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Study Finds That Strong Rural Broadband Is a Good Deal for Urban Economies

Randy Sukow Apr 20, 2016

As Congress and the FCC scuffle over universal service mechanisms for rural-serving rate-of-return carriers, a disinterested city dweller might ask, “What’s in it for me? Why should I help pay for broadband network services to small populations in remote areas nowhere near us?”

 2015 economic impact of rural broadband from Hudson Institute based on data from NECA, Bureau of Economic Analysis, and Bureau of Labor.

The Hudson Institute today released a study, “The Economic Impact of Rural Broadband,” that answers that question directly.

“The rural broadband industry influences the size of the economy through employment and purchases of goods and services,” concludes the report, which Hudson released today during a luncheon in downtown DC. “The access that these firms provide to networks that reach around the world are a necessary input to all that makes up e-commerce. In this way rural broadband defines the economic geography of the United States, making it feasible for some economic activity to take place in some locations and infeasible in others.”

The report finds that the rural broadband industry contributed $24.2 billion to the U.S. economy in 2015. An estimated $8.2 billion of that total – slightly more than a third – directly or indirectly benefited rural areas in the form of jobs created and revenues through the sales of goods and services. The other two-thirds, about $16 billion, actually benefited urban areas.

Rural broadband providers, for example, helped generate more than $100 billion in e-commerce transactions last year. The report uses the example of a window manufacturer that sought to open a 200-employee plant in Sioux Center, IA. The plant needed 1 Gbps rural broadband services to communicate with its corporate headquarters and a national network of distributors. “Absent the broadband availability that the manufacturer wanted, Sioux Center would have been out of the running in a competition among more than 50 sites,” the report found. The end result benefited rural Sioux Center and several urban workers and consumers as well.

Manufacturing was the largest segment of the rural e-commerce pie, according to the report. Retail also was significant. “Without the access to the Internet provided by the rural broadband industry, $9.2 billion would not have taken place,” Hudson said.

The overall drift of the report is that the U.S. economy is an intricate network that gains strength through business connections across state lines and larger geographic regions. “Broadband networks have nearly erased the cost of moving information,” the report finds, meaning there is no reason why much of that economic activity can carry on just as well in rural areas.

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