A new study conducted by two economists from a major banking institution says that municipal broadband networks contribute significantly to helping low income households gain access to banking services.
Major Findings, And Why Does This Matter?
The researchers concluded that access to the Internet is a more significant predictor of access to banking services (specifically, having a bank account) than both race and education level. They found that when low income families get access to Internet service, their likelihood of having access to banking services increases by 10%.
Economists commonly focus on access to banking services as a key indicator of financial inclusion for low income households. A bank account enables basic human stability and prosperity as it facilitates financial planning, paying for recurring expenses, and allays negative effects of unexpected financial shortfalls from traumatic events. Bank accounts also allow individuals to build working capital and financing for small business enterprises.
Financial inclusion is a significant concern not just in developing nations but in some wealthy countries as well. Currently, the U.S. ranks 23rd out of 38 high-income nations on the World Bank’s Global Financial Inclusion Database.
Municipal Networks: Catalysts For Equal Opportunity
The authors suggest that in addition to directly improving Internet access through better availability, municipal networks improve Internet access by improving local Internet service competition. They note that collaborative efforts between local governments and private industry can also improve Internet access and financial inclusiveness.
What can be done to advance the goal of getting fast, affordable, reliable Internet access - and access to banking - for all? The authors of the study suggest that municipal broadband projects in particular increase the likelihood that everyone, regardless of race or income, will have access to banking services.
They offer the city of Boulder, Colorado, as an example:
Boulder, Colo., which ranks at the top of our Financial Inclusion Metropolitan Index, is one of a few areas in the U.S. with financial inclusion levels that rival those of the Nordic countries. Interestingly, the city once owned miles of fiber that its residents could not take advantage of because of laws limiting municipal broadband. But the city challenged the telecommunications industry at the polls in 2014 and won. In doing so, Boulder has become one of a growing number of municipalities that have voted to allow their local governments to increase competition by offering Internet service to residents. This speaks to the mindset of a community that has embraced technology as a way to lift up everyone that calls Boulder home.
Boulder voters didn't just approve the change in the law and forget about it. By the following April, the city began offering free Wi-Fi in the downtown area and consultants are now finishing up a feasibility study.
There's More To Life Than Money, But It Helps
Communities hoping to build municipal networks generally have to first confront the issue of how a network can make its return on investment and have direct economic development benefits for local businesses and residents. But beyond these types of direct economic benefits, this study reveals one of the many important human benefits of municipal networks that tend to fly under the radar.
In addition to improving financial inclusion for the disadvantaged, there are a number of other “under the radar,” spillover benefits of municipal networks. These include increased home values, better access to healthcare services including telemedicine, reduced car usage and access to various types of e-services, and bridging the digital divide.