2010 Buyers Guide - Broadband Properties

using broadband. What is more interesting
is how businesses are changing the
way they conduct business. Broadband
enables deeper engagement in e-commerce,
reshaping business and industry
supply chains and products. The OECD
views that broadband will replicate and
possibly even exceed the economic gains
from the use of previous GPTs including
ICT at large.
Substantive economic impacts will be
reflected in productivity changes – that
is, improvements in labor productivity
where genuine broadband services make
work easier, and, more important, multifactor-productivity
(MFP) gains where
broadband reduces friction in many supply
chains in the economy. MFP is more
valuable than labor productivity because
it makes the whole system work better.
There is already some empirical evidence
about these gains from ICT in general
and genuine broadband in particular.
The CIE has recently been using its
detailed economywide models to evaluate
the impacts of broadband and other
technological changes and how differences
in commercial structures may
alter the outcomes. The model used is
the Monash Multi-Regional Forecasting
(MMRF) model, also used by key
economic agencies including, most
recently, the Australian Government
Treasury when estimating the impact
of combating greenhouse-gas emissions.
These models look at the long-term impacts
after all the direct shocks, changes
in prices, exchange rates, employment,
investment, multipliers and other flow
effects are taken into account.
A key input to the analysis is the
extent of productivity gains. After conducting
an exhaustive study over several
years, the Productivity Commission
recently reported evidence that ICT
investment generated a multifactor productivity
gain of between 0.15 to 0.2 per
cent per annum over the 1990s. If the
OECD is correct, genuine broadband
alone could stimulate a similar gain in
coming years; it would be reasonable to
expect an MFP gain of around 1 percent
over the medium term (say five to
six years). If adoption is slower than expected,
then these gains would take longer
to be realized. The MMRF model
A general-purpose technology, broadband
changes the way businesses conduct
their business. It deepens engagement in
e-commerce and reshapes supply chains.
has been used to see what the economywide
implications would be from this
productivity improvement in the medium
to longer term.
Broadband to Lift Australia’s
Output by 1.4%
The MMRF simulation results show
that genuine broadband offers gains
over most economic indicators. GDP
would rise. An increase of around 1.4
per cent is projected after about five
to six years. This is equivalent to $15
billion [all amounts are in Australian
dollars] in terms of GDP in 2007–08.
Prices would fall – by around half a percent.
The Australian economy would be
more competitive and export more, and
investment would grow.
The industry results point to a structural
change in the economy. Retail and
wholesale activities will be smaller than
otherwise, reflecting direct sales and supply
chain consolidation. Other activities
grow as they offer greater value to customers
(such as health, education and
recreation). Residential building grows
by a lot, reflecting Australia’s penchant
for real estate and the family home.
BIGGER COSTS ARISING FROM
IMPERFECT COMPETITION AND
HIGHER PRICES
The second main thread of this article is
about the investment cost. This is not a
discussion about the cost of broadband
technologies or difficulties in estimating
what it might be. These possible costs
November/December 2009 | www.broadbandproperties.com | BROADBAND PROPERTIES | 65