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March 02, 2012

Study quantifies the impact of broadband speed on GDP

A new report, conducted jointly by Ericsson, Arthur D. Little and Chalmers University of Technology in 33 OECD countries, quantifies the isolated impact of broadband speed, showing that doubling the broadband speed for an economy increases GDP by 0.3%.

A 0.3 percent GDP growth in the OECD region is equivalent to USD 126 billion. This corresponds to more than one seventh of the average annual OECD growth rate in the last decade.

The study also shows that additional doublings of speed can yield growth in excess of 0.3 percent (e.g. quadrupling of speed equals 0.6 percent GDP growth stimulus)

Both broadband availability and speed are strong drivers in an economy. Last year Ericsson and Arthur D. Little concluded that for every 10 percentage point increase in broadband penetration GDP increases by 1 percent.

So a 32 times increase in broadband speed should mean a 1.5% boost in GDP.
A 1000 times increase in broadband speed should mean a 3.0% boost in GDP.
A 1,000,000 times increase in broadband speed should mean a 6.0% boost in GDP.
A 1,000,000,000 times increase in broadband speed should mean a 9.0% boost in GDP.

Terabit per second internet would be about 100,000 times faster than current 10 megabit per second internet and should mean a 5.1% boost in GDP.

Getting to affordable gigabit per second internet as exists in Hong Kong would mean about 2.1% more GDP.





This growth stems from a combination of direct, indirect and induced effects. Direct and indirect effects provide a short to medium term stimulus to the economy. The induced effect, which includes the creation of new services and businesses, is the most sustainable dimension and could represent as much as one third of the mentioned GDP growth.

"Broadband has the power to spur economic growth by creating efficiency for society, businesses and consumers," says Johan Wibergh, Head of Business Unit Networks, Ericsson. "It opens up possibilities for more advanced online services, smarter utility services, telecommuting and telepresence. In health care, for instance, we expect that mobile applications will be used by 500 million people."

During a keynote speech at Broadband World Forum 2011 in Paris, Wibergh said: "We expect a huge increase from the current estimate of around 1 billion people with broadband access to about 5 billion in 2016, most of whom will have mobile broadband. Connectivity and broadband are just a starting point for new ways of innovating, collaborating and socializing."

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