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Broadband Stimulus May be Ill-Advised

Technology infrastructure stands to benefit from Barack Obama's $819 billion economic stimulus plan: A total of $37 billion will be spent on the digitization of health records, a smarter power grid and high-speed Web connections. As The Economist points out, the U.S. isn't alone in betting on technology to help revive its economy: Britain and other rich countries will also include large doses of tech spending in their economic stimulus plans.

The idea behind "broadband for all" is that boosting broadband infrastructure will help economies in much the same way that railways and highways did in the 1930s. This is because broadband is considered a general-purpose technology with far-reaching effects that help foster new business models, processes and services. In fact, studies show that in down economies, more broadband means more jobs. According to The Brookings Institution, a think-tank in Washington, for every percentage point increase of broadband penetration at state level, employment increases by 0.2% to 0.3% per year, or 300,000 jobs nationally.

However, The Economist argues that "throwing state funds at technology may not be the best approach," because broadband penetration can be improved by other methods than simply asking taxpayers to foot the bill. Among them: accelerating the release of federal radio spectrum to foster more competition. There is also no clear market failure that demands intervention; America might rank 15th on the list of broadband penetration in developed countries, but telecom giants like Verizon and AT&T are already spending billions upgrading their networks




Read the whole story at The Economist »

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