Broadband tardiness runs $4b risk: study

By Helen Twose

New Zealand risks losing up to $4 billion a year in economic benefits if it doesn't move immediately to a fibre-based broadband network, says a report released this week.

The study by business think-tank the New Zealand Institute investigates the economic benefits of broadband, determines the speeds needed to capture that value and the pace of change required to move to a fibre-based network.

"We're really trying to contribute to a debate about 'what are the priorities? Are we agreed that this needs to shoot up the priority list a little bit?"' said institute chief executive David Skilling.

He said present policy targets focused on broadband penetration - the Government wants 90 per cent of the country getting broadband at 5 megabits per second by 2010 - which had non-economic objectives.

He believes that to capture economic value, higher speed to fewer people is better than lower speeds to more. "The priority is to deliver really high-speed broadband to at least a few parts of the economy that really matter and then roll that out slowly over time."

His strategy would focus on technology-based sectors such as media and entertainment, education and health and companies using communication technology to connect to staff and clients.

"Over time you would hope that that higher-speed access would be delivered to a larger and larger chunk of the population, but I think we have to understand it is not going to be an egalitarian distribution where everyone has access to the same quality."

Sectors were identified for priority based in part on overseas research and a judgment about the New Zealand business environment. "For example, we included digital media because New Zealand has got at least the start of a significant sector in terms of film, animation and the like."

Skilling said the focus on existing industries meant economic benefits - estimated at between $2.6 billion and $4.4 billion annually - didn't take into account the potential development of innovative new companies and products as a result of high-speed broadband and so were at the conservative end of the range.

To capture these benefits, the institute said investment in fibre networks needed to begin next year with continued investment in copper technologies only where it would take some time for fibre to reach.

A five-year delay could cost up to $16 billion in lost benefits.

Skilling said with some countries having entry-level residential broadband packages offering 25 Mb/s - most urban New Zealand households would get broadband at speeds of between 1 and 4 Mb/s - some companies and industries would bypass New Zealand without improved bandwidth.

Thinking Broadly

* The New Zealand Institute study has estimated economic benefits from broadband in the range of $2.6 billion to $4.4 billion a year.

* Policy focus should be on increasing network speeds rather than penetration.

* Investment in fibre networks needed to begin immediately.

* A five-year delay in fibre investment could cost up to $16 billion in lost economic benefits.

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