Billions at stake over fast internet

New Zealand could add more than $13 billion in gross domestic product by 2030 through greatly accelerating broadband uptake over the next five years, a new study has found.

The research - which applied a macro-economic formula to project broadband's GDP effects over the next 25 years, at various rates of uptake - was funded by New Zealand Trade and Enterprise, the HiGrowth Project and Microsoft. It was carried out by the Economist Intelligence Unit (EIU) and IDC New Zealand.

"It's a piece of research that is highlighting something we probably all had a gut feel about," said Graeme Muller, country manager of IDC.

Muller said the report is apolitical about how uptake should be accelerated, but suggested New Zealand was behind in its thinking.

"The point of argument that we're at in New Zealand is we're still questioning whether we should be doing this, whereas if you look at Scandinavia and some Asian countries and European countries, even the UK, it's not a matter of whether we should be trying to increase penetration and speeds and so forth, it's a matter of how fast should we do it?"

The research used the Gompertz curve, a model used to predict uptake of technology goods and services, to project direct economic effects of broadband. The report was in line with studies by the Organisation for Economic Co-operation and Development in finding that broadband uptake here was low compared with other member countries. At its current rate of growth, New Zealand will achieve a rate of 50 broadband subscribers per 100 inhabitants in 16.8 years.

The country has 6.9 subscribers per 100, according to the most recent OECD statistics. South Korea, the world leader, has 25.5 subscribers and is predicted by the EIU to hit 50 in just over five years.

If the uptake rate were sped up so that New Zealand reaches 50 subscribers within 10 years, GDP would increase by $314 million by 2010, $2.7 billion by 2020, and $7.2 billion by 2030.

If the rate were "super-accelerated" so that 50 subscribers were reached within five years, the growth would be $889 million by 2010, $5.9 billion by 2020 and $13.1 billion by 2030 - or $2,706 per person.

Andrew Williamson, the EIU's London-based global director of custom research, said the study was very conservative in its estimates because it only gauged broadband's direct impact on GDP and didn't consider any of its wider economic benefits.

"Broadband is an enabling technology ... it allows people to do things better, quicker and more efficiently," he said. Spillover effects include allowing consumers to make more informed buying decisions, boosting telecommuting and thus reducing energy consumption, and improving education and worker productivity.

Williamson said that New Zealand reaching a rate of 50 subscribers per 100 in the next five years was unlikely, but theoretically possible.

SPEEDING UP

* New Zealand can add $13 billion in GDP by 2030 if it greatly speeds broadband uptake in the next five years.

* A slower acceleration of uptake, over 10 years, could result in a $7.2 billion GDP increase by 2030.

* The projection doesn't include true economic benefits from spillover into areas such as productivity, education and retail.