Deller et al.: Rural Broadband and Business Startups

The COVID-19 pandemic has not only increased demand for broadband services generally but also directed more attention to the speed and quality of those connections. Recognizing a knowledge gap in how speed in particular contributes to the rural-urban digital divide, Steven Deller, Tessa Conroy (both Agriculture and Applied Economics, University of Wisconsin), and Brian Whitacre (Agricultural Economics, Oklahoma State University) sought to test the relationship between broadband speed and business startup rates in rural counties across the U.S.

In Rural Broadband Speeds and Business Startup Rates, published in the American Journal of Agricultural Economics, the authors use a cross-sectional dataset of all rural U.S. counties to examine the relationship between small firm startups and wired/wireless Internet speed availability in 2014. Their analysis considered four broadband speed thresholds ranging from 10Mbps to 100 Mbps and the impacts of those speeds across twelve different industry groups. The study sought to accomodate at least six additional variables, including rate of economic growth, economic structure of the county, demographic characteristics, social capital of the community, and the level of assets available to potential entrepreneurs.

Ultimately, the authors confirm that rural counties with higher levels of broadband availability and speed tend to have higher rates of business startups across every tested industry type. Their research indicates that 50 Mbps is the suggested speed for networks to contribute to startup activity. This is faster than the current 25/3 Mbps threshold used by the dominant existing federal programs when pursuing rural broadband delivery.

As a result, the authors argue that investing in broadband has become akin to other types of infrastructures such as roads and bridges, where other research has concluded that such infrastructure investments are essential for economic growth and development. Overall, the results suggest that broadband access does play an important role – though not necessarily a causal one – in rural entrepreneurship. It also suggests that speed matters. It is not enough to simply develop any (i.e., slow) broadband access for rural communities.