Fast Broadband Internet Access Increases Regional GDP

As part of its Digital Agenda, the German government has made considerable public funds available for nationwide broadband internet coverage in Germany. For the first time ever, a study published by the ZEW – Leibniz Centre for European Economic Research in Mannheim shows that broadband internet access has a positive influence on regional gross domestic product (GDP). Particularly the availability of fast internet fosters regional GDP growth in rural districts. Implementing broadband internet is therefore economically beneficial not only for those districts directly affected but for their neighbouring districts as well.

For the study, ZEW researchers analysed vast amounts of data sets from all 401 German counties from the years 2010 to 2015. Based on this data, the researchers evaluated for the first time whether different broadband technologies influence regional GDP growth in rural districts and their neighbouring districts.

According to the study, the availability of fast internet via fibre optic cables – with a transfer speed of 50 megabits per second (Mbit/s) or more – stimulated regional GDP growth slightly more than broadband internet with a slower speed did. When the supply of fast broadband internet increases by one per cent in a rural district, the regional GDP grows by a number between 0.05 and 0.09 per cent. And this effect doubles when external influences are included in the calculations. This means that a rural district’s broadband infrastructure has a significantly positive effect on the broadband infrastructure of its neighbouring districts. Urban districts benefit from this effect much more than rural districts.

The researchers also show that the number of houses with broadband internet and a transfer speed of at least 50 Mbit/s more than doubled between 2010 and 2015, the final number being 82.9 per cent in 2015. The proportion of households in Germany with access to broadband internet of at least six Mbit/s also rose from a good 80 per cent in 2010 to 99.8 per cent in 2015.

“Nationwide high-speed internet coverage for Germany has been de facto achieved. The federal government’s goal of providing all households with access to broadband internet with a transmission rate of at least 50 megabits per second was clearly missed, however, despite millions of euros being invested,” explains co-author of the study Dr. Wolfgang Briglauer from ZEW’s Research Department “Digital Economy”. Nevertheless, the investment appears to have paid off. “Although the federal government’s funding programmes weren’t sufficient to equip all households with access to the high-speed internet connections, they did prove economically efficient. In other words, the benefits far exceeded the costs,” says Briglauer.

The study bases itself on data from the Federal Ministry of Transport and Infrastructure’s broadband atlas, the Federal Statistical Office’s genesis database, as well as the Federal Institute for Building, Urban Affairs and Spatial Development’s INKAR database.