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ECONOMIC DEVELOPMENT How Broadband Boosts Household Income A new study sponsored by Ericsson confrms that broadband access positively afects household income – but only if the broadband exceeds a minimum speed threshold. B oth broadband access and broadband speed positively afect household incomes, according to a new analysis by network equipment vendor Ericsson. Te study, conducted with Chalmers University of Technology in Gothenburg, Sweden, and consultant Arthur D. Little, continues earlier work by these three partners on the impact of broadband. Te earlier research concerned broadband's efects on the gross domestic product of entire countries; the new study, "Socioeconomic Efects of Broadband Speed: a Microeconomic Investigation," examines the efects on individual households. Interestingly, household benefts don't increase smoothly along with broadband speed. Instead, they rise in steps, and a minimum speed level is required to make any diference at all. Tis minimum level is itself likely to rise over time, the researchers found. • In Organization for Economic Cooperation and Development (OECD) countries – the most developed economies – the threshold level for broadband to have an impact is 2 Mbps; gaining 4 Mbps of broadband increases household income by $2,100 per year. • In the less developed economies of Brazil, India and China, the threshold level is 0.5 Mbps, which increases household income by $800 per year. THE IMPACT OF BROADBAND ON INCOME By comparing certain countries with varying economic characteristics, the new study asks whether having access to broadband is enough to make an impact or whether faster broadband is the way to signifcantly increase income. Te study analyzed data from eight OECD 102 | BROADBAND COMMUNITIES | www.broadbandcommunities.com countries (U.K., France, Germany, Italy, Spain, Sweden, Japan and the U.S.) as well as from Brazil, India and China (BIC), investigating the similarities and diferences between them. It measured the impact of broadband speed on household income by analyzing whether leveraging the benefts of faster broadband can improve competitiveness in the labor market. Survey data from Ericsson ConsumerLab was the most important source for the study. Te Web-based survey conducted in 2010 had 22,000 respondents. Te researchers used statistical regression analysis to investigate the impact of broadband speed on household income. Tey also accounted for other relevant factors that might afect household income levels, such as education, skills and socioeconomic variables. Figure 1 shows the countries studied in relation to their household income and broadband speed. Te U.S., Japan, the U.K. and Sweden all have high levels of household income and high broadband speeds. Brazil, India and China, together with Mexico and South Africa, are at the bottom left of the fgure, indicating lower broadband speeds and lower income levels. Tis observation suggests that higher broadband speeds contribute to higher income levels – but it could equally well indicate that countries with higher income levels can aford better broadband, so the researchers had to conduct further analysis to rule out that possibility. Tis study supports previous research that found the most advanced countries gain the greatest total beneft from broadband and that they can quickly move toward highly innovative markets and improve labor productivity. Te ability of the most advanced countries to leverage higher broadband speeds is enabled | NOVEMBER/DECEMBER 2013