Study finds U.S. Adopting Broadband on Par With Most OECD Countries

A new analysis by the Phoenix Center shows that the United States is adopting broadband technology at the same pace as most other industrialized countries, once demographic and economic differences are taken into account. The study demonstrates that 91 percent of the differences in the broadband adoption rate among industrialized countries are explained by demographic and economic factors such as education, income inequality, and population age and density.

Using broadband data just released by the Organisation for Economic Co-Operation and Development ("OECD"), the study calculates a "Broadband Efficiency Index" ("BEI") to measure the efficiency with which each of the 30 OECD member countries converts its economic and demographic endowments into broadband subscriptions. With very few exceptions, the Phoenix Center finds that broadband subscription in OECD countries is consistent with those endowments -- about two thirds of OECD countries have an efficiency rate of 95 percent or better. Significantly, the United States has an efficiency index of 96.7 percent, which is slightly higher than Japan (96.3 percent) and Korea (95.8 percent). The BEI uses the econometric technique of Stochastic Frontier Analysis to arrive at the results. The study expands on the Phoenix Centers' earlier work.

Phoenix Center Policy Paper No. 33, The Broadband Efficiency Index: What Really Drives Broadband Adoption Across the OECD? shows that relatively poor countries like Portugal (98.3 percent) and Turkey (96.3 percent) are doing well in adopting broadband in spite of their challenges. In contrast, Luxembourg, the Czech Republic, Ireland, the Slovak Republic and Greece trail the rest of the OECD considerably. The study's finding suggests that public policy's role for broadband adoption may be most effective if it is targeted at improving or mitigating specific demographic and economic conditions, such as computer ownership and education programs. Because countries have different demographic and economic conditions, the most effective mix of policies will vary country-to-country. Therefore, the study warns that "blindly following the policies of countries 'ranked' higher in the OECD raw rankings is not likely to result in optimal success."

"When the OECD broadband data is subjected to a sophisticated analysis, broadband adoption in the United States is efficient relative to the rest of the OECD," said Phoenix Center President Lawrence J. Spiwak. "Most industrialized countries appear to be similarly efficient in adopting broadband technology."

"Our approach estimates directly whether countries are doing a good job in translating their given economic and demographic conditions into broadband adoption," said Phoenix Center Chief Economist and study co-author George S. Ford. "The relevant question is not what your broadband subscription rate is, but how a country's subscription rate compares to what it should be. Simply looking at raw OECD data is misleading because the economic and demographic conditions that affect broadband adoption vary considerably across the OECD. After taking into account a wide range of factors, it actually turns out that low subscription rate and relatively poor countries like Portugal and Turkey are far more 'efficient' adopters of broadband than high subscription rate but relatively rich countries like Germany and Luxembourg."

According to Phoenix Center Resident Scholar and study co-author Thomas M. Koutsky, "Broadband adoption is intimately tied to demand-side factors like income inequality and education and, therefore, policies directed at those factors may be more cost effective than supply-side subsidies and regulation. Programs that put computers in low-income schools and train teachers may have a far broader impact on broadband adoption in the United States than network subsidies."

The Phoenix Center is an international, non-profit 501(c)(3) organization that studies broad public-policy issues related to governance, social and economic conditions, with a particular emphasis on the law and economics of telecommunications and high-tech industries.