Go for Gigabit? First Evidence on Economic Benefits of High-speed Broadband Technologies in Europe

The literature on the effects of investment in broadband infrastructure finds positive macroeconomic effects. However, it is severely constrained because it could hitherto only analyse investment or adoption up to basic broadband, but not up to the newer generations of hybrid fibre and end-to-end fibre-based broadband. Utilizing a comprehensive panel dataset of EU27 member states for the period from 2003 to 2015, we estimate a small but significant effect of end-to-end fibre-based broadband adoption over and above the effects of basic broadband on GDP; specifically, we find that a 1 per cent increase in adoption leads to an incremental increase of 0.002-0.005 per cent in GDP. The incremental effect of hybrid fibre broadband adoption over basic broadband is slightly lower (0.002-0.003%). Our cost-benefit analysis implies that policy intervention - as foreseen by the European Commission - is only justified for coverage and adoption levels of around 50 per cent, whereas for a 100 per cent coverage level net losses are likely.