Superfast broadband: is it really worth a subsidy?

Abstract

Purpose

Governments around the world are providing multi‐billion dollar subsidies to roll out fiber to the home (FTTH) to enable superfast broadband (50 Mbps and above). The premise for this is a belief that superfast broadband brings substantial economic and societal benefits. This paper's purpose is to examine whether this belief is well founded.

Design/methodology/approach

The authors critically review the arguments most commonly made in favor of FTTH, examining their logic and underlying evidence.

Findings

The paper finds that these arguments often inappropriately use benefits of basic broadband to make the case for the upgrade to superfast broadband, or use the benefits of providing superfast to business premises to argue for providing superfast to homes. The authors find the evidence that basic broadband brings economic growth is patchy, and that frequently studies that argue for a link do not adequately distinguish between correlation and causation.

Originality/value

Thus the authors conclude that the conventional wisdom that FTTH will bring substantial economic and societal benefits and therefore deserves a subsidy is, at best, much overstated. The case has simply not been made that FTTH has sufficient incremental externalities over other forms of broadband. This is an important conclusion for politicians, policy makers, telecoms providers and taxpayers, and suggests that billions of dollars of public money may be being wasted.

Citation

Kenny, R. and Kenny, C. (2011), "Superfast broadband: is it really worth a subsidy?", info, Vol. 13 No. 4, pp. 3-29. https://doi.org/10.1108/14636691111146127