chalmers universty

Chalmers University of Technology

Session 5 Panel DiscussionSession 5. Panel Discussion

The broadband economy : Moving along the macro and micro o g a o g t e ac o a d c o

measurement

Erik BohlinDivision of Technology and Society

Department of Technology Management and EconomicsDepartment of Technology Management and Economics

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Purpose

• Measuring the impact of the broadband for the E E i f GDPEuropean Economy in terms of GDP

• Forecasting the impact of the broadband penetration rate and broadband speed to economic growth at macro level

• Distinguishing the impact of the broadband speed in micro level (case Sweden)( )

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Methodology and data

3


Purpose 1

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Q1 MultiplierC

XA

Q1. Multiplieranalysis

X

1. Defining the ICT sectors(OECD 2008)

Step of analysis

(OECD, 2008)2. Assuming that ICT sectors

correspond to the broadbandeconomy

3. Comparing the ICT and non ICT sectors multiplier

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Source : Compiled by Rohman (2011)

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Q.1. Multiplier analysisQ p y1995 2000

2005

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ConclusionQ1. Multiplier analysis• If the evaluation of broadband deployment is conducted based strictly on

the analysis of sector performance the opportunity cost of broadbandthe analysis of sector performance, the opportunity cost of broadband investment is large in the sense that investment in other sectors will obtain a greater economic impact.

• But, since ICT is a general purpose technology (see Bresnahan and Trajtenberg, 1995), the ICT sectors will have the potential for pervasive use in a wide range of sectors, and its technological dynamism enables the generalized productivity gains to be transferred to the rest of economy. Thus, broadband policy is an important agenda to be addressed.

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Purpose 2

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Q.2/3. Impact of penetration and speedD t d i tiData description

1. All OECD countries (33 countries)

2. Quarterly data from 2008Q1 –2010Q4

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Broadband penetration rate (%), OECD (2010)

30

35

40

20

25

5

10

15

0

5

ustra

lia

Aus

tria

elgi

umC

anad

aC

hile

epub

licnm

ark

Esto

nia

Finl

and

Fran

ceer

man

yG

reec

eH

unga

ryIc

elan

dIr

elan

dIs

rael

Italy

Japa

nK

orea

mbo

urg

Mex

ico

erla

nds

zeal

and

Nor

way

Pola

ndor

tuga

llo

vaki

alo

veni

aSp

ain

Swed

enze

rland

Turk

eyin

gdom

d St

ates

S OECD

Au A B C

Cze

ch R

eD

e E F Ge H I

Luxe

m MN

ethe

New

z N P S l Sl SSw

eitz T

Uni

ted

Ki

Uni

ted

Source : OECD

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Speed of Broadband (kbps), OECD (2010)

20000

25000

15000

5000

10000 Download_Kbps

0

S OECDSource : OECD

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Impact of penetration and speedImpact of penetration and speedGroup variable: id Number of groups = 31Fixed-effects (within) regression Number of obs = 365

corr(u_i, Xb) = 0.8729 Prob > F = 0.0000 F(15,319) = 51.20

overall = 0.9773 max = 12 between = 0.9752 avg = 11.8R-sq: within = 0.7065 Obs per group: min = 8

llf .2282831 .0531393 4.30 0.000 .1237353 .332831 lcap .6300417 .0725769 8.68 0.000 .4872518 .7728316 lgdp Coef. Std. Err. t P>|t| [95% Conf. Interval]

( , )

1% increase in broadband penetration rate will increase 0.04% economic growth for OECD

d 6 16980 2 01 63 6 11 60 0 000 198 96 1 10116 dum5 -.1481497 .012258 -12.09 0.000 -.1722664 -.1240329 dum4 -.1030123 .0095679 -10.77 0.000 -.1218364 -.0841882 dum3 -.0599621 .0071012 -8.44 0.000 -.0739332 -.0459911 dum2 -.0289151 .0048139 -6.01 0.000 -.0383862 -.019444 lspeed .0162494 .0033997 4.78 0.000 .0095607 .0229381 prate .0432579 .0767012 0.56 0.573 -.1076462 .194162

0 0 % eco o c g o o O Ccountries

1% increase in speed level corresponds to 0.02% increase in

d 12 2455179 0267286 9 19 0 000 2981045 1929312 dum11 -.2338624 .0248496 -9.41 0.000 -.2827522 -.1849725 dum10 -.221911 .0229717 -9.66 0.000 -.2671062 -.1767159 dum9 -.2120087 .0210896 -10.05 0.000 -.2535009 -.1705165 dum8 -.1986156 .019 -10.45 0.000 -.2359967 -.1612345 dum7 -.1837087 .0169488 -10.84 0.000 -.2170543 -.150363 dum6 -.1698042 .0146346 -11.60 0.000 -.1985967 -.1410116

pGDP growth, et ceteris paribus.

For comparison 1% mobile penetration rate for developing

rho .99959897 (fraction of variance due to u_i) sigma_e .01467352 sigma_u .73258742 _cons .383476 .8899209 0.43 0.667 -1.36738 2.134332 dum12 -.2455179 .0267286 -9.19 0.000 -.2981045 -.1929312

p p gcountries in Waverman study contributes to 0.075% GDP growth.

F test that all u_i=0: F(30, 319) = 576.44 Prob > F = 0.0000

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ConclusionQ2. Impact to growth• The broadband penetration rate contributed to growth of OECD

countries around 0 04%countries around 0.04%.• Speed level contributes to growth around 0.016%

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Purpose 3

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Q.3. Speed to productivity“Broadband Strategy for Sweden (2009) ; by 2020 ninety perBroadband Strategy for Sweden (2009) ; by 2020, ninety per cent of households and businesses in Sweden should have access to broadband at a rate of at least 100 Mbps, and that all households and b h ld h d l blbusinesses should have good opportunities to use electronic public services and other services via broadband”– Why should we spend a lot of money for broadband sector?y p y– Are there any evidence that the economy is growing thanks to the

broadband development?i b i b ff?– Is society becoming better‐off?

– Is broadband speed really important?– How to evaluate such the impacts?How to evaluate such the impacts?

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• Critiques towards the GDP

GDP h i thGDP emphasizes more on the achievement of material aspects, less on non‐income related indicator (Kuznets, 1941; Galbraith 1958; Samuelsson1941; Galbraith, 1958; Samuelsson, 1961; Mishan, 1967; Nordhaus and Tobin, 1972; Hueting, 1974; Hirsch, 1976; Daly 1977; Dasgupta 2000)1976; Daly, 1977; Dasgupta, 2000)

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• Recent studies on income and quality of life and happinessquality of life and happiness

Easterlin Paradox (1974) holds for many countries TRUE, that within the countries wealthier people are , on average, happier than poor ones.

BUT across countries very little ifBUT, across countries , very little, if any, relationship between increases in per capita income and average happiness (Graham, 2010, p.12)

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Broadbandaccess and

usage

Allison and Stewart (1974); Levin and

h

Quality

usageDasgupta, 1999; Landefeld and Fraumeni 2000,

Stephen 1991, Grimsrud, and Stein Gunnes, 2003.

P d ti it

Qualityof lifeCostanza et al, 2006.

Productivity

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Source : Costanxa, et al (2008)

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Order probit ModelOrder probit Model

Source : ADL (2011)

21


Source : Chalmers for NTT Docomo (2011)

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Speed of broadband and productivity*C t

likelihoodComments

How to read this?A >20 MB/s subscriber has the likelihood for:

having the lowest probability for being “a medium level productive” person.p phaving the lowest probability for being “a lower level productive” person.ha ing the highest probabilit forhaving the highest probability for being “a high level productive” person.

NOTE:

* The investigation on income does not show any statistical evidences that there is a differences between income level due to the broadband. Likewise the type of broadband (DSL, fiber, dial up) also does not have any statistical impact . Hence the “Sweden Broadband strategy of Broadband (2009) that emphasizes more on the speed factor becomes a more relevant unit of analysis.

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Speed and productivity: Large cities* vsSpeed and productivity: Large cities* vs. Small cities

likelihoodC tComments

The impact of broadband policy varies between region.Broadband policy (through increasing speed) has clearly been benefitted by large cities :

increased the productivity level p yin large cities more than small cities.Decrease the medium productivity users in large citiesproductivity users in large cities compared to small cities

* Stockholm. Gothenburg. Malmo

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Speed of broadband andlikelihood Speed of broadband and productivity based on

incomeincomelikelihood

likelihood

Comments

The impact of broadband policy varies between income. Clearly higher income users (who has higher willingness to pay) can afford higher broadband speed enabling them for higher productivity gain

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