Broadband Panaceas

 

The recent release of new economic growth measures has prompted once again again a debate on regional, from which we can generally read urban versus rural, development in Ireland. To listen to some commentators you would imagine that beyond the M50 ring-road or beyond Blarney there is an economic wasteland, with those few people remaining in their 90s and an infrastructure barely out of the 18th-century.

Reality is of course quite different.  There is an economic world beyond the cities, and what parts of it are thriving in other parts are undoubtedly struggling.  Dublin, and to a lesser extent Cork and other medium-size towns, will continue to be the economic engine driving island forward. That is both inevitable and desirable.

Rural Ireland has lower income per head than Urban Ireland . It has a higher level of persons at risk of poverty but a lower  level of consistent poverty. In terms of value added per person, on a regional basis, regions such as the Border region or the midlands are at the bottom. These have few large town. The border region produces less than a third of gross value added per person than Dublin and 40% that of the South West (which includes Cork).  However, despite a perception of rampant rural depopulation, since 1966 or even since 1986 ever single county has shown population increases. Moreover,  the relative distribution of population has remained remarkably static. Dublin and Cork had, essentially, the same % of the state population in 1966 as they have now.

MEdian Personal IncomeGVA nataverageGVA Based

 

Much of the present angst on rural vs Urban divides now revolves around the issue of availability of broadband. As someone from Kerry who regularly returns there, there is no doubt whatsoever that access to fast reliable broadband is a rare and fleeting thing outside the urban areas. Many households and small businesses rely on wireless dongles which give poor to barely adequate service most of the time. The CSO 2016 Detailed Census results, released recently, show a stark digital divide.

 

There is a national broadband plan, of course.  Like many such national plans it is both overhyped and under resourced. First announced in 2012 it was to have a fully connected broadband available to all by 2015. Now in 2017 we are to have it completed by 2019, or 2024. Maybe. A lot depends on how much effort Eir, the latest incarnation of Telecom Eireann, can put into it. Given the history of the fixed line business in Ireland we can expect this to be slow.

In 2012 Pat Rabbit, in announcing it, proclaimed it as the Rural Electrification of the 21st Century. Rural Electrification started, properly, in 1946. Although it ceased in 1965 as a scheme electrification of rural areas did not complete until 1977. By that metric, 21 or perhaps 36 years might be expected to elapse from Mr Rabbitt’s announcement. 21y would take us to 2033 by which stage we might well be done. We might also question cost. The 1946-1965 scheme took some 36m pounds, perhaps the equivalent of 1.3b now. In that context 600m euro seems an underprovision, even allowing for the existing physical infrastructure.

There is a presumption, throughout the debate, that rural broadband will transform the economies of rural areas. The evidence from similar schemes worldwide is distinctly mixed. Recent German evidence [1] [2] suggests that while broadband provision can stem depopulation and job declines it does not in and of itself seem to be associated with employment increases. Some US evidence[3] suggests that average wages rise in areas with better broadband. This however is strongest[4], it seems, in areas closer to existing urban areas than in more remote regions. Crucially, mere availability is not associated with any beneficial outcomes. Adoption, as opposed to availability[5], is the key. Here we might hark back at what made the Rural Electrification a success – it was the initial work of the Area Organizers, who went round and canvassed rural dwellers as to their likely use of electrical appliances, who sold the benefits before asking people to sign up for the scheme. Here we find chickens and eggs – the evidence is that people who know the benefits of technology[6] are much more likely to ask for that to be supplied. While there is a general presumption as to the need and desire for broadband, a more structured granular survey of possible business users, on a national rural scale, might be useful.

A further question might be asked as to what sort of jobs, and indirectly what sort of persons, benefit. Studies[7] suggest that broadband adoption in rural areas leads to an increase in scale in existing firms, and that these firms have relatively speaking more skilled workers than the norm. Service[8], as opposed to goods based industries do best from rural broadband. Skilled small manufacturing companies[9], those with high value added which are demand rather than cost driven, these also benefit. Australian[10] evidence is suggestive that for individuals, access to broadband is not in and of itself associated with increased positive labour market outcomes.

 

Rural broadband may well be, and in my personal view is something to which we should aspire as a nation. The drivers should be the creation of a modern connected society, and not revolve around the idea of it as a panacea for economic relative underperformance

 A shorter version of this was published as an Irish Examiner column 

http://www.irishexaminer.com/business/rural-broadband-is-not-a-panacea-for-economic-ills-456526.html
 

[1] Briglauer, Wolfgang and Dürr, Niklas and Falck, Oliver and Hüschelrath, Kai, Does State Aid for Broadband Deployment in Rural Areas Close the Digital and Economic Divide? (October 6, 2016). ZEW – Centre for European Economic Research Discussion Paper No. 16-064.

[2] Czernich, N. Does broadband internet reduce the unemployment rate? Evidence for Germany (2014) Information Economics and Policy, 29, pp. 32-45.

[3] Kolko, J. Broadband and local growth (2012) Journal of Urban Economics, 71 (1), pp. 100-113.

[4] Kandilov, I.V., Renkow, M. Infrastructure Investment and rural economic development: An Evaluation Of USDA’s broadband loan program (2010) Growth and Change, 41 (2), pp. 165-191.

[5] Whitacre, B., Gallardo, R., Strover, S. Broadbands contribution to economic growth in rural areas: Moving towards a causal relationship (2014) Telecommunications Policy, 38 (11), pp. 1011-1023.

[6] Hollifield, C.A., Donnermeyer, J.F. Creating demand: Influencing information technology diffusion in rural communities(2003) Government Information Quarterly, 20 (2), pp. 135-150.

[7] Atasoy, H.The effects of broadband internet expansion on labor market outcomes (2013) Industrial and Labor Relations Review, 66 (2), pp. 315-345.

[8] Ivus, O., Boland, M. The employment and wage impact of broadband deployment in Canada (2015) Canadian Journal of Economics, 48 (5), pp. 1803-1830.

[9] Shideler, D., Badasyan, N. Broadband impact on small business growth in Kentucky (2012) Journal of Small Business and Enterprise Development, 19 (4), pp.

[10] Alam, K., Mamun, S.A.K. Access to broadband Internet and labour force outcomes: A case study of the Western Downs Region, Queensland(2017) Telematics and Informatics, 34 (4), pp. 73-84.

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