Thursday, April 26, 2007
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.