Aussie broadband to make a trillion in 2050

By 2050, ubiquitous high-speed broadband will generate around $1 trillion in revenue and reverse Australia's productivity decline, according to a new report commissioned by IBM Australia.

IBM managing director in Australia and New Zealand, Andrew Stevens .
(Credit: Luke Hopewell/ZDNet Australia )

Speakers at the launch of A Snapshot of Australia's Digital Future to 2050, in Sydney yesterday, blamed any reluctance to embrace high-speed broadband, as embodied in the National Broadband Network (NBN), on fear, a lack of perspective and a lack of leadership.

"We were, quite frankly, a little frustrated by [the NBN debate] and by the lack of vision," said Andrew Stevens, IBM's managing director in Australia and New Zealand.

"Being amongst those people who were over the horizon, in terms of confidence in the economic impact of this, we thought we should actually do some quantitative and qualitative research to prove our confidence — or, to disprove it."

The report, produced for IBM by international strategic forecasting firm IBISWorld, positions high-speed broadband as "the new utility", comparing it to the utilities that underpinned previous transformations in society — such as the water- and steam-driven mechanical power utilities of early industrialisation, and the electricity grids and telephony systems of later industrialisation.

"In the Infotronics Age, information communications technology (ICT) — in the form of computers, telecommunications, broadcasting equipment and software — led the new utility sector from the mid-1960s to the mid-2000s," the report said.

"The second stage turbo-boost has now arrived, in the form of digitisation (displacing analog), broadband (cable, fibre and wireless) and advanced software (learning systems, search engine capabilities and more to come). It will prove a productivity fillip to industry, as did electricity and telephony in the second half of the industrial age. It will facilitate the creation of new products and new industries, and, as always, it will benefit individuals and households, as well as industries."

IBISWorld estimated the expected revenue of this new age utility in 2012 as $131 billion (3.3 per cent of Australia's total revenue, of just on $4 trillion).

"By 2050, this could be expected to rise to $1 trillion (in constant 2012 price terms)," the report said.

The report's author, IBISWorld founder and chairman Phil Ruthven, said that, given these figures, we shouldn't be scared by the NBN's construction costs, which he puts at $37 billion.

"If you look at the sunk cost of all telecommunications today — that's Telstra and Optus, and everybody else — it's $70 billion. Now, the NBN's meant to be spent over seven years. Divide [the NBN costs] by seven, you've got roughly $5 billion a year being spent," Ruthven said.

"I regard that as a depreciation allowance only. We should not be scared by $37 billion ... Is some of that going to be waste? Probably. But so is every project, anyway ... I'm not here in a sense to be overly defensive about NBN, except to say that perspective says it's not a lot of money and we shouldn't be blown away by that."

The other main benefit of the NBN, said Ruthven, is that it gives us the chance of getting to gigabit-per-second speeds and higher, "and that's not easy to do with wireless, yet".

"I think whether the NBN makes a very high return on shareholder funds really doesn't matter all that much. Because in the final equation, it is a government utility at this stage, and it's the benefits that flow from it, rather than the exact return on the NBN, that I think we should be looking at," Ruthven said.

According to David Kennedy, from analyst firm Ovum, political attitudes to high-speed broadband have changed dramatically in the last five years.

"Five years ago, there was no plan for a broadband utility in this country," Kennedy said — a situation Ruthven described as "very scary".

"Now, both sides of politics are committed to a national wholesale-only broadband utility. The only disagreement is a squabble over the technology mix," Kennedy said.

For IBM's Stevens, the big surprise from the report was not only the breadth of impact from the new utility, but its depth and significance.

"At a time when people seem to be focusing only on the time between now and the next election, I think our contribution here is — I hope it's this — that we see a roadmap out some forty years from now," Stevens said.

"You do need someone to lead us, and I think at the moment we've got too much management and not enough leadership there. I think our ability to encourage society to embrace the future is not there to the extent that it should be. It's almost as if we've been made fearful."