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Gigabit Broadband Could Boost UK Economy by £13bn Come 2025

Tuesday, February 25th, 2020 (12:01 am) - Score 1,653

New research from the Internet Association, which was prepared by Public First, has claimed that the UK Government’s ambition to achieve universal coverage of “gigabit-capable broadband” (1Gbps+) ISP networks by 2025 could produce an economic boost equivalent to £217 per person per year or 0.7% of GDP (£13bn total).

Just to recap. On top of existing investment programmes, the current Government has recently committed to ensure that the whole of the UK can access 1000Mbps+ capable broadband services by 2025, which includes an extra investment of £5bn in order to help cover those in the hardest to reach (final 20%) of mostly rural areas (here).

According to the Internet Association, which is a trade group that counts lots of major brands like Amazon, airbnb, Facebook, Google, PayPal and reddit (plus many more) amongst its membership, there are two primary drivers for an economic and productivity boost to occur.

The Key Drivers

● Saving time. Reducing the time it takes for consumers and workers to get tasks done or download and watch content. In practice, however, broadband speeds are already fast enough that gigabit is unlikely to be a significant change for normal web browsing or email.

● Enabling innovation. Making possible entirely new types of business models or products. For example, many people believe that the rollout of faster internet will enable new types of media, Internet of Things (IoT), augmented reality (AR) and virtual reality (VR) applications.

The report then adopts models from several other research papers (examples here and here) in order to conclude three “plausible scenarios” for the impact of universal gigabit broadband in the UK.

The UK Economic Scenarios:

● An optimistic scenario in which UK GDP increases in line with the cross-country findings of Bohlin and Rohman (2012) According to Ofcom , average home broadband speeds in the UK were 54.2 Mbps in the UK, suggesting that achieving universal gigabit broadband (1,000 Mbps) would represent just over four doublings – or a total growth impact of 1.2 percent of GDP by 2025.

● A central scenario in which we cap the growth benefits of universal gigabit broadband at 280Mbps to take account of potential diminishing returns. This suggests a total growth impact of universal broadband of 0.7 percent of GDP by 2025.

● A pessimistic scenario in which we cap the growth benefits of universal gigabit broadband at 85Mbps to take account of potential diminishing returns. This suggests a total growth impact of universal broadband of 0.2 percent of GDP by 2025.

You can read the full briefing paper here, but it’s incredibly short and doesn’t add much. Likewise it largely assumes that the Government will achieve their stated target, which is currently by no means certain.

Daniel Dyball, IA’s UK Executive Director, said:

“Our new research shows how the internet can be at the forefront of driving growth in the 2020s. Ensuring access to high speed broadband will allow the UK economy and wider society to reap the benefits of the internet. IA member companies fully support the UK government’s objective to deliver this roll out and help make the UK a digital powerhouse.

It is vital that we nurture the ‘virtuous circle of innovation’ in which new internet applications and services increase the demand for advanced broadband. That increased demand drives network improvements, which in turn leads to further innovative network uses. IA member companies are keen to play their part through providing attractive products and services that can be widely accessed – further stimulating demand for high-speed broadband.”

Sadly trying to accurately gauge the economic impact of deploying faster broadband is notoriously difficult, not least since most businesses and homes won’t be starting from a point of zero connectivity (today around 96% of the UK already has access to a “superfast broadband” speed of 24Mbps+, if they order it). The biggest immediate benefit is usually felt in rural areas, which tend to wait the longest for an upgrade but these have less impact overall.

Likewise we’re all very different in our consumption requirements and not all businesses benefit from having access to significantly faster broadband speeds than are currently available. As the report above hints, the difference between, for example, 10Mbps and 1000Mbps is also largely irrelevant when talking about basic tasks like online shopping and banking etc.

On top of that we have to consider the impact of other things too, such as take-up (i.e. it can takes years for this to grow once a new service becomes available and not everybody will take the top 1Gbps+ packages) and slow WiFi (i.e. you might have 1Gbps but if, in the rooms where you use your WiFi, you only get 50-100Mbps due to a poor signal then some benefits may be negated) etc.

In short, any study that claims to show a huge economic boost should be taken with a pinch of salt as they’re often overly optimistic. On the other hand few could disagree that there does tend to be a strong positive relationship between broadband investment and growth, even if there is an issue of diminishing returns. But over the longer term such investments do seem likely to pay for themselves.

Meanwhile successes like Twitch, as well as new cloud-based video gaming services, show that as broadband improves then so too does innovation and the new economic benefits that can create. Future benefits can be hard to predict but standing still is certainly not an option, particularly when every other competitive country nearby is also busy upgrading (most in the EU are already well ahead of us for ultrafast broadband and full fibre).

Leave a Comment
10 Responses
  1. Avatar The Facts

    ‘Increasing the average speed of broadband in the UK to gigabit’ What does that make the min and max to get a 1G average?

    1G may be available but not everyone will buy it, or use it.

    60% can have >100M, what is that doing for the GDP now?

  2. Avatar Gary

    Do you really need a math lesson ?

    • Avatar TheFacts

      Please explain. If they want a 1G average there will have to be a lot of connections above that.

    • Avatar Gary

      No there doesn’t have to be a lot above 1G, that depends entirely on the number below 1G or if as they say universal then none above or below.

      But you didn’t really need me to explain that did you.

    • Avatar TheFacts

      And is it available or connected? People buy the cheapest for what they want. So without a compelling reason beyond UHD streaming many will stick whatever is best for them like 100M.

    • Avatar JmJohnson

      TheFacts… Surely you’ve witnessed the evolution of services provided by the internet over the past few decades.
      Using a technology as an exception for peoples bandwidth/speed requirements isn’t wise as new services and higher requirements are being announced frequently.
      Stadia, families streaming to multiple rooms, MS/Sony game streaming… the list goes on.
      Your argument is much akin to “people will never need more than 640K RAM”.

    • Avatar Gary

      JmJ I dont think Thefacts actually suggested not installing 1G capable services, But that peoples uptake of higher speed products is very much Need vs Budget.

  3. Avatar Occasionally Factual

    “According to the Internet Association, which is a trade group that counts lots of major brands like Amazon, airbnb, Facebook, Google, PayPal and reddit (plus many more)”

    And how many of these companies pay any tax on the real profits they make? Not the published accounts showing profit but the real money that it hidden away in tax havens around the world.

    Start paying taxes commensurate to your turn over and the UK might be able to fund a public program. Which would help you make even more money.

    • Avatar Gary

      The response to your comments from these companies usually follows the same theme.

      We pay all taxes due as calculated and required by HMRC”

      Maybe you should offer a bit more of your salary too, you know out of generosity, cos you can.

    • Avatar Occasionally Factual

      Amazingly Starbucks when questioned on revenues/taxes started to pay tax after many years of always claiming a loss in the UK.

      This came about after the CEO told Wall Street analysts that the UK was their most profitable country when at the same time telling the HMRC that it made a loss.

      Like a lot of the companies in that trade organisation.

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