The Economic Ripple Effect of Broadband Investments

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

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

We find that the US $59.7 billion investment from the Biden administration’s Bipartisan Infrastructure Law could lead to a total macroeconomic impact of up to $146 billion, given an indirect impact of $86.3 billion (59.1%). This is based on the direct investment being spent on building out (predominantly) new fixed broadband infrastructure for cost items such as civil engineering, active equipment deployment, and the associated labor necessary to connect households to high-speed broadband Internet. Whereas, the indirect investment represents both industries utilizing broadband to grow their customer base and the multiplier effects of employed labor undertaking secondary spending in the economy.

Our research estimates that overall, the BIL investment may reach a return multiplier as high as 2.45, which is slightly larger than other infrastructure investment estimates in the literature, such as by Dimitriou (2.2) (Dimitriou et al., 2015). Therefore, this spending could boost GDP growth, while also potentially providing long-term opportunities for (particularly rural) households at a time when our reliance on high-speed broadband connectivity is growing. Thus, there is a strong need to overcome market failure in areas of current poor broadband service. Proponents argue that the lack of infrastructure necessitates the passage of the BIL, as the return on investment to national GDP outweighs the cost to the taxpayers. Additionally, as the estimated $146 billion in GDP trickles through the macroeconomy, there may be other economic benefits, ranging from productivity gains to increased entrepreneurship.

The broadband programs within the Bipartisan Infrastructure Law are the largest federally-directed investment in broadband infrastructure to date. The program’s goals are similar to those of the Rural Electrification Act (REA) in the 1930s, established by Franklin D. Roosevelt as an investment associated with the New Deal (Record Group 221, 1934). At the time, many detractors argued that the program was too expensive. However, as evidence has shown, the investment laid the foundation for nearly a century of economic development, improving the quality of life of citizens and expanding business opportunities, especially for rural regions (Bouzarovski et al., 2023; Olanrele, 2020; Tierney, 2011).

Similarly, many critics of the programs take issue with the significant government investment at a time when fiscal headroom is at a minimum. Recently, many congressional representatives have voiced their concerns about government spending, stating “...we have no money” and “there’s no money in the house” (Davis, 2023; Sforza, 2023). Concern has been growing about the current administration financing government spending through deficit spending, for example, with the US budget deficit effectively doubling in 2023, with the ongoing expansion of a range of federal programs, such as BEAD, ACP, and the TBCP (Gopinath, 2023; Rappeport & Tankersley, 2023).