Where would we be without the UFB? A lot less productive
New Zealand's strategic investment in ultrafast broadband (UFB) has emerged as a pivotal driver of economic productivity and innovation.
That’s according to a report by Deloitte published this week, which suggests that the government-backed investment has not only transformed the daily lives of Kiwis but also holds the potential to significantly boost the nation's economy by $163 billion over the next decade.
Deloitte's report highlights that digital fibre infrastructure has already contributed $31 billion to the economy between 2011 and 2023, with a hefty $8.8 billion added in 2023 alone. The consulting firm used economic models to examine how access to high-speed internet enabled us to do things more efficiently and enabled new types of products and services in the digital economy, such as telemedicine, streaming video, and smart city infrastructure.
“Well over 100,000 Kiwi businesses are now on speciality business-grade fibre connections, highlighting the strategic importance of quality fibre to future business activities, as well as supporting the rising use of cloud and near real-time applications,” the report notes.
Around $5.5 billion has been invested in the UFB network to date making the return on that infrastructure spend to date significant.
Source: Deloitte
Productivity remains one of New Zealand's most pressing economic challenges - we work harder and longer than other developed countries to achieve the same economic output. The ability to raise wages and improve living standards is closely tied to increasing output per worker. The UFB initiative is crucial in addressing these challenges by enabling innovation and business transformation says Liza Van der Merwe from Deloitte Access Economics.
“Unleashing the power of our fibre network can enable innovation, unlock business transformation and uplift productivity in New Zealand. The report identifies six dimensions as being critical to achieving these outcomes.”
Key dimensions for future growth
The Deloitte report identifies six critical dimensions necessary for maximising the benefits of digital fibre infrastructure:
Digital equity: Ensuring widespread access to fibre, which is currently available to 87% of the population.
Innovation: Driving advancements with technologies like AI.
Business transformation: Encouraging small businesses to adopt digital tools.
Export growth: Seizing opportunities to expand international trade.
Government services: Leveraging data and digital technologies for improved services.
Regulatory settings: Regularly reviewing policies to support digital growth
Source: Deloitte
Where will the accelerating returns come from?
The boosted gains from access to ultrafast broadband assume access is extended to 95% of the population as is currently planned. It also estimates the impacts of emerging digital services, particularly those based on artificial intelligence, that will evolve from mainly text-based applications like ChatGPT to full real-time multimedia services.
But Deloitte says New Zealand businesses will need to improve their game if we are to capture the full benefits of the UFB investment. Their product development and digital competitiveness has been going backwards compared to businesses in other countries.
“The fibre network is yet to fulfil its ambitions, in part due to limited business innovation, the report notes.
“The Business Operation Survey shows the product innovation rate for SMEs has experienced a downward trend, declining from 27% in 2007 to 22% in 2021.44 Additionally, our digital competitiveness rankings have seen a decline, dropping from 21 in 2019 to 31 in 2023. It is important we reverse this trend. Digital technologies also generate spillover effects, such as increased competition, which in turn fosters innovation and compels businesses to use resources more efficiently, thus enhancing productivity.”
