Increasing Broadband Internet Penetration
In the OIC Member Countries
21
gender, employment status and healthcare coverage, level of formal education, and role within
the family). In this section, the average impact on individual income level of broadband
introduction at the canton level is estimated.
The results indicated that broadband adoption increased the average individual income by US$
25.76, which represents a 7.48% increase in relation to the initial average income of the entire
sample. Given that the introduction of broadband occurred over the course of two years -
between December 2009 and December 2011 - the annual increase in the income level was
3.67%. This figure captured the increase in income generated directly by broadband use, the
impact on the job market as a result of the labor required for network deployment and the new
staff hired by companies to provide the service, as well as the spillover effect on society. The
impact on income was shown to be greater among households owning a computer. As
evidence, computer users witnessed an average income increase of US$ 38.36, which equates
to a total 8.00% increase, or 3.92% per year. Finally, the largest impact occurs among Internet
service users, who benefit from increased speed and, in the case of those users who previously
used dial-up Internet service, elimination of the incremental cost of usage. Users who can now
access the service directly in their homes as a result of network deployment also benefited. For
this group, the increase in the income level was substantially greater than in the previous
cases: their income increased by US$ 51.86, a 10.27% rise relative to their initial income, or a
5.01% increase per year.
This analysis demonstrated that the introduction of broadband services at the county level
results in an increase in average household income. While the causes for this increase can vary,
broadband does have an impact through four effects. First, broadband deployment requires
infrastructure construction in order to provide the service, additional workers for the
operator’s new commercial offices, and technical personnel for the installation and
maintenance of household broadband. The new demand for labor in a market with an
unemployment rate that is already below 5% generates a shift in the demand curve for
workers, which leads to an increase in equilibrium wages. Furthermore, the rise in wages
through this channel may reflect a need for better compensation for those workers who, given
the low unemployment rates, should receive better wages to meet or exceed their reservation
wage. This is defined as the “construction effect”.
A second explanation for the income increase is that, as seen in Katz (2012), broadband has a
positive effect on worker productivity. Classic labor economics literature shows that wages in
competitive markets equal marginal productivity. As a result, higher labor productivity should
yield higher wages. This is labeled the “productivity effect”.
Third, research results also show that the effect of broadband deployment is greater for
computer and Internet users. In this sense, the introduction of broadband at the county level
allowed workers with digital literacy skills to signal their computer knowledge to potential
employers and then use those skills in the workplace in return for a higher wage. This has been
called the “skill signaling effect”.