NZ research questions the value of high speed broadband

Stuart Corner
Monday, 02 November 2009 10:38

Opinion and Analysis

A New Zealand study has found that the productivity benefits businesses gain by moving to higher speed broadband are minimal compared to the gains by from implementing lower speed broadband services - but it admits to many significant uncertainties in its conclusions.

If someone comes out with a report suggesting, even inconclusively, that there is little economic benefit from high speed broadband you can bet that it will (a) generate spectacular headlines (b) be seized on immediately by those opposed to the National Broadband Network as vindication of their position.

New Zealand's Motu research institute has issued a report entitled 'The Need for Speed: Impacts of Internet Connectivity on Firm Productivity' . It claims that despite huge investment budgets associated with broadband (especially fibre) rollouts, "there has been little rigorous supporting evidence indicating that such connectivity brings material productivity benefits."

Motu claims that its study "Is the first, internationally, to estimate the productivity impacts of connectivity upgrades using firm level data after controlling for firms' connectivity choices based on their characteristics." Other studies, as been done has been at a macro level - an industry, country or region.

Motu's headline conclusion: "We determine that the productivity benefits that arise from a switch from no broadband to broadband access are material; we do not find evidence for productivity differentiation based on the type of broadband connection (ie cable versus other)."

Naturally the report was far too good an opportunity for shadow communications minister, Nick Minchin, to pass up, He used the findings to once again demand "full-cost benefit analysis of Labor's reckless $43 billion NBN Mark II proposal."

But Motu's key finding comes with a number of caveats, none of them insignificant. The authors warn: "The finding that a move to fast broadband (cable) from any other form of broadband has no estimated effect should be interpreted with care. At least four explanations (other than an actual nil effect) could account for this result." It is worth stating all these in full.

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