When communications ministerStephen Carter published hisDigital Britain interim report in late
January, the UK joined a process that has been going on in Europe
for at least five years, and one of which most Britons are
unaware.
On the day that Carter launched Digital Britain, the European
Commission announced it would make available €1bn to help member
states support the extension of broadband networks into rural
areas.
The EC is putting up the money because it expects a huge return
on its investment. Noting that 93% of Europeans already enjoy a
high-speed online connection, the EU believes making broadband
universally accessible will create one million jobs and boost the
EU's economy by €850bn between 2006 and 2015.
Broadband
study
Evidence for this comes from the Micus study, entitled "The
impact of broadband on growth and productivity", published late
last year.
The study used three main indicators for its conclusions: the
development of the broadband infrastructure the readiness of the
population to use broadband-based technologies, IT skills and
affinity to new technologies and awareness of the benefits of
broadbandintegration of broadband-based services into companies'
processes.
Unlike Digital Britain, Micus cast its net wider. It said the
following telecommunications technologies are "broadband": ADSL,
VDSL, cable modem, fibre optics, wireless, satellite internet,
mobile broadband (UMTS, HSPA) and internet through the electric
power transmission network (powerlines).
Based on a review of the development plans of the main national
telecommunications services providers, Micus said broadband
penetration would reach 81% of European households by 2015. This
includes households that use broadband over mobile links and do not
subscribe to a fixed-wire service.
Making
progress
Micus made two in-depth studies to give its analysis some basis
in fact. One was the Actnow regional broadband project in Cornwall,
the other was the Wi-Pie project in Piedmont, Italy. Both focus on
the adoption of value-added broadband services by companies and
public services.
Four years after Actnow kicked off, Micus could tell that
Cornwall was outperforming the rest of Britain by 10% in economic
growth and 7% in productivity per year. Two years after Piedmont
started, the regional IT observatory recorded progress of 9% per
year on average in regional broadband-related economic
indicators.
To understand better how broadband affects company activity,
Micus modelled broadband-related productivity improvement,
structural displacements within the economy and innovation-driven
growth.
It found broadband-based processes improve employees' labour
productivity on average by 5% in the manufacturing sector and by
10% in the services sector. But due to the slow take-up, especially
among small and medium firms (SMEs), the economic impact of
broadband was restricted to average annual GDP growth of 0.29%
between 2004 and 2006.
Impact on
employment
Micus found that broadband speeded up information flow between
companies. This led to a demand for knowledge workers, who had to
come largely from other activities.
All told, Micus said broadband will destroy 725,000 jobs per
year in Europe in traditional economic sectors, but it would create
989,000 new ones in business services such as IT, engineering,
accounting, legal and financial services or research.
This net gain of 105,000 jobs would yield a productivity
improvement of 0.15% per year at the European level and foster
innovation, it said.
Taken together, the process improvement, increased
specialisation in knowledge-intensive activities and
broadband-based development of innovative markets resulted in a
growth of the European gross value added (GVA) of €82.4bn per year
(+0.71%) from 2006 to 2015, Micus said.
In modelling the effect of broadband, Micus found the speed of
broadband roll-out affected its economic impact.
"The successful development of innovative activities, which
constitutes a large share of the positive impact of broadband,
requires remaining at the forefront of worldwide development," it
said.
Opening up
access
UK optical fibre plans announced so far will provide high-speed
service to less than half the population by 2015. This is far from
the targets other developed countries are setting.
Fibre accounts for 45% of all broadband subscriptions in South
Korea and 39% in Japan. The EU and the US have 1.4% and 1.5%
respectively.
In terms of access to fibre, penetration rates averaged 21.7% in
EU27 in July 2008. Europe is led by Denmark, the Netherlands,
Sweden and Finland, which topped the Organisation for Economic
Co-operation and Development (OECD) with penetration rates above
30%. The penetration rate in the US is 25%.
Figures released at the
Fibre to the Home conference in Copenhagen showed Britain was
not in the top 100 countries.
Countries that are now rolling out national 100mbps services are
planning to upgrade them to 1,000mbps within a decade. Carter's
starting point? An "up to 2mbps" service.
Carter is expected to produce his final report, which will
become government policy, in May or June. If the UK is going to be
economically competitive when the recession ends, the
communications minister may have to
raise his game100-fold.
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