Govt to stimulate broadband to stimulate the economy

HiGrowth project ponders lobbying government over broadband

HiGrowth project head Garth Biggs believes the government will find the right levers to build New Zealand’s broadband capacity. It may be hard to see any definite action or declared direction yet, but this is because government is “playing its cards close to its chest”. It is aware that too big a move in any direction may meet resistance in the form of a request for a judicial review of any decision, Biggs says.

The HiGrowth project itself has not brought its own pressure to bear on government, he says, but it is considering whether such a move is advisable.

“First we have to consider whether it’s our role to do that, then if it is, what our view should be.”

Some indication of a move may emerge at the next one or two board meetings, he says. The board meets every two months, with its next meeting on March 31.

Correlation between ICT or general business sophistication and broadband adoption does not necessarily mean increasing broadband uptake will boost the other factors, but other evidence indicates that the causality chain goes that way rather than the reverse, says Biggs.

An analysis undertaken last year by The Economist Intelligence Unit (EIU) for the HiGrowth project argues that increasing New Zealand’s broadband uptake to reach a “saturation” point of 70% of the population sooner will benefit business as a whole and this will express itself in the gross domestic product.

“Based on existing and medium-term forecast data, the best fit for [the predictive model, known as a Gompertz curve] suggests that New Zealand will achieve a level of broadband diffusion of 50 subscribers per 100 of population within 16.8 years.”

The EIU defines broadband as a bandwidth of at least 512Kbit/s.

“If broadband diffusion in New Zealand is accelerated, by whatever means, to a level of 50 broadband subscribers per 100 of population within 10 years, the EIU forecasts that, compared with the baseline forecast, nominal GDP would increase by NZ$314m by 2010, NZ$2,740m by 2020 and NZ$7,215m by 2030,” says the study.

“If the target can be achieved within five years, the EIU forecasts a GDP increase of NZ$889m by 2010, NZ$5,968m by 2020 and NZ$13,122m by 2030.

The unit bases these forecasts on an international indication that broadband correlates with a sophisticated industry and particularly a sophisticated ICT sector. Trying to advance industry by accelerating broadband might then be like trying to make everyone successful in business by having them wear expensive watches, however.

“If you have a prosperous economy, I don’t see that the first thing people will do with the money will be to buy broadband,” Biggs counters. In fact, he suggests, New Zealand already has an advanced economy, with a skilled workforce and an aware government with constructive policies, he says. Broadband is one of the few points at which we fall down. Therefore it must be at least partly to blame for our low ranking among OECD nations.

“I have had personal experience and heard a lot of anecdotal evidence of broadband as a productivity tool,” he says. A HiGrowth “map” of the local IT industry shows a predominance of software production, and it is obvious that trading of software benefits from being able to move bits more quickly.

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