Study: UFB will more than pay for itself

The business case for UFB in New Zealand has just gotten a boost in the form of an Alcatel-Lucent study placing the economic benefits of high-speed broadband at $32.8 billion over 20 years.

The business case for UFB in New Zealand has just gotten a boost in the form of an Alcatel-Lucent study placing the economic benefits of high-speed broadband at $32.8 billion over 20 years.

At the request of the World Economic Forum last year, Alcatel-Lucent’s research organisation Bell Labs analysed the social and economic benefits of accelerating ubiquitous access in multiple regions of the world.

Building the Benefits of Broadband measures the GDP impact of the UFB and Rural Broadband Initiative (RBI) builds and determines the likely end-user economic benefits, called consumer surplus gains by economists, of a sample of high-speed broadband applications across the healthcare, education, business and agriculture sectors – including online doctor consultations, remote learning, teleworking and online farm management tools.

Incremental growth in GDP stemming from the network builds will be $5.5 billion over 20 years and the economic benefits to end users, the report found, will amount to $32.8 billion over 20 years. The calculation is based on an assumed steady-state average application adoption rate of 40 percent, reached in the seventh year.

Alcatel-Lucent New Zealand chief executive Andrew Miller said the combined consumer surplus of using high-speed broadband applications significantly outstripped the GDP impact of building the UFB and RBI networks and the government’s $1.5 billion capital contribution.

“The combined consumer surplus of the applications considered in the study reached nearly $33 billion over the 20-year period and continued to grow year-on-year,” said Miller.

The study identified three factors that if improved could further increase the potential consumer surplus: the availability of relevant applications; the speed of application adoption; and the total level of application uptake.

A sensitivity analysis showed that by increasing the speed of application adoption by 20 percent over the baseline, and increasing the total level of application uptake by 20 percent over the baseline, New Zealand can turn a $33 billion consumer surplus into almost $48 billion.

“Without relevant, compelling and useful high-speed broadband applications, there will be no consumer surplus," Miller said.

“There is no doubt some of this innovation will occur in the R&D labs of big global companies. But for a variety of reasons – language, culture, distance, and all the things that make New Zealand unique – many high-speed broadband applications will need to be created, adapted or incubated here.”

The study was released at the Future of High Speed Broadband Conference held in Auckland today.

Communications and IT minister Amy Adams addressed the conference this morning, saying faster broadband had the potential to lift GDP by about 1.5 percent.

"We see little point in laying fibre optic cable in the ground or building new cell towers if the infrastructure doesn’t ultimately deliver productivity gains and better outcomes," she said.

"A host of factors will influence the success of the initiatives – including retail pricing, the quality and speed of services, access to content and innovation applications, along with effective promotion and encouragement in key areas."

And the RBI was "unparalleled" in its potential to facilitate productivity gains, she said, given the "significant parts of our economy operating in the rural sector and the fact that those areas are still under-represented on most connectivity measures".

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