New Study Questions Benefits of Subsidizing Broadband

Published July 7, 2005

Much of the economic benefits of broadband have already been realized, and gains from its further extension to rural areas are probably not sufficiently large to justify government subsidies, according to a new research report published by Marshall University in Huntington, West Virginia.

The report, The Residential and Commercial Benefits of Rural Broadband: Evidence From Central Appalachia, commissioned by the West Virginia Development Office, represents a comprehensive effort to give policymakers objective data on the economic benefits of broadband in rural areas, a point of major contention in the national debate over municipal broadband.

The study rises above the usual advocacy reports often sponsored by advocates and opponents of municipal broadband. Mark L. Burton and Michael J. Hicks, two Marshall University economists, have conducted a careful econometric analysis of the economic effects of broadband in rural states, using a large database and regression analysis to find the impact of increased access to broadband.

The authors found:

  • On a state-wide basis, there is no statistical correlation between access to broadband and economic growth.
  • Virtually all of the productivity gains attributable to broadband access in West Virginia occur in two industries: finance and banking.
  • Most of the benefits from access to broadband have already been achieved, so using government intervention to expand access would produce little additional benefit.
  • Among residential users, price is not a significant obstacle to access. Most people don’t know how much more broadband would cost than dial-up, and most people not already connected aren’t interested in getting connected.
  • The private sector is meeting demand throughout West Virginia, including rural areas.

This report is now available for free through The Heartland Institute’s online research database, PolicyBot™, at