A new report, conducted jointly by Ericsson, Arthur D. Little and Chalmers University of Technology quantifies the isolated impact of broadband speed, showing that doubling the broadband speed for an economy increases Gross Domestic Product (GDP) by 0.3%.
Significantly, a 0.3 percent GDP growth in the United Arab Emirates (UAE) is equivalent to approximately USD 690 million. The study also shows that additional doublings of speed can yield growth in excess of 0.3 percent (e.g. quadrupling of speed equals 0.6 percent GDP growth stimulus).
“This study reflects the tremendous amount of influence that connectivity has on the socio-economic aspects of society not just here in the UAE, but around the world,” said Anders Lindblad, president, Ericsson Region Middle East and North Africa. “The numbers are clear evidence that we are evolving from an information society to, what we at Ericsson call, a Networked Society. We have reached a stage where broadband has developed and is no longer simply a tool for communication but an enabler for new possibilities for people, business and society.”
Both broadband availability and speed are strong drivers in an economy. Last year Ericsson and Arthur D. Little concluded that for every 10 percentage point increase in broadband penetration GDP increases by 1 percent.
This growth stems from a combination of direct, indirect and induced effects. Direct and indirect effects provide a short to medium term stimulus to the economy. The induced effect, which includes the creation of new services and businesses, is the most sustainable dimension and could represent as much as one third of the mentioned GDP growth.
“Broadband has the power to spur economic growth by creating efficiency for society, businesses and consumers,” says Johan Wibergh, Head of Business Unit Networks, Ericsson. “It opens up possibilities for more advanced online services, smarter utility services, telecommuting and telepresence. In health care, for instance, we expect that mobile applications will be used by 500 million people."
Wibergh added: “We expect a huge increase from the current estimate of around 1 billion people with broadband access to about 5 billion in 2016, most of whom will have mobile broadband. Connectivity and broadband are just a starting point for new ways of innovating, collaborating and socializing.”
Erik Almqvist, Director at Arthur D. Little, says: “Until now there has been an absence of hard facts investigating the effects of broadband speed on the economy. This unique empirical study may help governments and other decisions makers in society make more correct tradeoffs and policy choices.”
“These results have been derived using rigorous scientific methods where the direction of causality, data quality and significance levels have been appropriately tested," says Erik Bohlin, Professor at Chalmers University of Technology. “The results of this study support governmental policies that recognize and promote the importance of broadband."
This study is the first of its kind in that it quantifies the economic impact of increases in broadband speed in a comprehensive scientific method using publicly available data.