Increasing Broadband Internet Penetration
In the OIC Member Countries
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The estimation of consumer surplus resulting from broadband penetration is important,
although this economic benefit is not captured by GDP. Greenstein and McDevitt (2009)
estimated the consumer surplus generated by broadband adoption in the United States. In
their analysis for the period between 1999 and 2006, the authors determined that in 2006 the
consumer surplus generated by broadband represented US$ 7.5 billion (or 27 % of the total
US$ 28.0 billion in broadband surplus). This was calculated on the basis of what users would
be willing to pay to adopt broadband and substitute narrowband access. Consumer surplus can
also be conceptualized in terms of the benefits that broadband represents to the end user. The
variables driving willingness to pay include the rapid and efficient access to information,
savings in transportation for conducting transactions, and benefits in health and
entertainment.
The authors also estimated the surplus generated as a result of broadband adoption in Canada,
United Kingdom, Spain, Mexico, Brazil and China (Greenstein & McDevitt, 2010). In this case,
due to the data limitations, they restricted their analysis to the benefit derived from price
declines, which necessarily underestimates its total impact. Nevertheless, the researchers
determined that for 2009, the total Brazilian broadband surplus represented US $ 7.03 billion,
of which 22 % should be considered to be consumer driven. In the case of Mexico, the total
surplus is US $ 2.30 billion, and the consumer portion was 8%. In general terms, the authors
concluded that the total broadband surplus is directly related to broadband penetration.
II.2. Differences between developed and developing countries with regards
to broadband impact As briefly discussed above, research on the economic and social impact of broadband
determined that the technology impact is not homogeneous across countries. Koutroumpis
(2009) was the first researcher to determine that the broadband contribution to GDP growth
increases with penetration: the higher broadband penetration is, the stronger its effect on
economic growth. This effect is labeled “critical mass” or, in economic terms, the return to
economies of scale. The evidence generated by Koutroumpis on OECD datasets indicated that
the impact of broadband on GDP growth increased with its penetration, when grouped in three
categories of OECD countries (see figure 6).