OECD rates NZ highly on broadband economy benefit

InternetNZ CEO warns there is no room for complacency

An OECD report that attempts to measure the benefit to the economy of the shift from dial-up to broadband internet access places New Zealand high in most of the league tables.

The study attempts to quantify the benefits of the shift by calculating new “consumer surplus” arising from the falling cost of bandwidth, as well as new gross domestic product (GDP), over the period from 2006 to 2010. Consumer surplus is a measure of the extra money a typical consumer has left after paying for internet access at diminishing year-on-year cost and higher speed and quality.

With adjustments for broadband quality, New Zealand is placed fifth in the OECD, with a broadband bonus as a percentage of GDP per capita of 3.03 percent. In comparison, Australia ranks 21st on the same scale, with 0.85 percent.

Authors Shane Greenstein and Ryan McDevitt admit that assessing what the dial-up market would have looked like in the absence of broadband diffusion is difficult. So instead, the study estimates users’ willingness to pay for upgrades to broadband

The study finds new economic value created by broadband internet correlates roughly with the overall size of a country’s internet economy measured by the scale of its respective internet usage. InternetNZ chief executive Vikram Kumar says “this research is starting to show the latent benefits that the internet is providing to all countries. It is also showing that New Zealand is benefitting significantly more relative to most other countries.” One key factor influencing New Zealand’s results could be our comparatively high level of broadband uptake despite the comparatively high broadband prices, Kumar says. “However, there is no room for complacency,” he adds, pointing to the latest quarterly State of the Internet report from Akamai Technologies. This shows New Zealand broadband speed slipping relative to Australia. “For the fourth quarter of 2011, peak connection speeds for Australian users from Akamai’s global network of servers reached 21.7 Mbps, a spurt of 25 percent quarter-on-quarter and 42 percent year-on-year, giving the country the highest growing connection speed in Asia and making it the sixth fastest country in Asia,” Kumar says. “Average speed was even better with 4.9 Mbps, an increase of 37 percent over the previous quarter, and 66 percent over the same period a year earlier. “New Zealand, according to Akamai, had peak connection speeds of 16.1Mpbs, down 3.8 percent quarter-on-quarter, while the average connection speed was 3.7 Mbps, down 7.2 percent quarter-on-quarter,” Kumar says. The OECD report – No 197 in its series of Digital Economy Papers, can be read in full here.

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