  Basic broadband connectivity is regarded as generally having a positive
macroeconomic effect. However, over the past decade there has been an emerging
school of thought suggesting the impacts of upgrading to higher speed broadband
have been overstated, potentially leading to the inefficient allocation of
taxpayer-funded subsidies. In this analysis we model the impacts of Next
Generation Access on new business creation using high-resolution panel data.
After controlling for a range of factors, the results provide evidence of a
small but significant negative impact of high-speed broadband on new business
creation over the study period which we suggest could be due to two factors.
Firstly, moving from basic to high-speed broadband provides few benefits to
enable new businesses being formed. Secondly, strong price competition and
market consolidation from online service providers (e.g. Amazon etc.) may be
deterring new business start-ups. This analysis provides another piece of
evidence to suggest that the economic impact of broadband is more nuanced than
the debate has traditionally suggested. Our conjecture is that future policy
decisions need to be more realistic about the potential economic impacts of
broadband, including those effects that could be negative on the stock of local
businesses and therefore the local tax base.
