Raul Katz: Can Investments in Robust Broadband Help States Limit the Downside of Recession?

The United States economy is still undergoing persistent inflation rates, high interest rates, and stock market volatility. According to a Wall Street Journal survey conducted in January, economists put the probability of a recession at 61 percent.

Simultaneously, we are also on the eve of the largest federal broadband funding distribution in American history. All 50 U.S. states have begun formulating plans to help connect their communities through the $42.5 billion Broadband Equity, Access and Deployment Program, and its funds are expected to be distributed within months. That, coupled with the Affordable Connectivity Program  and other initiatives designed to subsidize broadband access, will play a critical role in connecting every American to the internet. This once-in-a-generation investment in building more robust and resilient broadband networks can help states weather the coming economic storm. To learn how, we simply need to look back to March 2020.

When the COVID-19 pandemic initially cratered the economy, states that had a higher rate of fixed broadband penetration were more insulated from its disruptive effects. Simply put, better-connected states had more resilient economies according to a study I authored for Network:On. In a separate study, by using an economic growth model that accounts for the role fixed broadband plays in mitigating the societal losses resulting from the pandemic, I also found that more connected societies exhibit higher economic resiliency during a pandemic-induced disruption.

In the study conducted for Network:On, we documented that U.S. states with higher broadband adoption rates were able to counteract a larger portion of the economic losses caused by the pandemic than states with lower broadband adoption rates. The states most adversely affected by the pandemic, such as Arkansas and Mississippi, were those exhibiting lower broadband penetration rates. Conversely, states with higher broadband penetration, such as Delaware and New Jersey, were able to mitigate a large portion of losses, as connectivity levels allowed for important parts of the economy to continue functioning during lockdowns.

Nationally, if the entire U.S. had penetration figures equal to those of the more connected states during the pandemic, the GDP would have contracted only one percent— a much softer recession than the actual 2.2 percent. These findings show that investments in closing the digital divide and ensuring everyone can access a high-speed Internet connection are critical to building economic resilience.

Today, wide penetration rate disparities exist between states — such as Delaware’s rate of 91.4 percent compared to Arkansas’ rate of 39.7 percent. Because of this, public authorities should focus on creating policy frameworks that allow operators to spur infrastructure deployments and find the optimal technological mixes to deliver the highest performance to users.

Broadband access matters. It doesn’t exist in a vacuum and is crucial to an area’s economic health. As state broadband offices around the country prepare to deploy BEAD funding, they must remember that broadband access and adoption are imperative to building economic resiliency.

Beyond my own study, a review of the research examining the economic impact of digital technologies over the past two decades confirms that telecommunications and broadband positively impact economic growth, employment, and productivity. This reinforces how consequential these government investments in broadband infrastructure and adoption are to protecting America’s economic health.

The BEAD program still has its challenges, but if managed effectively, it could play a key role in allowing our economy to weather the storms ahead.

Dr. Raul Katz is the president at Telecom Advisory Services LLC and author of the study: The Role of Robust Broadband Infrastructure in Building Economic Resiliency During the COVID-19 Pandemic. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.