| Broadband is becoming important to both the economic and social progress of a nation. Commerce and social interaction are increasingly conducted "on line." The economic importance of broadband has been theoretically framed in terms of the "network effect." Additionally, broadband may produce significant positive externalities in areas such as education, healthcare, and the environment. For these reasons, policymakers have been closely monitoring the progress of broadband diffusion.;I examine a decade of hard data on the rollout of first generation broadband in the context of policies employed by different administrations around the world. My primary focus is in the use of industrial policy and loop unbundling. As in previous studies in the literature, the dependent variable modeled is broadband subscribers per 100 inhabitants. The impact of industrial policy is consistently a statistically significant predictor of broadband density, with a stable value and positive sign over all regressions. The use of an unbundling policy is found to be statistically significant when lagged by one or two years, and it is always positive.;I use these results to predict policy impacts on the rollout of Next Generation Network (NGN) broadband, which will be characterized by heavy investment in fiber optic facilities supporting access speeds of 100 megabits per second and above. I conduct a benefit-cost analysis for U.S. NGN broadband deployment using predicted increases in NGN availability to drive the compilation of associated costs and benefits. To monetize benefits, I estimate private producer and consumer surpluses. I also include benefits to the economy by virtue of the network effect. Additional positive externalities can be optionally added in the areas of healthcare and the environment.;A number of different scenarios are run in order to get a sense of the impact of the two policies and the sensitivity to different study parameters. The results show that both policies have the potential to be justified on the basis of a benefit-cost analysis. The more that we can attribute positive externalities to a modern, high speed broadband network, the stronger the case there is to justify policies which promote and invest in broadband. |
