‘True’ Broadband Can Grow GDP: Gartner

“True” broadband infrastructure would help advanced countries such as the
United States add as much as $500 billion to their Gross Domestic Product,
according to Gartner Dataquest .

The tech research firm reckons the impact of ubiquitous broadband in the
U.S. could total as much as $500 billion worth of goods and services
produced over a span of ten years. But it also said the estimate is based on
what it calls “true” broadband, defined as 10 megabytes per-second data
transmission speeds.

Using the International Telecommunications Union’s (ITU) historical tracking
of the relationship between GDP per capita and telephone penetration in each
country around the world, Gartner said it applied the same correlation
principle of “teledensity” and GDP per capita to create a broadband model.

Within that framework, Gartner said the development of broadband at 10 Mbps
or faster could create huge growth in goods and services related to building
broadband delivery and including what goes through the broadband pipes.

“Mass deployment of 10 Mbps connections to the consumer will result in the
need for deployment of a vastly more capable backbone,” said Martin
Reynolds, vice president and research fellow for Gartner. “The deployment of
a new network will demand continuous upgrade of communications equipment,
driving years of growth in user devices as well as networking hardware.”

But while broadband penetration across the U.S. is certainly growing at a
rapid clip, the definition of broadband is being defined down in the
process, he added. For some service providers, the benchmark has fallen to
about 384 kilobits per second (kbps) downstream.

“My broadband connection is becoming slower and slower. When I first got my
cable modem, it was about a 5 Mbps connection in both directions (upstream
and downstream),” he said. “Then it went to 2.5 Mbps, then 1.5 Mbps.”

When you have at least 10 Mbps upstream and downstream, you can look at
different ways to work at home, from moving all of your data storage out of
your house and onto a network to all kinds of opportunities, he said.

Boosting capability back to a benchmark 10 Mbps rate could drive tremendous
change and opportunity in today’s depressed technology sector and lead to
broader economic benefits, he added.

Martin said the $500 billion figure is a composite, reflecting an estimated
$30 billion addition to GDP in the first few years and hitting a zenith of
about $300 billion within five years before tapering off as “true” broadband
penetration spreads and then matures.

Of course, there are bottlenecks aplenty to overcome in order to break
through the “last 200 meters” access to homes, he added, starting with a regulatory framework that some Gartner researchers call
too “backward-looking” when forming policy in support of broadband growth.

In addition, the backbone providers in the telecom industry are already
trying to cope with long distance profit margins that keep eroding as more
telephony services are overlaid on IP connections and offered for next to

“The telecom industry wants to protect its own. But telephony over broadband
IP will come one way or another. If WorldCom (currently in bankruptcy)
survives intact, for example, it will continue driving long distance prices
into the ground. Long distance companies will continue to feel the pain.”

Another bottleneck, Reynolds said, is that local phone service providers are also
concerned about losing inter-carrier charges, a small “toll” they collect
every time they deliver a local call into a long distance provider’s

“All these fees point to an industry that doesn’t want to move,” Reynolds

Kathie Hackler, chief analyst for Gartner Dataquest’s
telecommunications and networking group, said “participants in today’s economic activities cannot tolerate slow, unsophisticated narrowband communications without suffering a loss of productivity.” The same is true now as it was
during the industrial age when economic activities benefited by each
breakthrough in communications capability, she added.

Still, for all the rewards that Gartner Dataquest expects with “true”
broadband connections, the development of always-on networks pose risks to
even the largest companies, “given the evolution of the industry structure
and the enormous investment required to achieve a goal of ubiquitous
broadband,” said Ron Cowles, principal analyst for the firm’s
telecommunications and networking group.

“Even with a national commitment
and unified goal, the physical deployment will take years.”