Effectiveness and efficiency of state aid for new broadband networks: evidence from OECD member states

Abstract

ABSTRACT The deployment of new broadband networks (NBNs) based on fiber-optic transmission technologies promises high gains in terms of productivity and economic growth. It has attracted subsidies worth billions from governments worldwide through various state aid programs. Yet, such a program's effectiveness and efficiency still need to be studied. We employ panel data from 32 OECD countries from 2002 to 2019 to provide robust empirical evidence that state aid significantly increases NBNs by facilitating the deployment of new connections to 22 percentage points of households in the short term and 39.3 percentage points in the long term. We find it highly cost-efficient, as the programs break even after three years on average. We also discuss possible efficiency improvements in future funding programs, particularly requirements of technology neutrality, consideration of mobile broadband solutions, and integration of demand-side funding.