Doubling broadband speeds would boost Aus GDP by $3.9b

Stuart Corner
Tuesday, 27 September 2011 17:01

IT Policy - Government Tech Policy

Ericsson has released findings from a study across 33 OECD economies, including Australia, that, it says found that a doubling of broadband speed produced a 0.3 percent increase in the GDP of that economy - $A3.9b in the case of Australia.

According to Ericson, "This [growth] corresponds to more than one seventh of the average annual OECD growth rate in the last decade." It added that the study showed the results to be linear: "A quadrupling of broadband speeds produced a 0.6 percent increase in GDP." However it has released no other details of the findings, nor any economy-specific findings (iTWire calculated the Australian benefit by applying the claimed percentage gain to the figure of $A1.3 trillion for Australia's FY11 GDP).

The study was undertaken by Ericsson in collaboration with Arthur D Little and Chalmers University of Technology. It follows one undertaken last year by Ericsson and Arthur D Little that "had a geographical scope and covered more than 120 academic reports and business papers published between 2001 and 2010 [and concluded that] for every 10 percentage point increase in broadband penetration, GDP grows about one percent [and] or every 1000 additional broadband users, roughly 80 new jobs are created."

Ericsson said that, across the 33 economies the average broadband speed in 2010 was 11Mbps, an increase from 6Mbps in 2008.

According to Ericsson the GDP growth stems from a combination of direct, indirect and induced effects. "Direct and indirect effects provide a short to medium term stimulus to the economy. The induced effect, which includes the creation of new services and businesses, is the most sustainable dimension and could represent as much as one third of the mentioned GDP growth."

It explains: "In the short run, more jobs will be needed - in construction, telecommunications and electronics - to create the new infrastructure - this is referred to as the direct effect. The indirect effects include spillover effects from one sector to another and efficiency improvement in the economy. The induced effects are new ways of doing business caused by increased broadband speed: more advanced online services; new utility services; telecommuting; telepresence.

Arthur D Little director, Erik Almqvist, said: "Until now there has been an absence of hard facts investigating the effects of broadband speed on the economy. This unique empirical study may help governments and other decisions makers in society make more correct tradeoffs and policy choices."

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