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The potential contribution of nationwide broadband to economic growth is a staple point in any political party’s manifesto. But research released this week by consultancy Arthur D. Little, Chalmers University of Technology and Ericsson, reveals there is some truth to the claims. In fact, doubling the broadband speed for an economy increases GDP by about 0.3 per cent.
September 27, 2011
The potential contribution of nationwide broadband to economic growth is a staple point in any political party’s manifesto. And research released this week by consultancy Arthur D. Little, Chalmers University of Technology and Ericsson, adds further weight to the argument. In fact, doubling the broadband speed for an economy increases GDP by about 0.3 per cent, the study found.
Both broadband availability and speed are strong drivers in an economy, according to the research carried out last year, which found that for every ten percentage point increase in broadband penetration GDP increases by one per cent.
A 0.3 per cent GDP growth in the OECD region is equivalent to $126bn, which corresponds to more than one seventh of the average annual OECD growth rate in the last decade, Ericsson said. The study also shows that additional doublings of speed can yield growth in excess of 0.3 per cent, so the quadrupling of speed equals 0.6 per cent GDP growth stimulus. The positive effects come from more automated and simplified processes, increased productivity as well as better access to basic services such as education and health.
The growth itself stems from a combination of direct and indirect effects which provide a short to medium term stimulus to the economy, while an induced effect, which includes the creation of new services and businesses, is the most sustainable dimension and could represent as much as one third of the mentioned GDP growth.
“Broadband has the power to spur economic growth by creating efficiency for society, businesses and consumers,” said Johan Wibergh, head of business unit networks at Ericsson. “It opens up possibilities for more advanced online services, smarter utility services, telecommuting and telepresence. In health care, for instance, we expect that mobile applications will be used by 500 million people.”
Ericsson expects a huge increase from the current estimate of around one billion people with broadband access worldwide to about five billion in 2016, the vast majority of which will have mobile broadband.
Erik Almqvist, director at Arthur D. Little, which compiled the study, said: “Until now there has been an absence of hard facts investigating the effects of broadband speed on the economy. This unique empirical study may help governments and other decisions makers in society make more correct tradeoffs and policy choices.”
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