A new econometric study commissioned by Nokia Siemens Networks and conducted by economic consulting firm LECG under the direction of Professor Leonard Waverman explores the economic benefits from the wave of broadband diffusion that occurred in Europe and the United States over the last 10 years. The study finds that in countries where ICT diffusion and usage were at medium or high levels, not only had broadband technology spread rapidly but the economic benefit from improved broadband penetration was significant.
As an example, the study predicts that adding 10 more broadband lines per 100 individuals across the U.S. (30 million new broadband lines) would raise U.S. GDP by over USD 110 billion.
However, the study finds that in countries where ICT diffusion was relatively low, broadband has generally been adopted more slowly and has not had a measurable impact in improving economic productivity. In these countries, while it may simply be a matter of time before the productivity benefits of broadband are fully evident, governments should take a more active role in helping to speed up broadband adoption and in helping businesses and consumers make deeper and more economically effective use of broadband.
One of the conclusions that the study reaches is that there is a significant role for “demand side” policies which create incentives for, or lower the costs of, adopting broadband and computing technologies. Governments and businesses could look at providing training in using ICT and raising awareness of the potential benefits to firms and consumers from being able to effectively use broadband and Internet technologies. Such policies may speed up the adoption and increase the effectiveness of broadband deployment in countries which were lagging on these measures. However, they may also be useful in addressing the internal “digital divide” that exists within all societies and which also includes a divide in user skills and savvy between different segments of the population.
“Many countries are looking at how to provide universal access to broadband as an assumed driver of economic productivity,” said Professor Waverman. “But far too little attention is being given to other key factors. For instance, a U.S. stimulus package that addresses affordable access would have a far greater impact when complemented by emphasizing access to computing devices, ICT training and education.”
The lesson for policy makers is that there needs to be a greater focus on the users of future broadband infrastructure, enhancing the “demand side” of broadband access. Specifically, for broadband to become a more effective productivity enhancement tool, countries need to invest in improving overall ICT skills and in lowering the costs to businesses of adopting technology and restructuring business models around technology.
“In the face of the current economic crisis, we call on European policy makers to develop their own models that provide the right overall environment for investment in broadband to be economically effective,“ said Ilkka Lakaniemi, head of global political dialogue and initiatives at Nokia Siemens Networks. “The models must take into account the digital divide between Northern and Southern Europe revealed in the Broadband Study.” He adds, however, that even with advanced countries, policies that call for universal broadband access should also address the issues of skills and awareness that are raised in the study.
The study supports the findings of the Connectivity Scorecard: ”Useful connectivity” depends not just on the number of people connected to a network or infrastructure, but how well those connected people utilize the network or infrastructure. Although it is convenient for governments and the telecommunications industry to focus on the “supply side” (access) of the broadband industry, ultimately policy makers cannot ignore usage, skills and technological savviness among businesses and consumers.
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