Blog & Tools

Broadband Plays Major Role in Economic Development

There’s been some debate in recent months about whether the availability of high-speed broadband increases economic growth.

The answer, to me, seems obvious: yes, of course.

Indeed, these days the lack of high-speed broadband service would seem to hurt present commerce, not just prospects for future growth.

But let’s explore the issue.

The question about the value of high-speed broadband arose in late 2011 after a report issued by Ericsson, a Swedish communications technology company; Arthur D. Little, an international consulting firm; and Chalmers University of Technology, also of Sweden.

The study area was 33 member countries of the France-based Organisation for Economic Co-operation and Development. (Yes, that’s how they spell organization.)

Increasing broadband speed affects GDP

The key finding of the study was that doubling the broadband speed in an economy increases gross domestic product by 0.3 percent. That’s the equivalent of $126 billion.

Another finding indicated that an additional doubling of speed can yield growth exceeding 0.3 percent. A quadrupling of speed resulted in 0.6 percent growth in GDP, according to the study.

“Positive effects come from automated and simplified processes, increased productivity as well as better access to basic services such as education and health,” according to a news release from Ericsson.

Cynics will point out that Ericsson makes broadband equipment, so it’s not an entirely dispassionate observer. Nor, for that matter, is SDN Communications, a premier regional provider of high-speed, broadband services. SDN has a 22,000-mile, fiber-optic network and offers an array of related communications and data-management services to businesses, organizations and government offices in South Dakota and parts of neighboring states.

With those disclosures out of the way, let’s get back to the real issue.

In a column published by, contributing writer Tim Worstall says there is merit to the suggestion that high-speed broadband increases economic growth. But he nitpicks at some of the study details. The Ericsson report is based on past information, for example, he says, and it assumes that faster broadband will mean more growth in the future.

Broadband Spurs Development at a Local Level

I put the general question about the economic effect of high-speed broadband to someone with knowledge of technology and local experience in economic development: Dean Dziedzic, director of strategic initiatives for the Sioux Falls Development Foundation.

“I think it definitely has a part in spurring economic development. There’s no doubt about that,” Dziedzic says.

“Sometimes it’s almost assumed on our part because it’s there. It’s definitely a tool for us to use to spur economic development,” he says.

In his experience, accessibility to high-speed broadband service is especially important to businesses in the data center sector. Data centers make up one of the key industrial sectors that the development foundation has targeted for local development. Prospects in the sector that check out Sioux Falls study maps to see what broadband trunk lines are available, Dziedzic says.

The presence of businesses such as an Automated Data Processing (ADP) center has helped the community dispel the myth that it lacks the broadband infrastructure to accommodate a significant, national company. ADP is a well-known national provider of payroll and other business services.

Business prospects in other fields also want good broadband service, too, Dziedzic says. They want to know if high-speed service is available at certain locations, who the providers are and the strength of the bandwidth they offer.

“Honestly, I don’t think it’s a valid site if it doesn’t have (good bandwidth). I think in today’s day and age, it’s just assumed,” Dziedzic says. “I don’t think you’re going to sell a piece of ground or offer it, if it’s not available.”

So, overall, the debate over service levels probably doesn’t have much relevance in the Sioux Falls area ­– at least not to businesses and institutions in the region that play key roles in economic development. SDN and other carriers already offer them high-speed broadband and other advanced telecom services.