Truly transformational innovations are few and far between. Economists call them "general purpose technologies," or GPTs, and they can affect nearly every aspect of the economy and the way people live.
One of the leading scholars on GPTs, Professor Timothy Bresnahan, wrote in 1996 that
"GPTs are characterized by pervasiveness (they are used as inputs by many downstream sectors), inherent potential for technical improvements, and innovational complementarities', meaning that the productivity of R&D in downstream sectors increases as a consequence of innovation in the GPT. Thus, as GPTs improve they spread throughout the economy, bringing about generalized productivity gains."
Scholars generally agree that the list in modern history includes electricity, the steam engine, and perhaps the semiconductor.
What about broadband? Some have argued that information technology in general is a GPT, in which case broadband might be just an important component of a GPT.
But perhaps a better analogy would be the story of the steam engine. Professor Manuel Trajtenberg argued in a 2001 paper that it was not the steam engine, per se, that revolutionized manufacturing. Instead, it was the Corliss design, "with its vast improvements both in fuel efficiency and in key performance characteristics…[that] greatly contributed to tipping the balance in favor of steam" and away from waterpower (p.3)
In this analogy, then, broadband would be to information technology as the Corliss was to the steam engine. It is the technology that makes IT a breakaway success.
Why does any of this matter? For at least two reasons.
First, a GPT may have very large effects throughout the economy, but those effects can be exceedingly difficult to measure. Thus, in addition to measuring the direct value of broadband, we may need to develop mechanisms to understand and measure the effects in other markets. Those effects might be big or small, but we should try to measure them, especially to the extent that they would not be captured in a straight measure of willingness to pay for broadband.
Second, adoption of GPTs makes us much better off as a society, but we have to recognize that some groups lose out. For example, local merchants might be hurt as more of their customers shop online. Some merchants will be able to adjust and profit in the broadband world, but some won't.
Thus, if broadband is a GPT then we should expect continued radical change in our economy and in the way we live. The transition won't be comfortable for everyone, but among our tasks as we develop the national broadband plan is to understand how broadband affects the economy and society and how the country can take advantage of the opportunities it presents and make the transformation a positive one for sectors like health care, education, and energy.