Study shows broadband brings productivity gains

New Zealand businesses with broadband were 10 per cent more productive than businesses without it, a world-first study by Motu Economic and Public Policy Research has found.

Although fast internet access is widely considered to enhance productivity, Motu senior fellow Arthur Grimes said the 18-month study, using 2006 data, was the first to estimate the productivity impacts of connectivity upgrades using business-level data.

The study sampled 6051 businesses, using an economy-wide survey, the Business Operations Survey 2006, by Statistics New Zealand. Each business had at least six employees.

Of the sample, 13 per cent had a fast cable broadband connection and 72 per cent had slow broadband. Most of the rest had dial-up.

Among the most interesting findings for study co-author Dr Grimes was the "overlooked very large effect" of having broadband compared with not having it, and that businesses associated with tourism were no more likely to have broadband than others.

He suspected many of these tourist businesses were motels in rural areas.

"Even though you'd think they were exactly the type of firms that would want the internet for bookings, they just couldn't get it. So it points to an issue that has to be addressed."

Dr Grimes believed the broadband accessibility picture today was "changing", rather than much changed from 2006.

"One of the biggest surprises was the number of firms that didn't have ADSL. They were obviously rural firms. It is one of the remaining issues in New Zealand."

But the study found no significant change in productivity when a business upgraded from slow to fast broadband. "Our estimates show that all of these productivity gains can be attributed to adoption of slow relative to no broadband, with no discernable additional effect arising from a shift from slow to fast broadband," the authors said.

But the latter finding should be "interpreted with care", they said.

There were several explanations, including the representation of different internet speeds and the full future benefits of moving to fast broadband not yet being apparent in 2006.

Data from a 2008 survey would soon be available for comparable study, Dr Grimes said.

The study's authors said much had been written in mainstream media about the benefits of the internet revolution and of the even greater benefits that could be achieved by linking businesses and households to the internet through fibre optic cable.

But despite "huge" investment budgets associated with broadband, especially fibre rollouts, there had been little rigorous supporting evidence to show such connectivity resulted in material productivity benefits.

- © Fairfax NZ News