Broadband: Hardwiring economic growth

Earlier this week, we heard that quadrupling broadband Internet speeds can contribute as much as 0.6 percent to a country's economic growth. On the face of it, the number by itself may seem miniscule but it is impossible to gauge its true impact without a closer look at the data.
Consider this: A 0.6 percent increase in the Gulf Cooperation Council's (GCC) gross domestic product (GDP) adds up to just over $ 8 billion, which is more than the national GDPs of some of the world's smallest economies. A similar increase in the Kingdom's GDP, would add more than $ 3 billion to the country's economy.
But how, you may ask, does increasing a country's broadband speed have anything to do with economic growth? Let us first take a step back and examine the science behind the research.
The study, conducted by Chalmers University, Arthur D. Little and Ericsson, looked at a variety of factors before arriving at this conclusion. The researchers examined broadband speed trends and the corresponding economic growth rates across the 34 Organization for Economic Cooperation and Development (OECD) member countries, along with other variables such as growth in populations, labor forces and telecom revenues. Recognizing a clear pattern, the researchers found that doubling a country's broadband speed would lead to a 0.3 percent increase in GDP, quadrupling it would add 0.6 percent to its economy and so on.
The study also noted that the boost to economies would not only come from direct investment - though the improvement of wireless access infrastructure, creation of jobs in the communications sector and revenues to telecommunications companies - but also indirectly, through the growth of commerce. In fact, it is the internet's ability to be a catalyst for development that led to it being labeled - along with electricity, automobiles, computers, automation and mechanization - as a General Purpose Technology (GPT), a term reserved for technologies that can affect an entire economy.
For those of us in the telecommunications industry, the findings did not come as a surprise. The role of communications, from the telegraph to broadband Internet, as a catalyst in the evolution of society and business is well documented. By facilitating the basic human need to communicate, telecommunications plays a critical role in virtually every aspect of our lives as we move towards becoming a Networked Society, where everything that can be connected will be connected.
Communications has, traditionally, also been an important enabler of business. From the days of messengers and the post to the fax machine and now, email and unified communications, entrepreneurs and companies continue to rely on communications to interact with their stakeholders and to transact business. Simply stated, taking away communications infrastructure, would severely handicap businesses, at the very least. Conversely, improving that infrastructure would speed up the communications process, allowing businesses greater flexibility to widen the scope of their work in a manner that is not only efficient and cost-effective, but also beneficial to the economy.
Working on this premise, we can safely conclude that increasing the speed of broadband Internet - possibly the single most important communications platform in the world today - will have a tangible impact on businesses, which in turn are drivers of economic growth.
An excellent example that illustrates this point is the phenomenal growth of group buying websites in the region. These Internet-based businesses spawned a multi-million dollar industry made possible entirely by region-wide penetration of high speed Internet access. Thanks to broadband Internet, a shopper can make a purchase in under a minute, something that would have taken significantly longer in a pre-internet world.
Moving beyond the transactional element, however, these websites also contribute to economic growth by employing staff, renting offices, consuming utilities and support services and, of course, providing other businesses with an effective sales channel. The true catalytic effect of these Internet-based businesses is hard to calculate but it is clear that their far-reaching impact on the general economy, a type of economic ripple-effect, would simply not be possible without the existence of broadband internet.
Similarly, a majority of the cost-saving technologies being employed by businesses, such as cloud computing and unified communications, are reliant on broadband Internet to function. These technologies help companies reduce their costs and boost profits and investments, which, in turn, contribute towards economic growth.
These are but two examples of how increasing the speed of broadband Internet access can have an impact on national economies. This alone is reason enough for the telecommunications industry to keep striving to provide faster, more efficient broadband access particularly in these times of economic uncertainty. After all, every little helps.

— Anders Lindblad is the president of Ericsson in the Middle East region.