downlink).

Key quote
“The pandemic hastened the pace of a decades-long trend in which innovative applications are increasingly essential to enhancing educational opportunities, organizing our lives, connecting with colleagues and friends, improving workplace productivity and enriching the quality of lives. If large segments of our population lack the necessary communications infrastructure to participate, progress will be increasingly difficult.”

−        Dan Littmann, principal, technology, media and
telecommunications, Deloitte Consulting LLP

The digital divide has significant economic impact
For years government, industry and academics have discussed the societal impact produced by closing the digital divide. To better understand the relationship between broadband and the U.S. economy, Deloitte developed economic models using publicly available information. The report’s economic models confirmed three hypotheses:

  1. Increased broadband penetration leads to economic growth: Deloitte’s analysis indicates that a 10 percentage-point increase of broadband penetration in 2016 would have resulted in more than 806,000 additional jobs in 2019, or an average annual increase of 269,000 jobs. The report notes that broadband can allow for greater access to formal education, as well as expand the types of jobs available in a region, thereby raising the level of skills.
  2. Greater broadband availability leads to economic growth: Deloitte found a strong correlation between broadband availability and jobs, as well as GDP growth. The report notes that a 10 percentage-point increase in broadband access in 2014, would have resulted in more than 875,000 additional U.S. jobs and $186 billion more in economic output in 2019. That is an average of 175,000 jobs and $37.2 billion in output per year.
  3. Greater penetration of higher speed broadband leads to economic growth: Deloitte’s analysis also shows that adoption of higher speeds drives noticeable improvements in job growth. Adding 10 Mbps to average download speeds in 2016 would have resulted in 139,400 additional jobs in 2019 or about 46,500 additional jobs per year. While the analysis shows that increasing speeds lead to greater job growth, it also indicates diminishing returns, with the rate of job growth slowing as speeds continue to increase. The report notes that this is a significant consideration. Diminishing returns should be considered when evaluating future speed mandates.

Key quote
“When it comes to the public or private broadband investments to close the digital divide, the economic benefits are clear, but will require stakeholders to navigate potentially competing priorities across emerging technologies that can meet needs in the near-term, the long-term desires for faster speeds, and financial support for devices and in-home equipment.”

−        Jack Fritz, principal, technology, media and
telecommunications, Deloitte Consulting LLP

Connect with us on Twitter @DeloitteTMT, or on LinkedIn: @DanLittmann  @JackFritz.

About Deloitte
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SOURCE Deloitte

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