Economic impacts of subsea cable deployment

Wolfgang Briglauer, Raúl L. Katz and Juan Jung

No 31, Research Papers from EcoAustria – Institute for Economic Research

Abstract: This paper provides a comprehensive empirical analysis of the economic impact of submarine cable (SMC) infrastructure, which is critical for global digital connectivity and carries almost all intercontinental data traffic. Despite their fundamental role in the digital economy, robust evidence on the economic returns of SMC investments is very scarce. To address this, we use a panel dataset of developed countries and causal identification strategies, such as two-way fixed effects models and instrumental variables exploiting exogenous variation from factors like a country's coastline length and legacy market competition. First, our analysis establishes that increased international bandwidth (IBW) capacity resulting from submarine cable deployment significantly improves broadband quality by increasing speeds and reducing latency. We then quantify the impact on broadband demand, finding distinct yet robust demand elasticities for mobile and fixed services. We find that a 1% increase in IBW capacity drives mobile broadband demand up between 0.044% and 0.088%, while the increase for fixed broadband demand is slightly lower at between 0.041% and 0.062%. Finally, we translate these estimates into a simple cost-benefit framework using an illustrative transatlantic cable project connecting Ireland and the United States. This analysis shows that the substantial GDP spillovers - quantified at between US$121.05 billion and US$163.09 billion for the Irish landing site alone - overwhelmingly exceed the total private deployment costs of $180-$260 million. Our findings affirm that SMC deployments generate significant positive externalities and high social returns. While it has been argued that these effects are critical to developing nations lacking infrastructure, our findings indicate this to also be applicable to advanced economies. Consequently, we argue that policymakers in coastal nations have a strong economic incentive to facilitate private investment by reducing regulatory barriers and transaction costs associated with, for example, cable permits and landing stations.

Keywords: Submarine cables; economic impact; costs and benefits; panel econometrics (search for similar items in EconPapers)
JEL-codes: L50 L52 L86 L96 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-ene, nep-ict and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ecoarp:328265

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