Broadband issues have figured in our news a lot this year.  Much of that was centred on government reviews including those of the “Digital Dividend”, the Telecommunications Service Obligation (TSO), and the Telecommunications Act.

One of the things common to each of these reviews, is that our government’s proposed broadband outcomes do not favour rural people and businesses.

The multi million dollar Digital Dividend to be reaped by the government will be paid by the large telcos of Telecom, Vodafone and 2Degrees.  This means increased revenue flows to achieve their desired return on investment. The consequence is ever higher broadband costs for those rural people who rely on mobile technologies for fixed broadband services.

The TSO looks likely to be scraped. This will save an impost on the telcos but at the price of the availability and affordability of telecommunication services to rural New Zealanders.

Amy Adams’ review of the Telecommunications Act requires copper-based broadband users to pay a higher price than that justified by international cost-based comparisons.  Chorus will be the beneficiary of the enhanced income stream.

If this assessment of the government’s policy direction is proved wrong, I will be pleased.  If not, rural households and small businesses will be at an economic disadvantage compared to their urban cousins.

The economic impact of broadband policies on households was brought home to me last week in a just-published study of the relationship between household incomes and broadband speed.

Swedish_inventor_Lars_Magnus_EricssonThe study, done by Swedish telecommunications equipment supplier Ericsson, is the first to quantify the impact of broadband speed on household incomes.

They found that the average increase in household incomes for a broadband speed upgrade from 4 to 8 Mbps was US$120 per month in OECD countries. For BIC [Brazil, India and China] households, incomes went up by US$46 per month when broadband was upgraded from 0.5 to 4 Mbps.

The study supports the idea that the gains from increasing broadband speeds, increase where more advanced services are available via the broadband access.

It seems reasonable to consider this idea against our government’s urban Ultra Fast and Rural Broadband policies.

Urban households will see broadband speeds increasing above the present average of 11 Mbps as the UFB network is rolled out.

Rural households dependent on the 3G wireless network, will see average speeds of under 5 Mbps decreasing as mobile broadband use flourishes.

These speed comparisons are consistent with the OPEC and BIC data.  Is the conclusion concerning household incomes also comparable?

Why does increasing broadband speeds lead to increasing household incomes?  There are several reasons.

First, high speed broadband gives access to more advanced services.  Through services like videoconferencing, more effective and productive ways of working increases personal productivity.

Second is that future services will be defined by the speeds available to the majority.

Third, repeated studies show that broadband enables people to become more informed, better educated, and socially enriched, leading to a faster and higher-paying career path.

As broadband technologies innovate and mature, participants with lower speed broadband will find it harder to stay competitive in the labor market – reducing their chances of finding a job and building capital.

The Ericsson study demonstrates that the more advanced an economy, the greater the benefits that flow from high speed broadband.

Yet in New Zealand, government broadband policies, reviews and actions are all pointing in a direction that disadvantages rural households and businesses.