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'True' Broadband Can Grow GDP: Gartner

Aug 27, 2002
By

Erin Joyce






"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 nothing.

"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 network.

"All these fees point to an industry that doesn't want to move," Reynolds said.

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."


 

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