How fixed broadband impacts the regional economy

While fixed broadband positively impacts household income in Latin America and the Caribbean, these impacts are uneven and could contribute to reinforcing social inequalities if not flanked by public policies, according to a study by the Inter-American Development Bank (IDB).

The study found that total and labor income rose by 6.92% and 7.43%, representing US$26.46 and US$22.38 purchasing power parity, between 2008 and 2019 in Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Mexico, Panama, Paraguay, Peru, Dominican Republic and Uruguay.

The working population increased by 0.84 percentage points and the formal employment offer by 0.66 percentage points after the countries facilitated last-mile broadband.

Previous studies showed that 10% growth in fixed broadband penetration had an impact of 1.5% on the countries' GDP.

Raúl Katz, who was also a co-author of the study, said in October that the impact of fixed broadband grows in line with its adoption, while the impact of mobile broadband decreases with rising penetration.

According to the IDB study, the economic benefits of fixed broadband increase as users gain more experience. The positive impact on total income is 2.99%, with an additional 5.43% for early adopters and 4.05% for late adopters.

In the short term, fixed broadband increases labor formality and facilitates job creation in the long term, the study said.

UNEQUAL IMPACT

But the benefits are more pronounced in urban areas, impacting total and labor monthly income by 4.33% (US$19.46) and 4.96% (US$17.63). Rural areas benefit far less. Employment, too, increases in urban areas more than in rural ones due to fixed broadband.

According to Eclac, the adoption of fixed broadband in the region is close to 67% in urban areas but only 23% in rural ones.

Mobile operators association GSMA found that last year around 275mn people in Latin America were excluded from the digital economy. GSMA said 4% of the regional population was not covered by mobile networks, while 40% had coverage but did not use the service for reasons such as affordability.

REMAINING GAPS

The IDB study rejects industry claims that wider broadband coverage helps reduce the gender income gap. The impact on male labor income is 7.55% and 6.92% for women, implying that the increase for women is 16% lower, US$20.01 versus US$23.68.

Without mitigating policies, fixed broadband also does not reduce the gender employment gap, the study said.

And users with higher education and which are more tech-savvy benefit more than others, which could deepen inequality.

A positive impact of 10.6% (US$52.97) on income was identified among users with more than 11 years of formal education, but 5.55% (US$11.89) among users with less than eight years of formal education. The results apply to both urban and rural areas.

IMPACT BY COUNTRY

Ecuador and Brazil registered the biggest impacts of fixed broadband adoption on income, with 4.6%, due to service availability, development, and quality.

El Salvador registered the lowest impact, with 2.9%, as fixed broadband reaches 31.2% of households.