Broadband would benefit economy by $2.8 billion

True broadband rollout is worth $A4 billion (US$2.8 billion) to a city the size of Auckland, and would only cost $A850 million to implement, says the Allen Consulting Group.

Allen Group’s report, True Broadband: Exploring the economic impacts, was commissioned by Swedish telco equipment manufacturer Telefonaktiebolaget LM Ericsson. It assessed the Brisbane region, roughly equivalent to greater Auckland in terms of population and density.

According to the report, “true broadband” is capacity in excess of 10Mbps and runs symmetrically. With access to over 50 per cent of the population, both residential and business, the report suggests that by the end of a 15-year period employment would increase by 1,100 jobs and generate a return on investment of around $A850 million per annum. In total, the network would provide a $A4 billion return over the 15-year period.

Interestingly the report recommends adopting a residential-user first approach.

“The mass-market rollout of a true broadband network will be undertaken covering 50 per cent of the businesses and households in the region. This scale of rollout will provide critical mass,” says the report.

Current thinking has seen telcos attack the business market first, for its higher value customers, before extending out into the suburbs and less highly populated areas. More customers, even at a lesser margin, would provide a greater base to work from.

The network would have to be based on fibre-to-the-home (FttH) given the capacity requirements and the report says economic value would be derived in part from having first-mover advantage. That is, if Brisbane and the Gold Coast were first to build such a network they would reap more rewards than if they were to follow the lead of another region. Even then, says the report, the rewards would still considerably outweigh the investment made.

True broadband, says the report, is necessary as opposed to entry-level broadband because it is symmetrical and allows for multiple users at a time to use multiple services: for the home user this would include surfing the web, email, television, gaming and so on.

The report also offers two models for the network operator: either a closed model where the operator controls the entire relationship from network to customer or an open model which allows the network operator to on-sell capacity to other providers who would in turn provide service to end users. Both models eventually produce a similar result, however the open model gets to the most customers more quickly than the closed model.

The report assumes the fibre network would be rolled out in a four-year period with initial services being offered after six months.

Allen Group used the Monash multi-region forecasting model, which is used to assess the economic impact of infrastructure development, as the basis for its findings.