Posted: May 18th, 2015

“Will the delivery of the current National Broadband Network (NBN) scheme have a positive or negative impact on the digital divide in Australia?”

The Australian Government has announced a plan to deliver fast-speed internet to Australian businesses and residents. The current plan is to roll out fibre optic cable to 93% of premises in Australia, which would enable internet speeds of up to 100Mbps (and 1Gbps at its peak). The remaining 7% of premises are expected to be covered by satellite or wireless coverage, which would enable speeds of 12Mbps.”
“The Lack of connectivity is constraining business activity and social connectivity for the region. The economic and social benefits of the early implementation of the NBN throughout the South West region are potentially significant and far-reaching”
“Consultations with residents in the region were unanimously positive regarding the economic benefits of the NBN. Existing literature on the topic also reveals significant economic benefits from the NBN. These benefits are mostly drawn from three key functions of the NBN:
••Increased internet speeds;
••Increased internet reliability; and
••Reduced internet costs.
The figure below provides an overview of the economic drivers and their impact on economic outcomes for the South West region.”
21% increase in revenues 5% increase in employment 6.3% increase in productivity
Resulting in:
• Increased output by 1.0ppt
• Increased GVA of 0.8ppt
• Increased incomes by 0.6ppt
• Increased employment by 0.5ppt
As well as:
• Diversification of business activity
• Additional amenity
• Ability to attract new residents, employees and investment
• Improved access to the region
ECONOMIC IMPACT:

The NBN is expected to have significant economic impacts for the region. The NBN will have both direct and indirect influences on the economy from the first year of roll-out. In this first year (assumed to be 2014), the economy is expected to benefit from additional:
••Output of $501 million (1.9% of 2010 Output and a 1.6% increase over the baseline 2014 estimate);
••Gross value add of $193 million (1.6% of the 2010 Gross value add and a 1.3% increase over the 2014 baseline estimate);
••Wages and salaries of $48 million (1.1% of the 2010 incomes and a 0.9% increase over the 2014 baseline estimate); and
••Employment of 839 FTE1 positions (1.2% of the 2010 employment and a 1.0% increase over the 2014 baseline estimate).

The National Broadband Network
The NBN is a $35.7 billion, eight-year plan to deliver fast-speed, always-on internet to Australian consumers and businesses. The NBN will be rolled out in stages, starting in Tasmania. The roll out of the project is currently under review.
The development of a National Broadband Network, and equalising Australian’s access to the internet, is the highest ranking communications infrastructure project for Infrastructure Australia (2009).
The Internet in Australia
Australian subscriptions compared to OECD
In 2007 Australia ranked 14th in terms of internet penetration (the proportion of internet subscriptions per population), according to OECD figures. More than 30% of the Australian population had an internet subscription in 2007, compared to 63% of the US population and 40% of Italy’s population.

Social Impacts of the NBN for the South West
The social impacts of the NBN are overwhelmingly positive and could be even greater than the economic impacts outlined above. Particularly for regions with low population densities, social isolation could be significantly reduced with improved connectivity allowing residents to keep in better touch with their family and friends in other areas. Education rates could increase with the greater availability and access to online training materials and course notes. To some extent, the introduction of the internet is already having an impact on local residents.
Some residents are teaching their grandchildren in other countries how to knit, and others have attained their dream job through the use of internet universities.
These anecdotes of social benefits of the internet are expected to increase once the NBN is rolled-out in the region.
The social impacts resulting from the implementation of the NBN throughout the South West region were identified as being wide-spread and far-reaching, and included:
••Increased connectivity and communication (particularly for the local youth);
••Increased access to health care services or specialist care (through online mediums);
••Increased education (through long-distance learning and access to new learning materials); and
••Increased co-ordination of volunteer organisations (including emergency services such as bushfire brigades).

Benefits of High Speed Internet
Scrutiny of existing research into the benefits of the NBN revealed strong economic and social benefits of increased connectivity, speed and reliability of internet. For more details of the literature review undertaken please refer to Appendix A.
Economic benefits identified through the literature review process included:
Productivity
Though research into the productivity and economic gains associated with internet use is still being undertaken and developed (with widespread usage of the internet having developed over the 1990s), research examined to date highlighted findings between researchers that increased IT services and internet services has a positive impact on productivity. Productivity was estimated to increase by 1% across the whole economy, 5% in the manufacturing sector and 10% in the services sector. The industries most widely suggested as benefiting from the introduction and use of computer-based technologies and internet were:
••Agriculture;
••Communications;
••Business and finance; and
••Manufacturing.
Industries which are inconsistently identified as benefiting from the introduction of the NBN are mining, health and education. The mining sector is the largest contributing industry to the region’s GRP. The ability to quickly and efficiently transfer information from the head office to the mine site would benefit the industry significantly.
Gross Regional/Domestic Product
Studies which focused on the impacts on the economy generally indicated an improvement in GDP from the introduction of fast-speed internet. Some researchers, however, found that some gains to production were eroded by the monopolistic structure of the internet (and particularly the NBN) provision market. Gains in GDP (and GRP) were found through the improvement in productivity. Improved information availability and speed at which services could be provided were suggested as the main drivers of firmer economic growth estimates. In addition, many researchers found that improved access to the global market (through increased global exposure) provided significant benefits. The NBN would facilitate Australian firms access to a more competitive and innovative market and broader demand base. Export volumes would be expected to rise under the NBN scenario. For the South West region, increased exposure to offshore demand for Australia’s resources could feed into increased economic growth through the mining sector. Increased productivity in other sectors, such as manufacturing (which would also benefit from an increased choice of suppliers – both onshore and offshore), communications and business and finance would also benefit the region.
Employment
Implications for the labour market were mixed. Some researchers found that labour demand would increase as productivity per unit of labour increased and workers produced higher-value outputs. Those working in Australia and the South West may find that teleworking becomes a more viable option under the NBN, due to increased speeds of internet in the household (enabling 31

video conferencing etc). This could encourage some residents of the South West back into the labour market, such as the physically disabled, carers (who might work outside normal work hours) and those who live in remote areas (such as some parts of the South West region). Some business expenses would also be reduced from increased teleworking (such as reduced office electricity use and reduced desk numbers), however, businesses may also lose some of the economies of scale benefits (cost benefits associated with business expansion) associated with housing all employees in one space (such as better rates on internet costs, telephone costs etc). The ability to attract more residents to the South West is likely to result in diversification of the labour force as new residents bring new skills and value-add activity to the region.
Wages and Salaries
In terms of wages, the ability for teleworking to become increasingly viable in the Australian labour market could create a scenario in which domestic labour is competing with foreign labour for jobs. As such, wages in Australia may experience slower growth as firms outsource some functions (such as IT maintenance) to cheaper, offshore centres. However, not all work will be able to be done remotely, retaining demand for local labour. Studies in the US found some indications of areas with higher internet connectivity experienced rapid growth in employment (and business counts), but slower wages growth than surrounding areas. Other factors, such as domestic labour market regulation and “Australian made” favouritism (and politics) would also influence businesses in their labour and remuneration decisions. In addition, US research found that their customer satisfaction ratings declined after front-line services were exported offshore. The South West region has a low unemployment rate of 5.0%. Full employment is generally considered by Australian economists to be 6%. Unemployment below this rate becomes inefficient as under-skilled workers enter the workforce and the cost of labour becomes inflationary. Increased labour supply from offshore could benefit the South West labour market.
Connectivity and Social Isolation
Studies of the social implications of broadband focused on the disadvantages of not having the internet (or the skills to adequately use the internet). In particular, exclusion of minority cultural groups with lower English skills was discussed. Over 80% of the South West community were born in Australia and over 95% of the population only speak English. Less than half a per cent of the population speak English either not well or not at all (ABS, 2007). However, other issues of social exclusion in the region are applicable, particularly the large range of activities which are now internet-centric. Applying for jobs, emailing friends and family and gaining information from the government and other sources were all cited as activities which are increasingly internet-centric. Those without the internet, or without high-speed internet, were increasingly excluded from these activities.
Access to Education
Easier access to educational information over the internet (including remote schooling) could improve the retention rate of students in the region. The South West region has a lower percentage of 20 to 64 year olds who have completed Year 12, than the national and State benchmarks. In a similar fashion, increased and easier access to learning information could encourage greater proportions of South Westerners to undertake post-graduate learning. Higher education attainment tends to have a direct positive impact on income levels (and consumer spending) in a region.
Access to Health Care and Services
The provision of healthcare could also improve from the introduction of the NBN. Accessibility to doctors (including flying doctors) could be greatly improved. In addition, virtual General Practitioner visits could assist those in remote areas to find appropriate medical advice.
Environmental Impacts
Environmental impacts, when addressed, generally indicated a reduction in greenhouse gas emissions as remote access to systems, information and teleworking feed into reduced travel. Increased speed of technology enabling improved communications from various locations would also reduce the need for travel. As an example, current video conferencing systems remain slow, unreliable and delayed, impeding upon the efficacy of holding conferences from multiple locations (and producing demand for travel). However, fast-speed internet would reduce lag times and technical difficulties currently experienced using these technologies. A mining company based in Perth with a mine in Collie would be able to hold a meeting between site managers, the head office and perhaps engineering consultants to repair mining machinery in a timely and efficient manner.
Economic Impact Assessment
Approach and Method of Assessment
Economic outcomes
In order to establish the economic benefits of the NBN, a baseline growth scenario was developed based on expectations for population growth (from Department of Health and Ageing) and the historical relationship between population growth and Gross State Product with an unchanged structure. Modelling of the economic growth scenarios for the South West region have been developed utilising projections of local population growth and the relationship between population growth and economic growth. Incomes and employment estimates are generated from the existing historical relationship between Gross State Product and employment and incomes. An additional growth factor was applied to “with the NBN” scenario estimates in appropriate years. These estimates were developed through research and refined during the consultation phase. Additional details of the modelling methodology used can be found in Appendix B.
Consultation findings and existing research were used to identify the impact of the timely implementation of the NBN on the region’s growth, productivity and industry employment. Modelling assumes the South West region receives the NBN in 2014. Faster speeds and higher availability of internet in the region has been determined to positively impact on output, gross value add, income and employment in the region. Consultation discussions indicated expectations for the impacts of the NBN to take effect over a 5-15-year time frame (for more information on the realisation of the NBN, see below, section 4.1.2).
Realisation time frames
Not all businesses will immediately take-up the fast-speed, always-on internet. Businesses in the industries not expected to experience significant impacts from the NBN may decide to wait before upgrading their internet connections. In addition, existing internet contracts may restrict some businesses from upgrading their internet connection once the NBN is rolled out. Consultations with local industry leaders suggested the economic impacts of the NBN would be dispersed over a 5-10 year period from the time of implementation. To ensure a conservative assessment a 10-year horizon was adopted for the base case with five and 15 year scenarios also examined and reported as Appendix C
Economic Effects of Broadband
The $35.7 billion dollar NBN plan is expected to deliver fibre optic to the premises internet coverage to 93% of premises with the remaining 7% receiving satellite and wireless coverage. The economic assessment will analyse the expected changes in the economy resulting both directly and indirectly from the roll out of the NBN in the South West region. The NBN is expected to result in higher economic outcomes for the region due to:
••Increased internet speeds, resulting in:
–Increased efficiency and productivity; and
–Increased ability for business workers to work offsite.
••Increased internet reliability, resulting in:
–Increased use of existing technologies; and
–Increased ability to adopt new technologies.
••Reduced internet costs6, resulting in;
–Reduced capital expenditure; and
–Reduced maintenance costs.
Economic Impact Assessment
Economic benefits to the region are expected to occur over a 10-year time frame beginning in 2014. The first year is expected to have the strongest impact as productivity gains a boost from faster download speeds and greater internet access. The timely implementation of the NBN throughout the South West region is identified to have a significant and prolonged effect on the broader regional economy.
In 2014
In the first year of the NBN, increased speed and reliability of the internet as well as reduced costs are expected to contribute to additional:
••Output of $501 million (1.9% of 2010 output and 1.6% of the baseline 2014 estimate);
••Gross value add of $193 million (1.6% of the 2010 gross value add and 1.3% of the 2014 baseline estimate);
••Wages and salaries of $48 million (1.1% of the 2010 incomes and 0.9% of the 2014 baseline estimate); and
••Employment of 893 FTE7 positions (1.2% of the 2010 employment and 1.0% of the 2014 baseline estimate).
By 2030
Since the NBN will be taken up over a 10-year time frame, economic impacts will continue to ‘drip-feed’ into the South West economy. By the year 2030, the NBN is expected to generate additional annual:
••Output of $11.0 billion (18.9% increase over the baseline “No NBN” result);
••Gross Value Add of $4.3 billion (16.2% increase over the baseline “No NBN” result);
••Income of $912 million (10.7% increase over the baseline “No NBN” result); and
••Employment of 13,058 FTE positions (12.0% increase over the baseline “No NBN” result).

Social Impact Assessment
Drivers & Leading Effects on Wellbeing
The effects (or mechanisms of social change) the proposed NBN may have on the wellbeing of the South West community and residents can be traced back to three key drivers from which all impacts are generated. These key drivers are described below:
Economic drivers
The economic benefits of the NBN are likely to have significant implications for community wellbeing in the South West region. These drivers are likely to take the form of:
••Increased local business activity: Industry business revenues in the region are expected to receive a 21% (on average) boost from the NBN over the take-up period due to a reduction in internet costs and an increase in productivity from existing businesses. Businesses generating greater output with lower per unit inputs will likely increase business investment, expansion and activity in the region.
••Increased business attraction: Flowing-on from the increased business activity in the region and the greater ease of conducting business in the region, more businesses are likely to establish in the area. This will result in a diversification of the business market in the region and could also result in increased training and development and diversification in the local skill set.
••Increased employment: From increased business activity and attraction, 13,058 more FTE positions are expected to be created in the region by 2030. The income increase, in today’s dollar terms of $3.5 billion to the region stemming from the increase in employment, is likely to feed into a higher standard of living in the area. In addition, there are social benefits experienced through participating in the labour force. The ability to telework (or work from home) will also have an impact on community wellbeing in the region.
Social connectivity
The NBN roll-out will deliver fast-speed internet to homes around the region and will increase the download capacity of the average home in the region. Video-conferencing software and downloading of attachments will enable South West residents to keep in touch with family and friends globally, whilst at the same time connecting with local residents.
Access to services
In isolated areas of the region, access to health care and schooling (in particular high schooling) will be improved though increased upload/ download speeds and the ability to video conference.

Spheres of Influence and Potential Impacts
Family & Community
CONTEXT
An individual’s family is often their most fundamental source of emotional, physical and financial care and support. Local communities often take on caring functions, supporting the education, sporting or artistic endeavours of their members. Communities also provide forums for socialisation, relationship building and the development of collective (or regional) identity. Families and communities are the core structural elements within society, which shoulder a large portion of the physical and financial burden of caring for individuals within society. As a result, the family is a crucial mechanism for the healthy and efficient functioning of society as a whole.
IMPACTS
Whilst the onset of the internet revolution caused many to worry that internet users would shy away from real contact with friends and family, research has found the opposite has occurred. Mass utilisation of social media networks, such as Facebook, Myspace and Twitter have heightened connectivity and friendships particularly those in different locations. Use of the social network site, Facebook, has been positively correlated with psychological wellbeing and the three types of social capital: bridging, bonding and maintenance (Ellison et al., 2007). Furthermore, researchers have found that not having the internet is becoming detrimental to social inclusion (Social Science Research Council, 2010). As such, increasing the coverage of internet connections in the region (which stood at 60% of households in 2006) is expected to improve the social connectivity of the region.
Consultation in the South West region revealed locals agreed that the NBN was likely to increase their wellbeing through increased connectivity with family and community. Many mentioned the ability of locals to keep in contact with family and friends who were living interstate or overseas. Locals also noted the ability country children would have to keep in contact with their school friends on the weekend and through the school holidays despite the distance between their homes. Already, the introduction of the internet is having a strong positive influence on the connectivity of family and community in the region. These connections would be more prevalent and available to a greater cross section of the community if higher speeds and greater coverage were available in the region.
The business community noted the benefits the internet would have on their networking ability with business partners in Perth, the Eastern States and globally through the use of the NBN. The ability to Skype or Voice over Internet Protocol (VoIP) call with business partners would have positive implications not only for their business relationships, but through these relationships for their business.
Whilst the construction of the NBN in the region would not necessarily be a specific drawcard of population to the region, the current lack of connectivity was seen as a deterrent to new resident attraction. The construction of the NBN would likely remove this deterrent and could result in a greater number of sea and tree-change residents drawn to the region.
Education & Training
CONTEXT
Education and training assist and support the population’s ability to produce goods and services and to be responsive to change. They help form the basis of social cohesion and assist in reducing unemployment, crime and poor health. Both education and training enable and encourage individuals to take their place in a skilled and changing labour force, to lead fulfilling lives, and to become active and contributing members of the broader community. Education and training are essential for the development and local retention of economic activity and production and also contribute strongly to the maintenance of a positive social environment.
IMPACTS
Alongside health, increased education was widely noted as a positive impact expected in the South West region from the NBN. Education and training provision at all stages of life were expected to increase with the NBN.
Research finds that children who use the internet receive higher school marks than those without the internet in terms of literacy and in general (Johnson, 2010). Children without the internet are socially and educationally disadvantaged. Primary schools in the region could utilise the internet to access age-appropriate learning materials and teaching aids, such as online maths quizzes and spelling games.
Some isolated areas within the South West catchment did not have high schools. As such, families with high school children faced the decision between boarding school (at either a nearby regional centre or Perth), with long commuting distances for the children, home schooling or relocating the family to a larger regional centre. Consultation indicated that families tended to move away to larger towns or cities once their children reached high school age. The NBN could result in these families remaining in their locations with the ability of children to study remotely online.
University learning in the region would also be boosted from the NBN. Current download speeds and coverage are prohibitive to distance education as downloads, which would normally take a few minutes, can take significantly longer in the region. The NBN would result in faster speeds to most of the region and more consistent connectivity, enabling students to download learning materials, undertake research, submit assignments and sit exams online.
Many employers noted that providing training and development to their staff would be easier if they had the capacity to use online training, rather than sending staff to Perth for a day (or more). Many employers noted that not only would this result in increased skills and specialisation for their staff, but it would also increase their ability to retain and attract new staff (which was widely noted as an issue in the region)

– http://swdc.wa.gov.au/media/128539/nbn_impact.pdf