Backbone of Rural Prosperity

Bringing broadband to rural and Northern Canada boosts economic fortunes in small communities at the expense of urban centres

The essentials

In the interests of economic development, governments in Canada spend considerable sums subsidizing the roll-out of broadband infrastructure in rural, isolated, and northern communities. Olena Ivus and Matthew Boland of Queen’s School of Business conducted Canada’s first empirical assessment of broadband’s impact on rural communities. They found that the deployment of broadband between 1997 and 2011 promoted growth in aggregate employment and average wages in rural regions across Canada. But the increased employment growth came at the expense of urban regions. The research is part of The Monieson Centre's economic revitalization project.

In industrialized countries, a high-speed data connection is considered almost a basic utility. It’s assumed that broadband gives individuals and firms in remote communities access to opportunities that urbanites take for granted, boosting innovation and productivity. That’s why Canada’s federal and provincial governments have spent hundreds of millions of dollars to subsidize the roll-out of broadband in rural, isolated, and northern areas where high-speed connectivity is limited.

But is it money well spent? According to Olena Ivus, assistant professor of business economics at Queen's School of Business, the answer is a resounding yes, as the evidence suggests that Internet connectivity lowers the cost of doing business in remote locations. 

Ivus and Matthew Boland, a PhD student at Queen’s School of Business, conducted the first empirical assessment of its kind in Canada. They accessed data from Industry Canada on broadband availability to see whether broadband — DSL, cable, or wireless — was available across various communities. They combined this information with data on labour market activity on unemployment and wages and then compared employment and wage outcomes to changes in broadband deployment in a given economic region. In all, Ivus and Boland studied the impact of broadband in 4,344 communities across Canada. 

They have two major findings. One, the deployment of broadband between 1997 and 2011 promoted growth in aggregate employment and average wages in rural regions across Canada. This impact was felt in service industries rather than manufacturing. And two, the increased employment growth in rural regions came at the expense of urban regions.

“This second finding leaves open the question of whether increased broadband deployment actually serves the goals of promoting national economic growth and competitiveness,” says Ivus. Since a decline in urban employment growth offsets an increase in rural employment growth, she says, at the national level employment growth is unchanged. 

A potential reason for the negative impact on urban regions is simple. “I think people prefer a nice lifestyle,” says Ivus, “and, if you're in the service industry, then nothing prevents you from taking your laptop and going.” 

“Our smaller businesses don't want to leave our region but, if they want to grow, they have to have the tools to do so and Internet plays a very key role in that”

Ivus and Boland measured the impact of broadband using a scenario that assumes all communities in a given economic region moved from having no broadband coverage in 1997 to having coverage in 2012. In this scenario, they estimated that employment growth in service industries would rise by 1.17 percentage points per year in rural regions and fall by 1.21 percentage points per year in urban regions, while average wage growth in service industries would rise by 1.01 and 0.99 percentage points per year in rural and urban regions respectively.

The facts on the ground seem to support these calculations. The Eastern Ontario Regional Network (EORN), for example, is almost finished assembling a 5,500-kilometre network of new and existing fibre optic cable with 160 new access points for Internet Service Providers. EORN was set up by the Eastern Ontario Wardens’ Caucus, a group of 11 counties and two single-tier municipalities in Eastern Ontario. 

EORN has heard from many local businesses about the game-changing benefits of broadband access. Speaking at the 2014 Economic Revitalization Conference organized by The Monieson Centre at Smith School of Business, Lisa Severson, EORN’s stakeholder relations officer, said one business owner told her that having high-speed Internet has allowed them “to flourish in the community where we started and where we want to stay." 

“Our smaller businesses don't want to leave our region,” says Severson, “but if they want to grow, they have to have the tools to do so and Internet plays a very key role in that.”

Vanessa Santilli

Smith School of Business
Goodes Hall, Queen's University
Kingston, Ontario
Canada K7L 3N6

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