The FINANCIAL — Home owners in London are willing to pay up to 8 per cent above the market price for properties in areas offering very fast internet speeds, according to a new study by the London School of Economics and Political Science (LSE).
The capital’s willingness to pay a premium for good internet coverage strengthens the case for rollout of high speed broadband in densely populated areas, argue researchers from LSE and Imperial College Business School.
In the first study of its kind, researchers have analysed the value of broadband to English households, looking at the link between property prices and broadband availability.
Statistics compiled over a 15-year period, from 1995-2010, show that property prices across the UK increase on average by about 3 per cent when internet speed doubles.
While the increase in value is even greater when starting from slow internet connections, an increase from 8 to 24 megabits per second raises the property value by no more than one per cent, according to LSE.
Londoners show a greater willingness than the rest of the country to pay for broadband, reflecting very high usage in the capital city for both work and personal reasons.
“Speed matters,” said Gabriel Ahlfeldt, Associate Professor of Urban Economics and Land Development at the London School of Economics and Political Science.
“The European Commission has set a target by 2020 that every European citizen will need access to at least 30 megabits per second and at least 50 per cent of households should subscribe to internet connections above 100 megabits per second,” he added.
“The target is ambitious and suggests that private provision alone may not be able to supply fast enough connections to people across the whole country,” Tommaso Valletti, Professor of Economics at Imperial College Business School, added.
Currently, internet connections are provided via ISPs such as telecom and cable suppliers but there is growing pressure on governments to intervene and make high speed broadband universal.
However, while urban areas pass the cost benefit test of rolling out fibre broadband infrastructure by a large margin, the opposite is true for rural areas, researchers say.
“In rural areas it would make more sense for governments to adopt less expensive fixed and mobile technologies that deliver decent and reliable speed. In urban areas a levy on landlords, who ultimately benefit from the improvements, could help saving taxpayers’ money when rolling out fibre,” Assoc. Prof. Ahlfeldt added.
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