Rural broadband is not a panacea for economic ills

The recent release of new economic growth measures has again prompted a debate on regional — from which we can generally read urban versus rural — development in Ireland.

To listen to some commentators you would imagine that beyond the M50 ring-road or beyond Blarney there is an economic wasteland, home to people in their 90s and an infrastructure barely out of the 18th century. The reality is, of course, quite different.

There is an economic world beyond the cities, and while parts of it are thriving, other parts are undoubtedly struggling. Dublin, and to a lesser extent Cork, and other medium-sized towns, will continue to be the economic engine driving the island forward. That is both inevitable and desirable.

Rural Ireland has lower income per head than urban Ireland. It has a higher level of people who are at risk of dropping into poverty but also has a lower level of consistent poverty.

On a regional basis, in terms of value added per person, the border region and the Midlands are at the bottom. They have few large towns. The border region produces less than a third of gross value added per person than Dublin produces and 40% that of the south-west (which includes Cork). Despite a perception of rampant rural depopulation, since 1966, or even since 1986, every single county has posted an increase in population, and the relative distribution of population has remained remarkably unchanged. Dublin and Cork had, essentially, the same proportion of the State-wide population in 1966 as they have now.

Much of the present angst on rural vs urban divides revolves around the issue of availability of broadband. Many households and small businesses rely on wireless dongles which give poor to barely adequate service most of the time. There is a national broadband plan, of course. Like many such national plans, it is over-hyped and under-resourced.

First announced in 2012 it was to have a fully connected broadband available to all by 2015. Now in 2017, it is to be completed by 2019, or 2024, maybe. A lot depends on how much effort Eir, the latest incarnation of Telecom Éireann, can put into it. Given the history of the fixed-line business in Ireland, we can expect this to be slow.

In 2012, then Communications Minister Pat Rabbitte proclaimed it as the “Rural Electrification of the 21st Century”. Rural electrification started, properly, in 1946. Although it ceased in 1965, the scheme was really completed only in 1977. By that metric, 21 or perhaps 36 years might be expected to elapse from Mr Rabbitte’s forecast to become a reality. That will take us to 2033.

The 1946-1965 scheme cost £36m, perhaps the equivalent of €1.3bn today. In that context, €600m seems too little.

There is a presumption, throughout the debate, that rural broadband will transform the economies of rural areas. The evidence from similar schemes worldwide is distinctly mixed. Recent German evidence suggests that while broadband provision can stem depopulation and job declines it is not in itself associated with employment increases.

Some US evidence suggests that average wages rise in areas with better broadband. This, however, holds true, it seems, in areas closer to existing urban areas than in more remote regions. Crucially, mere availability is not associated with any beneficial outcomes. Adoption, as opposed to availability, is the key.

Here we might hark back at what made Rural Electrification a success. It was the initial work of the area organisers who went around and canvassed rural dwellers to their likely use of electrical appliances, who sold the benefits of the scheme. It is a classic ‘chickens and egg’ scenario. The evidence is that people who know the benefits of technology are much more likely to ask for it. While it is generally assumed there is a huge need and desire for broadband, a more structured and detailed survey of potential business users, on a national and rural scale, might be useful.

Rural broadband may well be something to which we should aspire as a nation. The drivers should be the creation of a modern connected society, and not revolve around the idea of it as a panacea for economic relative underperformance.

  • Brian Lucey is professor of finance at the School of Business, Trinity College.


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