Friday, October 19, 2012

Broadband's importance to economic recovery and growth


Recent data from the Organisation for Economic Co-operation and Development (OECD) underlines the importance of broadband to economic recovery and growth. According to the OECD's  Internet Economy Outlook 2012,  Internet firms continue to drive growth and job creation in the IT industry, with fast-rising demand for mobile services helping to boost revenue and investment in research and development. From the related OECD press release:
"The IT services industry weathered the 2009 downturn better than manufacturing, quickly rebounding to positive growth in early 2010. This is likely due to increasing specialisation in ICT services across OECD countries, while manufacturing has shifted to lower-cost production areas, according to the report. The strength of the services sector is partially the result of the increasing role ICTs play in helping businesses become more efficient. Firms may look to ICTs to cut costs during downturns, creating a continued demand for ICT services as other budgets are cut. The same is true for the telecoms sector which continued to perform strongly during the crisis, as households and individuals today consider them essential services and prefer to cut back on other expenses. Total worldwide ICT spending is estimated to reach USD 4 406 billion in 2012, of which 58% (USD 2 572 billion) is on communications services and equipment, 21% (USD 910 billion) on computer services, 12% (USD 539 billion) on computer hardware and 9% (USD 385 billion) on software."
A recent report by the Policy Exchange, Bits and Billions: A blueprint for high-impact digital entrepreneurship in the UK, suggests that the UK has enormous potential to be a world-leader in the high-tech and digital economy, building on growth to date:
"In the UK, our domestic technology, digital and creative sectors are already well established. The ubiquity of the internet and digital technology makes it hard to separate out precisely how much they matter to the modern economy. Virtually every business makes use of technology in one form or another – from email and web hosting through to cutting edge data analytics and automation. Nevertheless, previous studies have estimated that the internet is integral to over 8% of the economy, with this figure set to grow to over 12% by 2016. Internet and online businesses contributed almost one quarter of total UK growth over the past five years."
The report goes on to analyse what needs to be in place if the UK is to capitalise on this, to become, as is the Government's intention, the best place in the world to start, run and grow a high tech company. Significant changes are needed:
"For policymakers it is not sufficient simply to assume that the basic building blocks of economic policy designed for previous eras will work for the next generation of digital businesses. We start from a place where rules, regulations, norms and laws designed for an analogue world have accumulated over centuries. As we move forward, bold policy thinking will be a necessary ingredient for radical reshaping of the economy… We are yet to see, however, the sort of radically ambitious and fundamental reforms across the public policy landscape that are necessary for entrepreneurs and the private sector to fully unleash the kind of transformational change in the digital economy that politicians aspire to."
The report welcomes the funding being made available for superfast and ultrafast broadband and identifies six pillars for high-impact digital entrepreneurship: skills for technology, ambition, finance for scaling up, mentors, agility and creativity, certainty and copyright. Current policies need to be re-engineered if the UK's opportunities in this area are to be realised:
"…from the perspective of high-impact digital entrepreneurship, the government’s growth strategy is more incremental improvement than disruptive innovator. The deep changes in our economy being ushered in by digitisation, along with the continued pressing need to kick-start growth, suggest that a more radical examination of the fundamental building blocks of public policy is in order."
These recommendations echo a similar one made in the Broadband Stakeholder Group's recent Demand for Superfast Broadband report (about which more here). This suggests that the UK, in the light of the rollout and takeup of superfast broadband, may now be in a position to lead on the development of the next generation of Internet services and applications, just as the USA led the development of current generation broadband services. However, the Policy Exchange report suggests that significant policy changes will be required if this is ever to happen, to create the right kind of environment for this kind of growth.

A similar point was made by Peter Cochrane in his presentation to the NextGen12 conference in London earlier this month: doing what we've always done but more efficiently is no longer sufficient to sustain growth. We need to radically change the way we do things, and the Policy Exchange report suggests ways Government policy needs to change to support digital entrepreneurship. Similarly, Nesta's recent Plan I report describes the importance of innovation in driving growth, suggesting that the Government is not yet doing enough to create the right climate for investment in innovation. According to Nesta's report, broadband is recognised as the most important infrastructure investment for the UK's long term growth by 54 per cent of businesses.

This recent speech to the Broadband World Forum in Amsterdam by Neelie Kroes, Vice-President of the European Commission responsible for the Digital Agenda, further underlines the economic and social importance of broadband. While some of the foundations to assist the UK's economic recovery and growth are in place, it would seem there is still more to do if this is to become a reality?

No comments:

Post a Comment