More on the broadband debate…

First a disclaimer – I’m no engineer, I use broadband (of course) but I don’t profess to understand all the arguments in depth – copper vs fibre vs mobile doesn’t concern me hugely – connectivity is the metric that rocks my world… I’m also not an economist – I use the economy in the broadest sense but leave macroeconomic analysis to others….

This post looks at a few variables – broadband penetration, GDP, broadband availability and broadband price and begs a few questions about them all.

Anyway a post over on the Unreasonablemen blog got me thinking. We’ve heard ad infinitum that the issue around broadband uptake is price, we’ve also had more reasoned discussion asking whether or not some thought should be given to this nirvanic ubiquitous broadband we’re trying to achieve. The UM pointed out a recent study that showed that New Zealand broadband prices are in fact lower than the OECD average, yet our uptake remains in the bottom half.

At US$16.75 per megabit, New Zealand broadband prices are US$1.25 cheaper than the OECD average and US34 cents less expensive than the OECD average of US$49 when comparing monthly subscriptions…New Zealand ranked 20 out of 30 OECD countries for broadband uptake

The graph underneath is interesting in that it shows a positive correlation between broadband penetration (number of subscribers per 100 inhabitants) and GDP within the OECD. Note that we’re talking penetration here and not speed – sure there are some areas that don’t have access to broadband but notwithstanding that, our penetration vs availability rates would be the most telling statistic to analyse. If we have high availability (regardless of speed) but low relative penetration, work needs to be done to right this wrong, rather than the speed issue.

The Unreasonablemen ask whether or not there are some other barriers to uptake other than price – the central premise of their post being that it seems an easy road to go down to blame all of our GDP woes on poor broadband penetration rather than looking at other factors (taxation, compliance, education etc etc)

Update by The UM

Sorry I can’t let this pass and Ben kindly gave me permission to throw in my two cents about this. This kind of data says a lot of things. Ben is right to ask if availability vs penetration is the issue. This should be measured.

This article in the NBR highlights the major issues behind improving productivity. Its worth noting that none of them are ‘broadband penetration’ and only one of them might be linked to it (connecting to the world).

This would challenge the implicit assumption that Broadband will drive productivity. The graph above says to me that productivity (which GDP is a proxy measure for) DRIVES broadband uptake, not the other way around.  In this case I think the we’ve been chasing the egg not the chicken.

What factors could be behind this difference?

• Cultural affects – Knowledge based economies are more likely to want and use technology than primary producing nations. Its exactly the same as social demographics – poorer families don’t use technology as much as well to do (I’m not saying its right, just that its a measured fact)
• Climactic – not wanting to brag, but the kiwi weather is better than some of these regions. In some of them you are literally ice bound for 4-6months of the year, which means its not that nice to be outside, which means you are in the home….and either connected or bored
• A highly trained and educated population?
• A national focus that isn’t on primary produce, but services, technology and software ( I know tourism is a big earner for NZ, but you could argue that that revenue stream is really the 1st world exploiting the natural resources of the 3rd world)
• A retention of the nations business (as opposed to selling them to offshore)

So what do you think?
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