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NEWS FEATURE: The Digital Economy Strategy - a roadmap to where?

NEWS FEATURE: The Digital Economy Strategy - a roadmap to where?

’It is more important to convince people of the need for an NBN as a starting point’

This article first appeared in the June 29th print edition of ARN

The Digital Economy Strategy, recently announced at ceBIT Australia 2011, has been warmly received by the industry. But analysts are less certain of the strategy.

When Communications Minister, Senator Stephen Conroy, lifted the curtains on the elusive Digital Economy Strategy at CeBit 2011 in late May, the response was overwhelmingly positive.

The strategy contains eight ambitious goals for Australia to achieve with the help of high-speed broadband by 2020. These include pushing Australia into the top five OECD countries with households connected to broadband, doubling the level of workers that telecommunicate and closing the gap between businesses in capital cities and those in regional areas.

These goals, according to the Communications Minister, will foster a vibrant digital economy which will in turn improve the broader “economy, education, health, social and environmental outcomes for all Australians”.

Ancillary investments in the hundreds of millions of dollars were promised by the Federal Government as part of a package to bolster the success of the strategy.

Of course, at the heart of the strategy is ‘the’ high-speed broadband network.

The $36 billion National Broadband Network (NBN), a project that strives to deliver fast broadband to every Australian household, has been spruiked as a remedy for a mixed bag of issues, but above all, it will boost Australia’s productivity, global competitiveness and social well-being by fostering the Digital Economy.

Lauded and reviled in equal measures, the NBN has become a polarising topic in the telco industry as well as in the political landscape.

The Digital Economy Strategy was meant to be the NBN’s knight in shining armour that will hush the nay-sayers and prove the $36 billion network will be a crucial conduit to grow Australia’s economy.

It is clear providing a broadband service to everybody regardless of location is important. What is not so clear is whether or not the Digital Economy Strategy is an adequate roadmap that will guide Australia towards a digital future.

Senator Conroy has talked up the importance of the Strategy, but how exactly will it help drive us to a digital economy?

Navigating without a map

The Digital Economy Strategy, along with the additional investments, is focused on education and increased public involvement on a high-speed broadband network. According to Senator Conroy, “the vision of the strategy would contribute to Australia’s productivity, maintain our global competitiveness and bring about tangible social wellbeing improvements no matter where people live in Australia.

But according to Intelligent Business Research Services (IBRS) broadband analyst, Guy Cranswick, calling the document a ‘strategy’ is a misnomer as it contains very little content to qualify as a strategy.

Cranswick has been watching the progress of the NBN closely and has conducted research in the different types of applications slated for the high-speed network. He also has expertise in areas of business productivity.

The Government has laid out where it wants to be by 2020 in relation to broadband connectivity but fails to explain adequately why it wants to do so, he claimed.

“For example, it sets out to be a top five OECD country with households connected to broadband by 2020, but why? What is the point?” Cranswick said. “This is not the AFL. What is the purpose? What have the top five countries in terms of broadband connectivity achieved in the last decade?”

While Cranswick doesn’t dispute the need investment in core infrastructure, he saw the Digital Economy strategy bringing little to the NBN debate and compared the Government’s approach on the Digital Economy to a general leading an army to battle without a detailed plan to take down the enemy.

Bullseye CEO, Jim McKerlie, agreed the Digital Economy Strategy does not detail how Australia will go about transitioning to a Digital Economy but was encouraged the Government has set a number of objectives. Attention to digitalising health, education and Government services was long overdue, he said.

McKerlie has been in the business consulting sector for 20 years with a focus on technology development. His telco pedigree includes managing the competitive process for the awarding of mobile telecommunications licenses.

“The strategy is a vision about where we want to be but I guess it is reasonably silent on the strategy side of things,” McKerlie said. “The first precursor is we need to have a broadband solution and whether it’s the NBN or some derivation of that, we would not achieve the vision of a digital economy unless we have a broadband solution in place.”

He highlighted while the roadmap of how the country will move into and work in a digital economy is lacking, it is more important to convince people of the need for an NBN as a starting point. In other words, the Government needs to sell the need for infrastructure first.

“If it started here with the strategies we are going to employ to increase adoption of services and migration from an analogue to a digital world I can imagine there is going to be a whole raft of arguments around them,” McKerlie said. “That will take the debate away from the first hurdle the Government has to get across which is getting the NBN in place in the very first instance.”

The productivity dilemma

Claims by the Government and indeed the strategy that a Digital Economy facilitated by the NBN would ramp up productivity has been put under the microscope as well.

The word productivity is referenced a number of times in the strategy but was not defined at all in the document, IBRS’ Cranswick said.

Appraising future productivity gains through the NBN issue that has haunted the Government for some time and the Opposition has demand on numerous occasions for Senator Conroy to place the NBN under the scrutiny of a cost-benefit analysis by the Productivity Commission.

Senator Conroy dismissed a cost-benefit analysis as a waste of time and money. Positive cost-benefit analysis on overseas broadband network and the release of the NBN Co business case provided enough firepower to keep the NBN ball rolling, he said.

But the definition of ‘productivity’ remains vague in the NBN lexicon.

“Productivity in the Digital Economy strategy is mentioned 31 times but the definition of the word is never even stated or defined,” Cranswick said. “The Government can say there is no need to because we all understand it but I actually don’t think it is widely understood.

“For example, in the IT industry, productivity is generally another way of saying work, while for economists the word means something entirely different.”

To put it simply in an economic sense, productivity is defined by a higher ratio of output relative to the input. Without a workable definition, Cranswick can’t fathom how the Government would be able to work out a path to increasing productivity through high-speed broadband let alone put it on paper.

Indeed, productivity is something that is hard to measure, especially when it comes to the NBN.

“How do you measure e-health benefits for, say, diabetics that can have their blood sugar levels monitored in their own homes or for ambulances to get to people quicker by getting real-time information through broadband? People can potentially live and work longer through this,” Bullseye’s McKerlie said. It is the social benefits that will feed into economic productivity gains, he said.

Is the NBN essential and who is going to use it?

Among some of the more pressing issues IBRS’ Cranswick had with the Digital Economy Strategy were claims which he considered to be misleading.

While the strategy eagerly points to projects by NICTA, CSIRO and IBES which concerns developing applications that operate on the NBN, Cranswick said this is a misrepresentation on the Government’s part since the referenced projects do not actually require the $36 billion NBN; they can operate on any high-speed network.

Then there is the whole idea of increasing productivity through a Digital Economy which is predicated on the idea that everybody will be connected through the NBN.

With disputes from ISPs such as Internode on wholesale services prices on the NBN, Cranswick was concerned about the repercussions to retail cost for consumers which may impact take-up NBN take-up rates.

“If a number of subscribers only take minimum access, that is if they don’t go with a 100Mbps package – which is where the economic marginal benefits could accrue over time – then you’re left with a bit of a lame duck,” he said. “That’s getting more into a slightly complicated financial economic analysis but it should be a part of the strategy.”

This would affect the projected productivity gains suggested by the Digital Economy Strategy.

The strategy does, however, help drum up more publicity for the NBN and the Digital Economy. More exposure and awareness for the NBN is desperately needed since it can actually drive NBN services take-up, according to Bullseye’s McKerlie.

“We need a national change management program that educates people on what’s available or will be available so there will actually be take-up and adoption,” he said. “Otherwise there is going to be all these great applications for the NBN out there but nobody will know about them or nobody will be inclined to use them.”

The final word

In essence, IBRS’ Cranswick saw the Digital Economy Strategy as little more than a marketing brochure.

“What we don’t have is a decent strategy; we don’t know what we are getting out of the Digital Economy and the NBN in terms of return on investment.”

Bullseye’s McKerlie was less brutal in his assessment of the strategy, denouncing claims of the document as merely marketing paraphernalia as “cynical commentary”.

“The content of goods and services provided is going from heavily reliant on labour material to being dependent on labour materials and information,” he said.

“Everything you get has some information content to it and there will be a greater demand for a way to efficiently distribute that over; this is what the strategy is about.”


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Tags Intelligent Business Research Services (IBRS)CSIROnictaNational Broadband Network (NBN)Senator Stephen ConroyDigital Economy Strategy (DES)Telecommunicationsbroadband

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