Broadband Internet’s Value for Rural America
by Peter Stenberg
, Mitch Morehart, Stephen Vogel
, John Cromartie
, Vince Breneman
, and Dennis Brown
Economic Research Report No. (ERR-78) 70 pp, August 2009
The Internet has become widely, but not universally, available.
Two-thirds of U.S. adults had in-home Internet access by 2008.
Rural businesses and consumers have become almost as likely as
their urban counterparts to use the Internet, though broadband-or
high-speed-access is less prevalent in rural areas than in more
densely populated areas. The 2008 Farm Act reauthorized USDA's
telemedicine, distance learning, and rural broadband access grant
and loan programs.
What Is the Issue?
Broadband access is viewed as necessary to fully utilize the
Internet's potential. As the Internet economy has matured, more
applications now require higher data transmission rates, even in
the case of simple shopping websites. In a recessionary economy a
number of Internet activities- including job searches and home
businesses -may become more critical for households. Whereas an
estimated 55 percent of U.S. adults had broadband access at home in
2008, only 41 percent of adults in rural households had broadband
access. Evidence suggests that this shortfall in broadband use is
involuntary, and may be due to the higher cost of broadband
provision or lower returns to broadband investment in sparsely
What Did the Study Find?
Analysis suggests that rural economies benefit generally from
broadband availability. In comparing counties that had broadband
access relatively early (by 2000) with similarly situated counties
that had little or no broadband access as of 2000, employment
growth was higher and nonfarm private earnings greater in counties
with a longer history of broadband availability.
By 2007, most households (82 percent) with in-home Internet
access had a broadband connection. A marked difference exists,
however, between urban and rural broadband use-only 70 percent of
rural households with in-home Internet access had a broadband
connection in 2007, compared with 84 percent of urban households.
The rural-urban difference in in-home broadband adoption among
households with similar income levels reflects the more limited
availability of broadband in rural settings.
Areas with low population size, locations that have experienced
persistent population loss and an
aging population, or places where population is widely dispersed
over demanding terrain generally have difficulty attracting
broadband service providers. These characteristics can make the
fixed cost of providing broadband access too high, or limit
potential demand, thus depressing the profitability of providing
service. Clusters of lower service exist in sparsely populated
areas, such as the Dakotas, eastern Montana, northern Minnesota,
and eastern Oregon. Other low-service areas, such as the
Missouri-Iowa border and Appalachia, have aging and declining
numbers of residents. Nonetheless, rural areas in some States (such
as Nebraska, Kansas, and Vermont) have higher-than expected
broadband service, given their population characteristics,
suggesting that policy, economic, and social factors can overcome
common barriers to broadband expansion.
In general, rural America has shared in the growth of the
Internet economy. Online course offerings for students in primary,
secondary, post-secondary, and continuing education programs have
improved educational opportunities, especially in small, isolated
rural areas. And interaction among students, parents, teachers, and
school administrators has been enhanced via online forums, which is
especially significant given the importance of ongoing parental
involvement in children's education.
Telemedicine and telehealth have been hailed as vital to health
care provision in rural communities, whether simply improving the
perception of locally provided health care quality or expanding the
menu of medical services. More accessible health information,
products, and services confer real economic benefits on rural
communities: reducing transportation time and expenses, treating
emergencies more effectively, reducing time missed at work,
increasing local lab and pharmacy work, and savings to health
facilities from outsourcing specialized medical procedures. One
study of 24 rural hospitals placed the annual cost of not having
telemedicine at $370,000 per hospital.
Most employment growth in the U.S. over the last several decades
has been in the service sector, a sector especially conducive for
broadband applications. Broadband allows rural areas to compete for
low- and high-end service jobs, from call centers to software
development, but does not guarantee that rural communities will get
Rural businesses have been adopting more e-commerce and Internet
practices, improving efficiency and expanding market reach. Some
rural retailers use the Internet to satisfy supplier requirements.
The farm sector, a pioneer in rural Internet use, is increasingly
comprised of farm businesses that purchase inputs and make sales
online. Farm household characteristics such as age, education,
presence of children, and household income are significant factors
in adopting broadband Internet use, whereas distance from urban
centers was not a factor. Larger farm businesses are more apt to
use broadband in managing their operation; the more multifaceted
the farm business, the more the farm used the Internet.
How Was the Study
This report summarizes all available nationwide data on
broadband use and availability and analyzes the data to isolate
interactions between broadband use and economic activities. It also
presents results from an ERS-sponsored workshop on rural broadband
and ERS-commissioned research studies conducted by others. The aim
is to assess the economic impact of not having broadband service on
rural communities and their growth, community facilities, access to
health care, and wellbeing, as requested by Congress on December
We first analyze who uses broadband, what it is used for, and
what differences exist between the average urban and rural user to
better understand the perceived usefulness of the Internet,
especially broadband. We then identify rural areas that have
broadband (by ZIP Code), determine when they acquired broadband
service, and develop measures of broadband availability over time.
We analyze the effect of broadband Internet access on the rural
economy using quasi-experimental design (QED), which allows us to
compare two sets of counties alike in most aspects but broadband
availability. The results are interpreted using further analysis of
rural businesses and consumers, including farm business logistic
regression analysis, rural-farm linkage logistic regression
analysis, and workshop research exploring many complex interactions
between the Internet and socioeconomic components of the rural
community: rural community social interactions; telemedicine;
distance education; and rural businesses, including retail,
service, and farm.