On The Download

By Kate Pierson

Google, email, blogs, chatrooms, online video conferencing, television on demand; makes you wonder how we ever managed without the internet. Fact is, it’s not a bad guess because when an ISP gets the hiccups, most offices come to a grinding halt.

With its interactive characteristics, powerful search engines and seemingly infinite information, the internet has revolutionised the way people communicate, trade, learn, consume news and do business.

But whether a new fibre broadband initative will boost New Zealand’s productivity is the question on everyones lips.

 A fibre optic future

On March 31, 2009 The National Government upheld its pre-election promise to deliver ultra-fast internet in New Zealand.

The Minister for Communications and Information Technology, Steven Joyce announced the government’s commitment to investing $1.5 billion in fibre broadband over ten years, including approximately $300 million on rural broadband, to introduce a fibre-to-the-home (FTTH) national network.

A technology that is gaining universal momentum, fibre broadband involves using fibre optic wire instead of copper. Fibre broadband has much greater bandwidth for information delivery and can reach speeds of 100 megabits per second.

With his eye on the productivity prize, Prime Minister John Key is confident a FTTH network will have multiple benefits for New Zealand.

“Enhancing our economic performance is one of the vital issues that New Zealand must address. Fibre will deliver big economic benefits for New Zealand – enhanced productivity, improved global connectivity, and enhanced capacity for innovation.

“Independent experts have estimated those benefits will be worth between $2.7 billion and $4.4 billion a year,” Key says.

With the intention of accelerating the roll out of fibre broadband to 75 percent of New Zealanders in six years, the government will first concentrate on priority broadband users such as businesses, schools and health services.

Fibre fueled productivity: too soon to tell

With the fibre broadband initiative still in early stages of development as the government explores its options for co-investment, a forensic examination of definitive benefits will have to wait. However, mixed opinion has been the catalyst for much discussion and the desire to investigate how fibre may increase productivity has inspired preliminary research.

Motu Economic and Public Policy research funded by the Foundation for Research, Science and Technology (FRST) has got the ball rolling with an empirical study, ‘The need for speed: Impact of Internet Connectivity on Firm Productivity’.

While the research suggested there were would be “no discernable additional effect arising from a shift from slow to fast broadband,” it did show that there could be marginal improvements in the rural sector.

In accordance with the study’s authors, Arthur Grimes, Cleo Ren and Philip Stevens, the Ministry of Economic Development (MED), who provided a researcher to help with the study’s econometric analysis, agrees results should be treated with caution.

“At the time of the research there was little or no fibre to the premise (FTTP). The vast majority of ‘cable’ that responses were referring to was co-axial cable, which delivered little increased speed over DSL. The adoption of cable may have been too recent for some firms to have achieved the full productivity benefits of doing so,” the MED says.

While the preliminary investigations continue and the fibre affect on productivity remains to be seen, plenty are anticipating the possibities.


All for fibre and fibre for all

The New Zealand Regional Fibre Group (NZRFG) is a collective of regional operators including lines companies and local fibre companies, who have united as a response to the government’s vision of introducing fibre.

Being locally owned and with proven exisiting infrastructure in place, its goal, says NZRFG spokesperson and Unison chief executive Ken Sutherland, “Is to provide fibre to every home and business in New Zealand,” by tendering for partnership with the government”.

With members like Alpine Energy, Counties Power, Vector, and Waikato based WEL networks,

the NZRFG is confident fibre is the way the rest of the world is going to go.

“It’s a quantum leap. The government’s initiative is going to change the game for the next few generations of New Zealanders,” Sutherland says.

He also believes fibre to the farm is critical and where productivity can increase substantially. “When you consider the rural economy is the economic backbone of New Zealand – and primary product exports contribute $20 billion of our $50 billion export revenue annually – then investing in infrastructure that will drive greatly improved efficiences is crucial to our productivity.”

Federated Farmers Policy Advisor and Economist, William McGimsey is also optimistic about the impact fibre will have on productivity in the rural sector.

“Telecommunications, like fibre broadband, are a technological substitute for transport and allow us to overcome the tyranny of distance. Realtime internet will provide further instantaneous solutions,” McGimsey says.

Farmland operations such as cellphone controlled irrigation and live video feed for video-conferencing are examples McGimsey offers to illustrate the benefits of technology in the rural sector at present.

With the introduction of the internet to the agricultural sector, farmers can now access information on Fonterra’s analyses of their milk components.

“This means they can put in orders straight away for milk supplements to better their milk quality,” he explains.

McGimsey says fibre will further revolutionise the way farmers do business and ensure New Zealand’s farming industry continues to flourish.

“If we do it right once, we are good to go, but if we don’t have the technogical capacity to utilise new innovations, we cannot future proof our industry which is the biggest industy in New Zealand.”

Keeping up to speed

Productivity gains aside, a technology that transmits signals at the speed of light and delivers broadband speeds at least 50 times faster than those currently available in New Zealand, is full of promise.

Ultra-fast broadband will help compensate for New Zealand’s small size and distance and ensure we stay in the loop with a rapidly evolving global network.

Whether fibre fuels productivity remains to be seen, but when we look at how internet has changed our lives for the better in the last ten years, our businesses and economy can look forward to keeping up to speed in the next ten.


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