Study finds that better Internet access drives economic growth
Basic broadband can add £200 a month to household income in developed economies, researchers have found, because better internet access improves learning and working from home.
Increasing download speeds from a weak 0.5 megabits per second to a basic 4Mbps – enough to reliably stream video – makes a statistically significant difference to a family’s earnings, a study by telecoms equipment firm Ericsson has found.
“If you have a good broadband connection you can enjoy online learning services from the most prestigious universities around the world, you can be a better informed consumer, you make better purchases at the best price,” said Sebastian Tolstoy, a vice-president at Ericsson. “As a better-connected professional you are likely to be more attractive at work and that could translate into being more successful in your career.”
Once a family’s download speed reaches 4Mbps, average earnings rise by $322 a month (£201) in the 34 richer nations, including the UK, that are part of the OECD (Organisation for Economic Co-operation and Development).
The increase is £75 a month for households which double their speed from 4Mbps to 8Mbps, enabling high-definition video and enough bandwidth for more than one person to use any website simultaneously. Once households jump from fast to superfast – more than 24Mbps – their income rises again.
For households which go from no internet access to 4Mbps, earnings can rise by £1,320 a year.
“The evidence is building for broadband speed as a driver of economic growth,” said Martin Glaumann, a partner at management consultancy Arthur D Little, which contributed to the study. “Yet in many countries, not least in the EU, regulatory developments are holding back the full growth potential. Broadband gives households the means to improve skills and productivity through e-learning and business services, but also to gain access to new venues for consumption.”
In the fast developing economies of Brazil, India and China, better broadband still improves earnings, but less markedly. Ericsson found that boosting speeds from 0.5Mbps to 4Mbps in these nations saw income rise by £29 a month. While consumers may be coming online in emerging economies, many of the services that might enrich them have not yet been created.
The study was based on 22,000 online interviews with householders. Tolstoy said these interviews had helped to prove that higher income was caused by better internet, rather than households first earning more and then being able to afford a faster connection.
The positive impact of broadband on gross domestic product (GDP) has been underlined by previous studies, with Ericsson research showing that for every 10% increase in the number of people online, a nation’s GDP rises by 1%. Doubling average broadband speeds in a country increases GDP by 0.3%.
“We know that speed matters and that upgrading broadband speed has a positive impact,” said Tolstoy. “Now we have shown this quantitatively using large data samples … even at the household level.”