The Impact of Broadband

3:25 PM Does high-speed broadband boost economic growth?

November 1, 2012

3 Min Read
The Impact of Broadband

3:25 PM -- Do economies benefit greatly from a higher penetration of high-speed broadband services? The natural inclination is to believe that the impact would be positive, but what's very difficult to judge is the precise impact such communications services have on the GDP of any country.

That's why it was interesting to see a report -- "Superfast Britain? Myths and realities about the UK's broadband future" -- issued this week by the Economist Intelligence Unit (EIU) that included the following analysis: "While the gains from significantly faster connectivity will indeed be sizeable over time, a good dose of reality is also in order."

A good dose of reality is always welcome, especially in the U.K., where the term "superfast" is used for almost any data communications service more advanced than a carrier pigeon. For its report, the EIU states that anything that delivers greater than 24Mbit/s downstream is considered superfast, whether delivered over a fixed or wireless connection.

Among the key findings of the report are that the shift to superfast broadband will "certainly deliver added growth and new jobs," though likely not to the levels resulting from the shift to basic always-on broadband from dial-up connections. And while some jobs will be created by the construction of new broadband infrastructure in the U.K., the "longer-term, indirect impact on job growth is more difficult to project."

That's not the kind of "cause-effect" analysis that some, especially politicians, would have hoped for.

The analysis and conclusions need to be taken in context, though, so the 22-page report should be read to get the full picture. It's available, for free, to download right here.

For me, though, the key sentences in the report are these:

  • Existing networks are capable of delivering many of the services anticipated over the next few years. Obstacles are also numerous to utilising even the existing technology capabilities to good effect, including a shortage of skills and resistance to change. In this context, some of the expectations about the early returns from superfast broadband rollout in the UK may be overstated.

Basically, the report is saying that there's a long way to go before the U.K. can start to realize the benefits of its existing broadband services (fixed and mobile), so there's no point in getting over-excited about fiber-to-the-whatever and 4G.

And that's because having an improved broadband infrastructure alone in itself is not enough to boost any economy. What's often referred to as "joined-up thinking" is required if the benefits are to be exploited.

Where, for example, are the schemes to foster applications innovation? Who is bringing investors and digital startups together? Where are the new education plans that enable schoolchildren to experiment with technology and show their teachers what they're capable of? Teaching children how to use Microsoft Office week after week is a waste of the nation's intellectual capacity.

Unfortunately, the U.K.'s telcos don't appear to be doing much to help at the moment. In fact, Britain's communications service providers should be somewhat ashamed that they're being shown the way by Spanish carrier Telefónica SA (NYSE: TEF). (See Inside Telefonica's Startup Incubator and Telefónica: A New Breed of Telco.)

There's only so much the operators can do, obviously, but every little bit helps and the main thing that's needed is a change of mindset -- engaging with external companies/individuals to figure out what value-added services can be created, and how, is going to be critical for the telcos.

Of course, the EIU report is specific to the U.K. only and so the findings have limited applicability to other countries. But for every country, developing a digital ecosystem, with input from the communications sector, regulators, government, industry, users, investors and more is needed to reap the benefits of broadband. Faster connections alone are not enough.

— Ray Le Maistre, International Managing Editor, Light Reading

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