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Australia 'should not be scared' of NBN cost

Broadband to account for AUD$1trillion of activity by 2050

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Australia should not be afraid of the NBN's price tag, but should be scared enough to build the network, according to Phil Ruthven, founder and chairman of research company IBISWworld.

Speaking at the launch of a study commissioned by IBM, A Snaphsot of Australia's Digital Future to 2050, Ruthven predicted the nation's gross domestic product will surge thanks to ubiquitous connectivity. He even labelled data networks a “new utility” and predicted they will generate AUD$1trillion of annual revenue by 2050, rather more than the $131bn data networks generate today.

“Other nations are already into gigabit speed broadband and we are not there yet,” Ruthven told the launch. “High speed broadband is not a delete option for Australia.”

Ruthven's remarks were preceded by Andrew Stevens, IBM's managing director for Australia and New Zealand, who said the company's leadership is “a little frustrated by ... debate and discussion and the lack of vision” and therefore decided to prove, or disprove, broadband's economic potential.

“The report proves our confidence,” Stevens said. “The findings are astonishing: the big surprise is how significant and deep the broadband impact will be.” Stevens then said he hopes the report encourages the community to look beyond the electoral cycle and consider the transformative power of broadband and its potential to “in a very positive sense transform living standards positively in Australia.”

“We we want to say there is a gap in terms of vision,” he said, adding that the NBN “fits very well with our view of the economy.”

Ruthven then said that debate over the cost of the NBN is unproductive, as “you can use numbers to scare the dog off a chain.”

Ruthven's own numbers suggest that the sunk cost of Australia's telecoms infrastructure are AUD$70billion, and that the annual depreciation rate of that kit almost exactly matches the yearly spend envisaged by NBNco's current rollout plan. The NBN is therefore sustaining the level of investment in Australia's comms infrastructure, although Ruthven said “nobody knows if the NBN formula is the best.”

But Ruthven did say that, from his perspective, the cost of the NBN “is not a lot of money and we should not be scared of it,” he said, adding that his own business cannot launch new products for lack of NBN-grade connectivity.

While he thinks fear of the NBN's cost is not valid, Ruthven does feel fear is a necessary motivator to increase Australia's competitiveness.

“You've got to scare people into doing things,” he said, and offers the following as things worth fearing:

  • Australian university degrees being three times the price of Asian degrees, which means the nation could lose its education export industries and become a net importer of education;
  • Mining is among Australia's least productive industries – costs are up but volumes have been static - and is ripe for technological transformation;
  • Mining will revert to around three or four per cent of the economy by 2020, at which point Australia will be more reliant on services industries;
  • Australia's growth may be better than Europe's, but Asia's growth rate is seven percent, ahead of even Australia's 4.3 per cent.

Australia therefore needs to “catch up”, Ruthven said, and ubiquitous fast data networks are an essential tool to make the chase possible. Strong leadership will also help, Ruthven said, and that sentiment was endorsed by Stevens and Ovum's Australian head David Kennedy, who also attended the launch. ®

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