Saturday, May 21, 2011

Broadband - Charles Kenny questions investment in broadband, saying it is not linked to economic growth

[npr] Expanding broadband access is international development's latest cause celebre, and it's easy enough to see why. The incredibly rapid spread of cell phones has enabled residents of the developing world to text crop prices to market and arrange bank credit; the Arab Spring has been fueled, filmed and mobilized using Facebook, Twitter, and YouTube. It's a tempting story line: If basic communications technologies like mobile phones are good, and narrowband Internet has even more uses, surely broadband Internet is the secret to unlocking global progress. If micro-entrepreneurs in rural Africa can access global markets through their flash-enabled websites, and if education and medical care can be imparted through streaming video technology, surely the world's poor can leapfrog into prosperity.

Indeed, that's the conclusion of a high-level U.N. panel that issued a report on the subject during last September's United Nations summit on the Millennium Development Goals. The Broadband Commission for Digital Development, co-chaired by Mexican telecom magnate Carlos Slim — the richest man in that country's history — and Rwandan President Paul Kagame, issued a "Declaration of Broadband Inclusion for All." Members of the wide-ranging commission — including billionaire Richard Branson, the heads of UNESCO and other international organizations, the Senegalese singer Youssou N'Dour, and high-profile development types such as Jeffrey Sachs and Muhammad Yunus — all joined in the chorus for broadband. "In the 21st Century, broadband networks must be regarded as vital national infrastructure — similar to transport, energy and water networks, but with an impact that is even more powerful and far-reaching," the report states. Many development organizations have jumped on the broadband bandwagon as well, declaring public subsidies for the spread of fiber-optic cable across regions from Africa to Central Asia a potential funding priority.

But with such a wide spectrum of the world's thought leaders backing the cause, it might be a surprise that the broadband report is rather thin on specifics and evidence. Its 69 pages have space for 58 photographs of commission members, but not one footnote to an academic article. In fact, the distance between the report's optimism and the existing literature on broadband's impact on development could be measured in astronomical units. To suggest the commission's conclusions were half-baked would be an insult to the frozen dinner roll.

It's true that information and communication technologies are having a big impact in the developing world. Ten African markets alone generate over $1 billion in mobile-service revenues each year, and the total for the continent is about $45 billion. Already, more than half of Internet users and nearly half of all broadband subscribers live in low- and middle-income countries. Information technology and business process offshoring (things like operating call centers and records management overseas), was close to a $100 billion industry in 2009, according to the U.N. Conference on Trade and Development (UNCTAD) — and much of those revenues were captured by developing countries. India's share of the industry alone has grown from $1 billion in 1990 to almost $60 billion in 2009.

But just because information and communication technologies in general are having a big development impact, and broadband in particular is spreading rapidly, doesn't mean that digging trenches and laying fiber-optic cables are the fastest way to a world free of poverty. For a start, there is little evidence that ubiquitous speed and nationwide broadband networks is necessary for firms to benefit from the opportunities offered by offshoring through the Internet. India's booming IT industry claims by far the largest share of the global business process offshoring market: 35 percent, according to UNCTAD. But India also ranks 114 in the world in terms of average connection speed, according to a survey by global consultancy Akamai.

Second, there is precious little evidence linking broadband rollout to economic growth. Sadly, in the commission's report one of the few brief nods to actual studies of the impact of broadband notes that "estimates suggest that for every 10 per cent increase in broadband penetration we can expect an average of 1.3 per cent additional growth in national gross domestic product." That is indeed what one unpublished study claims, but the analysis supporting it is tenuous. The estimate is based on economic growth rates and broadband penetration from 1980 to 2006. Countries with more broadband also grew more rapidly on average, reports the study. But for most of that period, broadband didn't even exist. So, the considerably more plausible interpretation of the analysis is that countries that grew faster between 1980 and 2006 could afford more rapid rollout of broadband as it became available in the new millennium.

Foreign Policy: Put The Breaks On Broadband

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