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The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP

  • Shane Greenstein
  • Ryan C. McDevitt

How much economic value did the diffusion of broadband create? We provide benchmark estimates for 1999 to 2006. We observe $39 billion of total revenue in Internet access in 2006, with broadband accounting for $28 billion of this total. Depending on the estimate, households generated $20 to $22 billion of the broadband revenue. Approximately $8.3 to $10.6 billion was additional revenue created between 1999 and 2006. That replacement is associated with $4.8 to $6.7 billion in consumer surplus, which is not measured via Gross Domestic Product (GDP). An Internet-access Consumer Price Index (CPI) would have to decline by 1.6% to 2.2% per year for it to reflect the creation of value. These estimates both differ substantially from those typically quoted in Washington policy discussions, and they shed light on several broadband policy issues, such as why relying on private investment worked to diffuse broadband in many US urban locations at the start of the millennium.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14758.

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Date of creation: Feb 2009
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Handle: RePEc:nbr:nberwo:14758
Note: IO PR
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  1. Marshall Reinsdorf, 1993. "The Effect of Outlet Price Differentials on the U.S. Consumer Price Index," NBER Chapters, in: Price Measurements and Their Uses, pages 227-258 National Bureau of Economic Research, Inc.
  2. Savage Scott J. & Waldman Donald M., 2004. "United States Demand for Internet Access," Review of Network Economics, De Gruyter, vol. 3(3), pages 1-20, September.
  3. repec:rne:rneart:v:3:y:2004:i:3:p:228-247 is not listed on IDEAS
  4. Mélisande Cardona & Anton Schwarz & B. Yurtoglu & Christine Zulehner, 2009. "Demand estimation and market definition for broadband Internet services," Journal of Regulatory Economics, Springer, vol. 35(1), pages 70-95, February.
  5. Griliches, Z. & Cockborn, I., 1993. "Generics and New Goods in Pharmaceutical Price Indexes," Harvard Institute of Economic Research Working Papers 1664, Harvard - Institute of Economic Research.
  6. Avi Goldfarb, 2004. "Concentration in advertising-supported online markets: an empirical approach," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(6), pages 581-594.
  7. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
  8. Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September.
  9. Hong, Seung-Hyun, 2007. "The recent growth of the internet and changes in household-level demand for entertainment," Information Economics and Policy, Elsevier, vol. 19(3-4), pages 304-318, October.
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