Fiber in the backbone! The impact of broadband adoption on firm growth in network markets

Abstract

This article examined the relationship between the adoption of technology, via the deployment of broadband, on revenue growth, which is an important measure of financial performance, of the deploying firms using panel data for all of the major local exchange carriers in the US telecommunications industry from 1988 to 2001. The sector is an important network market context where the implications of deployment have substantial salience. The results show a positive relationship between broadband deployment and carriers’ revenue growth. This result implies that encouraging the adoption and deployment of broadband technologies in addition to the benefits of the consumers and firms at the receiving end of the new technology create the potential for better financial performance for the deploying firms. These results also imply that steps that can be taken to provide incentives that will hasten the further deployment of broadband will result in gains in financial performance within the sector.

Keywords:

• broadband
• revenue growth
• technology adoption
• dynamic panel data analysis
• telecommunications sector

Notes

This section draws substantially on Majumdar (2008) and Majumdar, Carare, and Chang (n.d.). General purpose technologies are also discussed extensively in important recent works by Bresnahan and Trajtenberg (1995), Crafts (2004), David and Wright (2003), Jovanovic and Rousseau (2005), Lipsey, Bekar, and Carlaw (1998), Lipsey, Carlaw, and Bekar (2005) and Ruttan (2008).