An investigation by The Canberra Times has revealed that the figure is drawn from a little known presentation by a firm of consultants which described the work as ''evangelism''.
The firm's estimate of the $30billion annual benefit was made in 2001 when Australia had next to no broadband and it appeared to confuse cost with benefit.
Labor's communications spokesman, Stephen Conroy, acknowledged last night that Labor had not checked out the original source of its claim. He said Labor had consistently quoted a range of figures that demonstrated substantial benefits to the economy from the widespread adoption of broadband.
But in launching Labor's plan to build a $4.7 billion national broadband network last month, Mr Conroy and finance spokesman Lindsay Tanner claimed it would deliver ''up to $30billion in additional national economic benefits''. One week later, Labor's treasury spokesman, Wayne Swan, defined the benefit as ''productivity gains of up to $30billion per year''.
In his first speech as Labor leader to the National Press Club this month, Opposition Leader Kevin Rudd sourced the claim to the Government saying, ''the Government's own advisers have estimated that the economic benefits from such infrastructure could be up to $30billion each and every year''.
The estimate does not come from Government advisers. Labor has sourced it from a 2003 report to the Government from its Broadband Advisory Group. The report makes no estimate of the economic benefit itself but merely reports a claim in a 2001 presentation by Accenture, formerly known as Andersen Consulting.
The Accenture claim has been widely quoted but little seen...Consultants ACIL Tasman, the Allen Group and Engineers Australia have all cited the Accenture study but cannot produce it. Neither can Accenture itself, which has searched for the presentation both in Australia and the United States. It makes the point that the presentation appears to have been screen-based and that its computer archiving system missed it. The staff that produced it moved on.
The Department of Communications cited the Accenture study in its Broadband Blueprint prepared launched last year by its Minister Helen Coonan. The department, too, had been unable to locate a copy until late last week when, after repeated requests from The Canberra Times, it found one on a disc in a box that contained the records of its 2003 Broadband Advisory Group inquiry.
The Accenture study, now seen by The Canberra Times and not seen by the Labor Party in the preparation of its broadband policy that used its figuring, fails to back that figuring up. Entitled Broadband for Australia, An Economic Stimulus Package, the Accenture study is based on an international study by the firm entitled Reinvigorating the Global Economy: The Broadband Stimulus Package.
That study, produced at a time when ''the global economy continues to flounder'' is heavy on photos and inspirational quotes and describes itself as a piece of ''evangelism''. It calls for tax credits for broadband use in order to ''lead the global economy out of recession''.
Both studies were produced at the turn of this century when broadband penetration was tiny.
The only paragraph in the international report that makes an estimate of the economic benefits of more widespread broadband states: ''Whether working from our own estimates or looking at analyses of various research groups, the impact of broadband on US GDP could represent an increase of $208billion and possibly up to $520billion.'' It says factoring up the US estimate, widespread penetration of broadband could boost the world economy by in excess of $1trillion per year.
The Australian study seems quaint from the vantage point of 2007 when about 90 per cent of the population can get access to some form of broadband and the proportion of households using it has passed 40 per cent. Produced in 2001 and arguing for tax credits to kick-start broadband. it says ''broadband can accelerate past the 10 per cent adoption rate within two years with a change in approach''.
The study proposed a tax credit worth $400 for each Australian household that spent more than $1000 a year on home broadband used for work and well as an additional payment of $400 to the employer. It cautioned against policies that would allow the price of broadband to fall, calling on the Australian Government to ''fight deflationary practices repeated price drops hurt''.
The graphs in it indicate that broadband in Australia grew far more quickly than Accenture expected, either with or without tax credits.
The study produced both a high and a low estimate for the economic benefit to Australia of widespread broadband. The high estimate of $30billion per year, the one quoted this year by the Labor Party appears to be a measure of the projected spending on broadband rather than the benefits received. It is derived by adding the projected spending on computer equipment per household per year to the projected spending on broadband subscriptions.
The low estimate of economic benefit $12billion per year is said to be based on ''Accenture propriety analysis'' but appears to be derived by assuming the economy will benefit by one-third of GDP growth.
Even if soundly based at the time, both Accenture's high and low estimates of the economic benefits of the widespread adoption of broadband are inappropriate as estimates of the benefit that would flow from Labor's proposal. They are estimates of the additional benefit that would flow to Australia from adopting broadband from a point where it had next to none. The benefits of extending Australia's present broadband penetration would be lower.
Importantly, the international Accenture study argues that what matters for economic benefit is not the speed of broadband. It wants decision-makers to look beyond the idea ''more speed, only speed''. It says what is important is the ''always on'' nature of broadband; something that Labor's broadband plan would do less to enhance.
The Labor Party is not the only organisation to have quoted Accenture's estimate of economic benefits of up to $30billion a year without examining what Accenture means. Telstra did so in its Broadband Australia Campaign launched last month. In brochures delivered to its shareholders, customers and employees, it espouses the line that would later become Labor's, saying ''an independent report to government has estimated high- speed broadband will bring economic benefits to Australia of $12billion to $30billion per year''.
Telstra was unable to confirm that it had seen the Accenture study or produce a copy.
1 comments:
With 30 years IT experience, I too have worried just what logic was driving this "speed alone" issue. It's always seemed to me that productivity improvements required penetration, not speed per se. In Korea, Japan and the other countries with faster-than-broadband penetration, most of the high bandwidth applications using that extra bandwidth are computer gaming! It takes a lot of bandwidth to convey constantly-changing scenarios for multi-player 'life-like' combat!
In Australia, I've always thought that access and price for 'reasonable throughput' was more important, so every farmer could know the weather in detail (eg current satellite maps), current futures markets and participate in national on-line livestock auctions as they happen. Similarly, every knowledge worker should have sufficient bandwidth to do their job from home (at least some days of the week) without physically commuting, with sufficiently fast access to files and applications, so that it did not significantly slow down the work rate to be performing their work at a distance from the files. And finally, every student, at whatever level, should be able to research whatever information they were after. But all of the above (other than video conferencing) can be done with just 64kbps in an 'always on' mode.
The remote area satellite broadband subsidy has been important, and treasury has been looking to cut it back, whereas the more remote places are where we should ensure access (for reasons of bushfire tracking, emergency services, evacuation advices, low cost VOIP telephony etc). The better the internet links, the more likely we are to have people happily live in our less-densely-populated areas. Given we already have too much aggregation into a few large cities, this should be encouraged, and is a pre-requisite for populating the Ord River Scheme, given rainfall is increasing in the North at the same time as it is decreasing in traditional farming areas in the South.
But as for telecommunications policy, this government has really stuffed up. I wrote a strong letter to then-Minister Alston when he was about to approve Optus' second cable roll-out to unspecified areas of Australia. I said Australia had a good policy of working out how people could share underpinning infrastructure, while competing at higher levels. We don't require a new freight company to build a new copy of the Hume Highway, so why not give out just regions of Australia to cable companies, on the basis that the cable company commits to cabling all houses that want it, within population centres down to (say) 5,000 people in that region, so at least when a franchise is given away, one knows it will be used, rather than sat upon. It is a bit like the requirement for people to fence the property they were given under Soldier Settlement and other land give-away schemes in our history!
Anyway, now we HAVE to separate the national fibre owner from the telco retailers, and Telstra needs to be split into Telstra Cable (say FibreTel) and Telstra Retail (say plain 'Telstra' after a while). Each shareholder would get one share in each, and it would work in just the same way as the USA split Ma Bell into AT&T Long Lines and AT&T Retail. Then, with that plan on the table, let's see if Telstra really will agree to a fair price, based on an independent pricing tribunal, with the calc to be on JUST THOSE ASSETS associated with the fibre backbone, and not some allocation of all of their Head Office and general expenses. THAT WAY we might get some sense.
Otherwise, the backbone company should be able to be subscribed to by each telco, in proportion to their existing marketshare, provided they elect to put up their share of the equity capital (allowing that entity to borrow a prudent amount).
Graeme (email: prof at-symbol post.harvard.edu)
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