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Chapter 1 - Why is Broadband Important?
1.1 Productivity
Harnessed effectively, broadband connectivity will be a key driver of Australia's Gross Domestic Product (GDP), jobs and wages growth. Broadband technologies will be the roads and railways of the 21st century, generating the next wave of economic expansion. Just as transport opened up new economic horizons in the last century, advanced communication networks will pave the way for productivity gains across global economies in the new century.
What quantum of productivity gains might be possible? Accenture[1] estimates that next generation broadband could produce economic benefits of $12 billion to $30 billion per annum to Australia. This assumes that broadband is adopted as universally as the telephone over the next 25 years. A policy of encouraging widespread broadband adoption could deliver accelerated economic value within years rather than decades.
In the United States studies have estimated that widespread, high-speed broadband access could increase US GDP by US$500 billion by 2006[2] and that building and using a robust, nationwide network will expand US employment by an estimated 1.2 million new and permanent jobs[3].
Broadband technologies make a range of networked communications possible, many of which are not apparent using first generation internet technologies. The 'always-on' network effect will also change business and user behaviour and revolutionise the way content and services are delivered and managed. Innovative use of broadband connectivity will be critical to Australia's ability to participate and compete in the global economy.
As Thomas Friedman has said:
'Jobs, knowledge use and economic growth will gravitate to those societies that are the most connected, with the most networks and the broadest amount of bandwidth - because these countries find it easiest to amass, deploy and share knowledge in order to design, invent, manufacture, sell, provide services, communicate, educate and entertain. Connectivity is now productivity[4].'
Several industrialised nations have recognised the economic advantages of broadband connectivity and are implementing comprehensive national broadband strategies. The OECD has said that it is crucial to build strong broadband access in the immediate future as the technology gains prominence in fields that go well beyond communications policy:
'One reason is the role advanced communication capabilities play in generating higher growth in productivity rates, as well as new network-based economic activities. If new communication tools such as the Internet and wireless networks boosted growth in the latter half of the 1990s, then the next steps towards broadband are of critical importance[5].'
Key decision-makers in major Western economies, including the United Kingdom, Canada and the United States, concur. The next steps towards broadband access are critical for Australia's future productivity and growth. If we lose momentum, we may be left behind in the wake of countries whose policy makers are enthusiastically embracing these emerging technologies.
1.2 Service delivery revolution
Broadband technologies will stimulate Australia's economic growth by revolutionising the way services are delivered and business is conducted. In short, broadband enabled technologies will change the way Australians live, work and do business. This is particularly true in service sectors such as health and education, as well as research, national security and general government.
Australia faces expanding demand for health care, fuelled by the availability of new treatments and the ageing of the population. Current health expenditure is 8.5 per cent of GDP and is expected to double in the next 40 years[6]. Connectivity in the health sector will help address the need to deliver health services to all Australians, regardless of where they live or work. Broadband technologies can help to contain costs, improve services and deliver better health outcomes.
High bandwidth applications are transforming distance learning programs in schools and allowing students and teachers access to interactive content. Broadband is also enabling tertiary students to use cutting-edge course materials from campuses around the world.
Broadband applications, which allow videoconferencing and facilitate large data-set transmission, are being used to integrate Australian researchers into global networks. Broadband applications such as graphics-intensive visualisation and simulation are also increasingly important tools for both industry and the consumer market. By providing a rich communications experience unable to be achieved with narrowband, broadband makes new business and service models feasible. These technologies will allow small and medium enterprises (SMEs) to become more efficient and to streamline their production and supply processes. Better networking capabilities will allow them to collaborate and supply to global markets.
As well as producing productivity gains in traditional and new industries, advanced connectivity can enrich community life, particularly in rural and regional areas. It provides the basis for integration of remote communities into national economic, cultural and social life.
The broadband debate has tended to dwell on how to exploit existing telecommunications infrastructures effectively. This is an essential first step in broadband development. Small business operators and consumers need to recognise the value proposition in broadband-enabled services in ways that they can relate to and understand. For many, the killer application is that the service is always-on and faster, as well as more cost effective as a result of bundling telephony and data.
However, it is also important to focus on enabling the emergence of next-generation networked services. These involve the delivery of personalised transactional services and new delivery channels for service industries. This is the true broadband of the future. The challenge is to maximise the opportunities of current and emerging broadband services while ensuring that Australia is positioned to participate effectively in the next stage.
1.3 Definition
Broadband refers to the ability of a single access line or wireless or satellite link, connected to a telecommunications network, to provide support for fast, always-on access to digital content, applications and a range of services, some or all of which can occur simultaneously.
This definition deliberately focuses on functionality rather than speed. The critical aspect of broadband is what it allows a user to do. The first generation of internet services used dial up modems and standard ISDN links to connect users to the internet at 'narrowband' speeds. The second 'broadband' generation of internet services depends on ADSL, cable modems and certain corporate and satellite data connections. This level is usually described as 'broadband' if it provides always-on data services of 200 kilobits per second (Kbps) or more.
However, there are those who argue the term 'broadband' should only apply to a third generation of services with connection speeds of 10 megabits per second (Mbps) or greater on the basis that it is only at these speeds that broadband becomes something more than a faster version of today's Internet services.
The BAG has included both second and third generation technologies in its consideration of broadband. Second generation services are becoming widely available, and require immediate attention, but it is also important to focus on issues likely to arise in the transition to next generation broadband services.
[1] Accenture, Innovation Delivered - Broadband for Australia, An Economic Stimulus Package, 2001, p8.
[2] Crandall and Jackson, Criterion Economics Study The $500 Billion Opportunity: The Potential Economic Benefit of Widespread Diffusion of Broadband Internet Access July 2001.
[3] New Millennium Research Council Study Building a Nationwide Broadband Network: Speeding Job Growth February 2002.
[4] T. Friedman, The Lexus and the Olive Tree, London, HarperCollins, 2000.
[5] OECD, OECD Information Technology Outlook 2002, p 246.
[6] Budget Paper No. 5 - Intergenerational report Budget Papers 2001-2002.