How Broadband Subsidies Affect the Economy: Data and Application of Economic Modeling Techniques

Table of Links

Abstract and Introduction

2. Literature Review

2.1 Reviewing Broadband Infrastructure’s Impact on the Economy

2.2 Previous Research into IO Modeling of Broadband Investment

2.3 Context of the Bipartisan Infrastructure Act through Previous Research

3. Methods and 3.1 Leontief Input-Output (IO) Modeling

3.2 Ghosh Supply-Side Assessment Methods for Infrastructure

3.3 Data and Application

4. Results and 4.1 To what extent does the Bipartisan Infrastructure Law allocate funding to unconnected communities in need?

4.2 What are the GDP impacts of the three funding programs within the Bipartisan Infrastructure Law?

4.3 How are the supply chain linkages affected by allocations from the Bipartisan Infrastructure Law?

5. Discussion

5.1 To what extent does the Bipartisan Infrastructure Law allocate funding to unconnected communities in need?

5.2 What are the GDP impacts of the three funding programs within the Bipartisan Infrastructure Law?

5.3 How are supply chain linkages affected by allocations from the Bipartisan Infrastructure Law?"

Conclusion

Acknowledgements and References

3.3 Data and Application

We will source IO tables from the Bureau of Economic Analysis (Input-Output Data Tables, 2023). The sector for broadband spending is Telecommunications (NAICS 517) (US Census Bureau, 2023). For our augmented final demand/value-added vectors, we can isolate the investments and introduce them into their respective sectors by entering 0 for all other sectors. We can calculate broadband’s final demand/value-added by summing the government’s subsidies and the increased household spending on broadband connections because they can now afford those services.

According to the ACP, US $14.2 billion is available in subsidies (FCC, 2023). As these are awarded as subsidies, each allocation leads to some household spending, which also contributes to the final demand. In total, if each subsidy is about US $30 per month, or US $360 a year, then there will be 39.4 million household recipients throughout the course of the program, assuming we treat this as though households must re-enroll each year. Thus, each of these 39.4 million households will contribute about US $30 themselves, as the average price of broadband is approximately US $61 (Broadband Af ordability, 2023; Shevik, 2023; Wilson, 2023), minus the subsidy, which is about US $360 a year. So, households will provide an additional US $14.9 billion in spending, and the final demand increase for the ACP will be US $29.1 billion.

The upstream effects of the ACP can be modeled with the Leontief IO method, as described in subsection 3.1. The downstream effects can be modeled using the Ghosh method described in section 3.2 for the BEAD program and the TBCP (Mathematical Derivation of the Total Requirements Tables for Input-Output Analysis, 2017). Using this methodology, we can also produce, analyze, and contextualize the multipliers for each program, where an economic multiplier represents the GDP change per $1 of direct investment.

As an effect of the three programs within the Bipartisan Infrastructure Law, the total direct impact on US GDP is $74.5 billion (comprised of $59.6 billion from government investment and $14.9 billion from additional household consumer spending) (Af ordable Connectivity Program, 2023; Broadband Equity Access and Deployment Program, 2023; Tribal Broadband Connectivity Program, 2023). Now that our methods are established, we can examine the results of our study.