Broadband speed a factor in GDP growth, says report

MANILA, Philippines - Doubling the broadband speed for an economy increases gross domestic product (GDP) by 0.3 percent, a new report conducted jointly by Ericsson, Arthur D. Little and Chalmers University of Technology in 33 OECD countries revealed.

A 0.3 percent GDP growth in the Organization for Economic Corporation and Development (OECD) region is equivalent to $126 billion. This corresponds to more than one seventh of the average annual OECD growth rate in the last decade. The 33 countries in the study comprise the OECD.

The study also showed that additional doublings of speed can yield growth in excess of 0.3 percent (e.g. quadrupling of speed equals 0.6 percent GDP growth stimulus)

Both broadband availability and speed are strong drivers in an economy. Last year, Ericsson and Arthur D. Little concluded that for every 10 percentage point increase in broadband penetration, GDP increases one percent.

This growth stems from a combination of direct, indirect and induced effects. Direct and indirect effects provide a short to medium term stimulus to the economy. The 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 of 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.”

During a keynote speech at Broadband World Forum 2011 in Paris, Wibergh said: “We expect a huge increase from the current estimate of around one billion people with broadband access to about five billion in 2016, most of whom will have mobile broadband. Connectivity and broadband are just a starting point for new ways of innovating, collaborating and socializing.”

Erik Almqvist, director at Arthur D. Little, 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.”

“These results have been derived using rigorous scientific methods where the direction of causality, data quality and significance levels have been appropriately tested,” added Erik Bohlin, professor at Chalmers University of Technology. “The results of this study support governmental policies that recognize and promote the importance of broadband.”

This study is the first of its kind in that it quantifies the economic impact of increases in broadband speed in a comprehensive scientific method using publicly available data.

Countries considered in the study are Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, UK and US.