Broadband Infrastructure Facilitates Economic Transformation Through Digital Productivity

Broadband Infrastructure facilitates Economic Transformation through Digital Productivity
Paul Budde Consultancy Customer Briefing
Broadband
Infrastructure
Facilitates
Transformation through Digital Productivity
17/02/2015 17:52
Economic
Table of Contents
1.
2.
3.
4.
5.
Synopsis.............................................................................................................................................1
Economic prosperity depends on digital productivity.......................................................................2
ICT industry has the drivers seat......................................................................................................3
Transformation requires open ICT infrastructure..............................................................................3
Brief insights into ICT infrastructure developments.........................................................................4
5.1
The National Broadband Network...........................................................................................4
5.2
The Changing Data Centre Landscape.....................................................................................5
5.3
The Cloud Computing Revolution...........................................................................................5
5.4
M2M and Big Data Key Global Trends................................................................................5
5.5
Smart Grids Transforming the Energy Industry....................................................................6
5.6
Smart Cities the Way Forward..............................................................................................6
6. Comprehensive infrastructure policies are needed............................................................................7
7. Collaborative trans-sector policies.....................................................................................................7
8. Case Study Australia.......................................................................................................................8
8.1
NBN: a blueprint for ICT infrastructure policies?...................................................................8
8.1.1
Effect of Australias NBN on the rest of the world..............................................................9
8.2
National Digital Economy Strategy.......................................................................................10
8.3
Australias digital transformation is underway Analysis.....................................................11
8.4
The issue is Industry Transformation, not Broadband analysis..........................................12
8.5
The impact on the economy...................................................................................................13
9. Conclusion.......................................................................................................................................14
10.
Paul Budde Consultancy.............................................................................................................14
11.
Related Reports...........................................................................................................................15
Exhibit 1 - Transformation business case examples...............................................................................2
Exhibit 2 - Global developments that are forcing transformation.............................................................2
Exhibit 3 - Regulatory system needs to support transformation................................................................3
Exhibit 4 - Smart communities..................................................................................................................4
Exhibit 5- Internet of Things the next infrastructure inflection point.....................................................6
Exhibit 6- Trans-sector vs. Cross-sector....................................................................................................7
Exhibit 7 - Australia National Broadband Network................................................................................9
Exhibit 8 - Broadband Commission for Digital Development................................................................10
Exhibit 9 - How does broadband relate to economic development?.......................................................10
Exhibit 10 - Key applications of a digital economy................................................................................13
1.
SYNOPSIS
The world in general, and its institutions and businesses in particular, is facing a significant number of
challenges: we will soon be 9 billion people; the environment has problems coping with us; whole
business sectors are facing digital disruption; healthcare in western economies could consume 40% of
national GDP by 2040.
Nowadays, people are more empowered they are moving away from traditional behaviour patterns,
and new jobs are in the new economy, not the old one. Governments and traditionally organised
businesses and organisations have great problems with these developments. They are unprepared to
embark on the essential economic and social transformations that are needed to face up to the
challenges.
In essence, in order to transform they will need to operate far more horizontally and be far more truly
customer/people focussed. And in order to be able to compete with those organisations that have been
successful in creating digital productivity, they often need to look at ways to remove 50%, or even
Copyright Paul Budde Communication Pty Ltd, 2015

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more, from their current business costs. It also necessitates cannibalisation of traditional services and
revenues, with no certainty of new income from new services to compensate for this.
As a result, many businesses are fighting rearguard battles rather than leading the charge, and whole
sectors are resisting the transformation process (retail, healthcare, education, energy, government).
This Paul Budde Consultancy customer briefing incorporates Paul Buddes international experiences in
the development of national broadband plans. These national infrastructure projects are an essential
part of any countrys industry and sector transformation process, as they are the key enablers of digital
productivity. Paul offers consultancy in the form of briefings, expert reports, workshops and training.
2.
ECONOMIC PROSPERITY DEPENDS ON DIGITAL PRODUCTIVITY
The current global problems require a new approach. To continue trying to fix broken systems doesnt
work (healthcare, environment, financial, education, etc). The GFC clearly demonstrates the economic
consequences of this global crisis. The consequences of environmental problems and the energy crisis
send a clear message that they cannot be solved in the traditional way. These significant global
developments are giving us an opportunity to make that break with the past and use transformational
processes to create totally new ideas, new solutions, new policies and new business strategies.
In economic terms, the end-result of a full industry or sector transformation is digital productivity.
This can be achieved by changing processes and systems, operating them more horizontally, with the
assistance of big data, in order to make them more efficient and effective often removing 50%+ of the
current business operating costs. There are many examples where these cost savings are more like
70%-80%. This makes these changes not just incremental, but transformative.
Exhibit 1 - Transformation business case examples
E-health could save $30 billion over 10 years and save 1,300 lives a year (Australia).
Video monitoring will reduce aged care hospitalisation by 40%.
Smart grids can save 25%-30% of energy costs.
Smart communities suit our lifestyle (people want it cost is important but not critical).
Current healthcare, energy, education budgets need to be redirected. No new money is needed
except seeding capital to kick-start the process.
(Source: BuddeComm, 2015)
Furthermore, our affluent western society has evolved and people/consumers are now looking for
different values and different lifestyles, other than just simply earning more money. At least in these
societies there is no longer any need for linear growth; sustainability is becoming a more important
issue.
Exhibit 2 - Global developments that are forcing transformation
There will soon be 9 billion people how to manage that?

The environment has problems coping with the worlds human population.
Whole business sectors are facing digital disruption.
Healthcare in western economies could take 40% of national GDP by 2040 unsustainable.
Education system based on principles from the Middle Ages.
People are more empowered and are moving away from traditional behaviour patterns.
New jobs are in the new economy, not in the old one.
In my work for the United Nations I have said: ICT cannot eradicate hunger and poverty in the world,
but one thing is certain without ICT it is never going to happen.
This applies to all of the challenges mentioned above. ICT alone cannot solve them, but without ICT
none of them can be resolved in an effective and sustainable way without major social and economic
disruptions. In the past, such challenges often led to wars or severe economic collapses.

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3.
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ICT INDUSTRY HAS THE DRIVERS SEAT
In essence, to bring about the necessary transformation government, industry and other organisations
will need to operate far more horizontally, be far more truly customer/people focussed. And in order to
compete with the organisations that have been successful in creating digital productivity they often
need to look at ways to remove 50%, or even more, from their current business costs. Complex
problems will require complex solutions that cross the traditional specialisations we have built up in the
form of government departments, business departments and specialised silo-based structures based on
highly developed and very sophisticated expertise in agriculture, energy, healthcare, communication,
media, manufacturing, finance, and so on.
Open ICT infrastructure (broadband, smart grids, data centres, cloud computing, M2M, smartphones) is
the glue that is needed in these transformational processes, which will lead to more horizontal
collaborative structures within both individual organisations and broader economic and social
structures.
The ICT industry, therefore, is in the drivers seat of the transformation and it should therefore take a
leadership role. Many leading ICT organisations are already showing thought leadership IBM,
Accenture, Cisco, Intel are some examples. Furthermore, some organisations have used the opportunity
left open to them by traditional companies and organisations unwilling to transform themselves (or
incapable of doing so) to use ICT in a disruptive way to bypass these old industry models and create
new business opportunities for themselves. Google, Facebook, Amazon, Microsoft, Apple, and also
many smaller e-companies operating in retail, media, communications and energy, are creating havoc
among the traditional players in their markets.
There will be more of these disruptive developments as many industries and sectors are extremely slow
to change. The healthcare and energy sector are earmarked as key target markets simply because of
their sheer economic size, globally worth trillions of dollars each.
In all of these new business breakthroughs, apart from leadership and vision, ICT has been the deciding
differentiator.
4.
TRANSFORMATION REQUIRES OPEN ICT INFRASTRUCTURE
Similar to the processes mentioned above, the infrastructure sectors also need to be transformed so as
to facilitate the industry and sector reforms.
This infrastructure needs to be available on a utilities basis, and technological advances make it
possible to provide this infrastructure at affordable levels.
In markets where there is sufficient competition, market forces will drive prices down to an affordable
level simply because of the commoditisation of such infrastructure. In markets where this level of
competition is not available, government intervention is needed to create a regulated, open
infrastructure at utilities-priced costs.
Exhibit 3 - Regulatory system needs to support transformation
Telecoms: utilities based open network models (structural separation)

Energy: allow for smarts to be included (competition at distributed energy, home energy
networks). Force interoperability of smarts
Healthcare insurance to accept video consults/monitoring, e-health in all its forms
Reform media ownership and copyright rules
The key reason for this is that the social and economic benefits of such infrastructure are significantly
larger than the commercial gains of the operator(s). Furthermore, those social and economic benefits do

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not show up on the balance sheet of commercial infrastructure operators and one cant expect these
organisations to make infrastructure investments simply for the good of the country.
Several countries have introduced structural infrastructure separation regulations in order to achieve an
open, low-cost broadband infrastructure.
Together, the combination of ICT infrastructure broadband, smart grids, data centres, cloud
computing, M2M, smartphones forms the basis for organisations to develop what is known as the
smart city or smart community.
Exhibit 4 - Smart communities
Fully collaborative and interactive (personal, care, education, services)

Smart sustainable buildings (energy self-sufficient)
Smart infrastructure (roads, bridges, pipes, etc)
E-cars and smart transport
An economy based on the gains of digital productivity
E-government at all levels
5.
BRIEF INSIGHTS INTO ICT INFRASTRUCTURE DEVELOPMENTS
5.1
THE NATIONAL BROADBAND NETWORK

The most critical element to the success of national broadband networks is the infrastructure company
that runs the network.
It has to make the critical architectural and design decisions for the open wholesale-only services which
will form the basis of this new infrastructure for at least the next 25 years. It is essential that the
network should facilitate the vision laid down by governments, including multiple use of the network
by other sectors such as healthcare, education, energy, etc. At the same time, the company will need to
ensure that it remains an infrastructure company and doesnt become another telco.
Australia was the first country to get the overall (national purpose) vision right, thanks to government
leadership, and it is currently deploying its national broadband network. The USA soon followed and is
now showing real leadership as well. The Netherlands and New Zealand are also on the right track.
Economic and trans-sector innovations are now key items on the political agenda of these countries.
There is no silver bullet and each unique situation generates its own alternatives, which in turn inform
others involved in similar national projects.
The vision gives rise to the creation of social and economic strategies that need to be taken into account
in the design and architecture of the infrastructure. Pragmatic solutions need to be developed to
maximise the use of existing infrastructure and other resources. Un(der)served areas need to receive
priority and local communities and councils can play a major role in this. Wireless broadband can play
an important part as well. These early projects could also be an ideal testing ground for trans-sector
applications.
It is important for an NBN infrastructure company to be seen as a regulated basic national
infrastructure provider and not as a telecommunications company. It is also important to note that
applications will come and go, and will continually improve, but that the NBN infrastructure at its most
fundamental level should be sustainable, lasting near-forever, and incurring only routine, periodic
improvements along the way.
See also: Global - Infrastructure - National Broadband Network Insights (NBN)

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5.2
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THE CHANGING DATA CENTRE LANDSCAPE
The data centre market is an extremely complex one, with many diverse aspects to it. There are literally
millions of data centres worldwide and 99% of them are embedded in the IT operations of the
organisations that generate and use that data.
The increasing data storage demands, rising energy costs and pressure on companies to appear
environmentally proactive is leading to a growth in the uptake of cloud solutions. This, in turn, is
leading to a growing demand for data centres, either operated by the cloud provider or utilised as thirdparty infrastructure.
In 2015, there is a growing awareness of the ongoing maintenance and energy costs incurred in
operating data centres. In late 2012, the introduction of Google Spanner changed the data centre
landscape, with its focus on energy use and efficiency squarely placed on data centres in the IT sector.
See also: BuddeComm Intelligence Report - Data Centres - A Key Global Development.
5.3
THE CLOUD COMPUTING REVOLUTION

Cloud computing deployment and development is gaining momentum around the world as the true
potential of this technology reveals itself. It has become one of the fastest growing areas for the IT
sector and cloud-computing solutions are being adopted by enterprises, government and consumers
alike.
For enterprises, the development of cloud computing takes the form of a business transition and
company strategies and policies need to be changed before its potential can be monetised by
businesses. Cloud computing should be seen as a valuable business tool one that will differentiate the
company from others.
Cloud security and privacy are issues that require scrutiny, and there are growing concerns about data
ownership. If these concerns can be overcome and the right standardisations and infrastructure are put
in place, this industry will really thrive.
In early 2013, around 5% of the top 1,000 companies worldwide were using cloud services. Platform as
a Service (PaaS) is currently concentrated on the developed markets but will eventually reach
developing markets as the technology matures. Safety and security concerns are moving towards
companies taking a multi-cloud approach, using two or more cloud solutions in order to minimise risk
if one of the services becomes compromised in any way.
See also: BuddeComm Intelligence Report - The Cloud Computing Revolution.
5.4
M2M AND BIG DATA KEY GLOBAL TRENDS
Machine-to-Machine (M2M) also referred to as Internet of Things, is going to be a real gamechanger. It will transform every single sector of society and the economy and it will be out of this
environment that new businesses and indeed new industries will be born.
With the development of high-speed broadband and mobile 3G/4G infrastructure now well and truly
underway in many countries, it is important to look at what the real value of this infrastructure will be.
It offers a range of features such as ubiquitousness, affordability, low latency, high speed and high
capacity. It will link millions of devices, such as sensors, that will enable us to manage our
environment, traffic, infrastructures and our society as a whole much more efficiently and effectively.
The large amounts of data generated by M2M developments, as well as the increase in user-generated
communications via social networks and the like, will be of benefit to big data developments.
Organisations are beginning to recognise the importance of storing and processing data efficiently, and
also of mining this data for commercial benefit.

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Exhibit 5- Internet of Things the next infrastructure inflection point

Making infrastructure smart basically means adding intelligence to the networks through sensors,
devices, M2M, etc which generate reliable data that can be processed in real time to provide
information to all those involved in making decisions about their energy use, transport movement,
weather conditions, financial status, healthcare monitoring etc.
By combining these databases in a trans-sector way linking energy to traffic, to healthcare, to
weather, to economics, we will be able to move from the current silo-based structure to a true transsector structure. The internet of things allows infrastructure to share data and to process and analyse it
in real time.
See also: BuddeComm Intelligence Report - M2M, IoT and Big Data - Key Global Trends.
5.5
SMART GRIDS TRANSFORMING THE ENERGY INDUSTRY

Driven by the increased awareness of environmental and energy concerns, the energy industry, as one
of the largest emitters of CO2, began to review its operations, with the aim of addressing both the
environmental issues (reducing the emissions) and the energy issues (the need for more efficient use of
electricity).
The electricity grid was earmarked as a key element for consideration. While the initial reaction was to
focus on the physical infrastructure, including smart meters, it soon became clear that both the
infrastructure and the structure of the industry itself would be subject to a massive transformation.
The present situation is often compared with the transformation that took place twenty years ago within
the telecoms industry. The electricity industry is, today, where the telco industry was 20 years ago. At
that time, it offered little or no customer service, hardly any competition, and no choice of devices and
applications that suited the user.
The transformation will have to be of a trans-sectoral nature and should include industries involved in
renewable energy, electric vehicles, micro-grids, IT and telecommunications. Collaboration and
cooperation is the key to the success of this transformation.
As the industry has learned the hard way, customer engagement is critical to effecting market changes,
especially in an environment where energy prices are sharply increasing.
Similar to the changes in the telecoms industry, which are giving rise to the digital economy, smart
grids will be at the core of the reforms that will lead to the green economy, where many new jobs,
companies and indeed a new industry will be created.
There are now several countries making smart infrastructure central to their energy policies they see
this as the key to linking the various policy and innovation developments. Germany, the Netherlands
and the Scandinavian countries are among the thought leaders in this field and Germany has invested
heavily to make this happen.
See also: Global Smart Infrastructure - Smart Grids and Smart Meter Trends and Statistics.
5.6
SMART CITIES THE WAY FORWARD

Smart cities are going to be amazing community hubs that will be sustainable, efficient and supportive
of citizens. The concept of smart communities is based on intelligent infrastructure such as broadband
(FttH) and smart grids, so that connected and sustainable communities can be developed. Around the
world, there are already examples of some smart cities emerging, and many countries have developed
plans for smart infrastructure. However, before these smart communities can be built properly, transsector policies and strategies need to be carefully considered and developed.

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Smart cities cannot be built from the silo structure that currently dominates our thinking. They require a
holistic approach, which includes environmental issues such as self-sufficient energy buildings, energy
exchanges for renewable energy and e-cars, delivery of e-health, e-education and e-government
services as well as digital media and internet services.
Half of the worlds population are already city-dwellers, and the trend towards increased urbanisation is
accelerating rapidly. The future for the majority of the worlds citizens is undeniably urban 70% will
live in cities by 2050 but how exactly that city of tomorrow will look, and how smart living is
implemented and experienced, remains largely uncertain.
In many cities around the world, high-density living is the norm and attention is now turning towards
making this style of living more sustainable. Technological innovations include water harvesting and
re-use, solar collection and energy-efficient appliances, including heating and cooling. Sustainable
urban transport systems are also on the agenda for many governments.
See also: Global Smart Infrastructure - Smart Cities and Smart Transport Trends and Statistics.
6.
COMPREHENSIVE INFRASTRUCTURE POLICIES ARE NEEDED
Obviously, the ideal situation would be for countries to develop a national plan for such developments.
The problem is that in the absence of a cohesive national blueprint, policies are increasingly being
driven by government reactions to developments that require urgent actions - the sort of muddling
along strategy you see in Europe and the USA. Without a national blueprint, government actions are
open to lobbying from people who have vested-interests to protect and who are often resisting change.
This also leaves the door wide open to often very powerful single-issue communities (eg healthcare,
energy, mining, finance), unwilling to get out of their protected silos and ivory towers.
In order to allow ICT to assist in creating more holistic solutions, the highest policy priority should be
to establish a first-class high-speed digital infrastructure as a national utility that allows for:
businesses and institutions to utilise digital productivity to remain innovative and competitive;
much higher levels of citizen participation in relation to government and business affairs;
increasing the transparency of the decision-making process and the development of policies.
7.
COLLABORATIVE TRANS-SECTOR POLICIES
As mentioned, a key element of the process of transformation is the move away from silo-based
solutions to a more encompassing horizontal approach.
One of the reasons we have so many social and economic crises is that we can no longer make any
progress within the silo-based structures that exist in businesses, industry sectors, politics and
government. The complexity of modern societies and economies requires a horizontal approach, but the
reality is that there are many obstacles to this, as people are very protective of their silos and ivory
towers. They will use all sorts of threats, such as security, privacy and disruption, to stop a more
transparent attitude being adopted in a collaborative environment with others.
In his research into this problem, Professor Nico Baken of the University of Delft in the Netherlands
coined the term trans-sector.
Exhibit 6- Trans-sector vs. Cross-sector
It is important to identify the difference between cross-sector and trans-sector. Cross-sector means that
two or more sectors are trying to work together. This often leads to situations where people will say:
I like to work with you as long as you do it my way.
The trans-sector approach calls for business and government leadership at the very top, directing the
various silos to work together in order to find new solutions.

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In government, this needs to be reflected in policies relating to energy, environment, healthcare,

education and so on.
The sharing of national infrastructure is a key element in these policies.
To embark on the transformation process, an intelligent infrastructure is needed ultimately based on

fibre networks with a large number of wireless access points.
If a holistic government policy were to be developed that directed the various sectors under its control
to use one shared national ICT infrastructure significant savings would be made by tapping into the
digital productivity that such a shared infrastructure can provide. Then sufficient funds would flow
from their budgets into digital infrastructure projects to create a good business case for the deployment
of high-speed ICT infrastructure in all but the more remote parts of the country. It has been argued that
savings in healthcare alone could pay for such a national infrastructure.
Here are some examples of why a trans-sector policy is needed to drive the transformation:
In healthcare alone, there are hundreds of silos, with specialists unwilling to share information and
work collaboratively.
By law, utilities are not allowed to share data that would make it possible to manage their water,
energy, gas and other infrastructure more effectively.
Regulations also make it impossible for other industries to generate energy for example, on their
factory roofs and share it with the neighbouring community.
The current energy network is completely unprepared for the management of PV systems and for
the approaching marketing blitz of electric vehicles.
Privacy laws need to be rewritten to make data sharing possible in keeping with permission-based
policies (the users should own their own data, not the utility, health provider, etc).
The 17th century-based International Property Right system needs to be changed, opened up to
innovation and flexibility, and aimed at advancing knowledge, thus advancing our society in order
to face the challenging future.
Governments should develop clear vision statements on how they will use smart ICT tools and
infrastructure to build smart countries, cities, communities and buildings.
8.
CASE STUDY AUSTRALIA
8.1
NBN: A BLUEPRINT FOR ICT INFRASTRUCTURE POLICIES?
One example of large-scale integrated national infrastructure is taking place in Australia, where the
government is building the national broadband network (NBN), which will link all Australians to
affordable high-speed broadband (93% of them to fibre-to-the-home networks). This is directed not
solely at supplying high-speed internet access, but primarily at facilitating trans-sector policies aimed
at developing the digital economy, e-health, e-education, smart grids, smart transport, and so on.
With its national broadband network, Australia is leading the world in these developments, and
interesting lessons can be learned from the Australian experience. However, this does not mean that the
Australian example can simply be copied. Each country will have to develop its own plan, based on its
own unique society, political system, geography, economic development and financial situation.
However, smart infrastructure and trans-sector policies are a crucial element in the process whether
the country is one of the poorest or one of the richest in the world, the basic problems are the same and
we can all learn from one another.
In order to facilitate industry and sector transformation the new infrastructure will be made available on
a utilities basis. The Australian government does not see this as a telecoms policy; it is regarded as a
national infrastructure similar to electricity, gas, water, roads, etc.

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Exhibit 7 - Australia National Broadband Network

After the September 2013 election in Australia, and with a new government in charge, a number of
reviews were announced that would shape the future direction of the NBN. For a start, the Minister
asked NBN Co to carry out its own review first, based on the original specifications of the NBN it
being a majority FttP rollout.
The outcome was that at a strategic level, the NBN will most likely continue smoothly. There will most
certainly be changes made to the rollout, but these could quite possibly be implemented by NBN Co
itself, now that it has largely been relieved of the political pressure under which it had to operate during
the onslaught of attacks by the then Opposition, which started off with a policy to kill the NBN. At this
stage, at least the NBN has bipartisan support.
The recent announcement regarding the protection of the NBN against cherry picking was another
good step forward.
Also, because of the likely continuation of the NBN, many of the issues that existed under the previous
government remain unchanged, and therefore will require the attention of the present government,
and/or will need to be taken into account in future policy developments. BuddeComm has already
indicated support for certain changes to the NBN in relation to greenfield developments and multidwelling units (MDUs) and these issues will now receive significantly more attention than they were
given in the past. Again, earlier comments and analyses made on these issues remain relevant under
the new government.
The rollout has seen delays, but at this stage, there are no indications that this will affect the longerterm outlook for completion of the project. The review will obviously shed more light on this, but so far
the issues seem to be more one-off and/or resolvable for instance, by being more flexible in the use
of technology, for example, in MDUs.
A serious omission remains that there is no policy or information that takes into account the
importance of the NBN for the digital economy, the opportunity to use it to increase digital productivity,
and where this infrastructure fits in relation to e-business, e-health and e-education.
This is an untenable situation as important decisions regarding a project that will run over a 20-30 year
period are being made in a policy vacuum. Costs and technologies have been discussed ad nauseam,
but so far, nobody has addressed the enormous economic and social benefits, essential in running a
modern society. We put the question forward can we afford not to have an FttP-based NBN?
There is still a misalignment between the social and economic benefits of the NBN and NBN Cos
business plan. The new government wants to prioritise the underserved areas and is looking at other
technologies to create some early wins. The question, however, is how much can be changed at this
late stage and also whether it will really lower costs and speed up the rollout.
Australia is highly reliant on its income from natural resources and, like other resource-rich countries, it
needs to diversify its economy. Interestingly, it is these resource-rich countries that are leading the
rollout of FttP around the world. The main reason for those governments becoming involved in digital
infrastructure is to increase their countrys competitiveness and productivity in areas other than
resources.
For further information, see separate report: Australia - The National Broadband Network 2.0 - Stats
and Updates early 2014.
8.1.1
Effect of Australias NBN on the rest of the world
The eyes of the telecommunication and digital economy world are on Australia. I was privileged to
become the strategic advisor to the Australian Minister for Broadband in the developments of the NBN.
In the following years, as a consequence of the NBN policy that was put in place and executed upon, I
was invited to also advise governments in the USA, UK, Netherlands, New Zealand, Ireland and Qatar
on the development of NBNs and digital productivity policies for their countries.
In the White House in Washington, I gave a presentation of my views on how America could profit
from such an approach, and provided input into the development of the FCCs National Broadband

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Plan for America. I was also invited to assist the United Nations to set up the Broadband Commission
for Digital Development to which I am now a special advisor.
The high-level policy requirements as outlined in this report have now also been accepted by the
United Nations, which wants to see the development of national broadband plans as an international
priority. By mid-2013, over 125 countries had signed up to this initiative.
Exhibit 8 - Broadband Commission for Digital Development
The role of The Broadband Commission is to define practical ways in which countries at all stages
of development can provide access to broadband networks for their citizens, in cooperation with the
private sector. The Commission reported its findings to the UN Secretary-General in September 2010,
immediately before the New York summit that reviewed the work towards achieving the Millennium
Development Goals by the target date of 2015. Broadband networks are an essential and uniquely
powerful tool for achieving those goals and lifting people out of poverty worldwide. In 2011, the
Commission set targets for 2015 and introduced its manifesto.
BuddeComm believes a trans-sector approach to infrastructure is essential, and it is important to look
across infrastructure projects and sectors to create synergy.
The Commission has helped achieve some notable policy successes for example, it has succeeded
in boosting ICT and broadband on the global policy agenda, as well as in the outcome of the
proceedings of the Fourth United Nations Conference on the Least Developed Countries in Istanbul in
May 2011. It has also inspired enthusiasm for greater engagement with the UN among key business
figures and provided the model for the World Health Organizations Commission on Information and
Accountability for Womens and Childrens Health.
For further information, see separate reports:

Global - Infrastructure - The Broadband Commission for Development.
Global - BuddeComms International Broadband and Trans-sector Activities
8.2
NATIONAL DIGITAL ECONOMY STRATEGY
Parallel to the rollout of the national broadband network (NBN) the government also has its National
Digital Economy Strategy.
Based on the trans-sector model the NBN has become the shared infrastructure for a range of sectors
such as e-health, e-education, smart grids, e-government, digital economy and digital media. The first
release sites are playing an important role in testing this concept, while at the same time allowing
organisations to obtain first-hand experience in building the digital economy.
I am convinced that convergence offers unprecedented opportunities if the NBN is linked to transsector innovation, creating a true digital economy.
This approach will most likely result in economic and social benefits worth many billions of dollars
and, as we are already seeing, it will create significant new business opportunities for Australian
companies. In healthcare alone, there is talk of savings worth more than $10 billion and $2 billion in
smart grid.
For more details of these policies and the many trans-sector projects underway see: Australia National Broadband Network - Digital Economy
Exhibit 9 - How does broadband relate to economic development?
Access, adoption and utilisation are not the same concepts Just because people have
access to broadband infrastructure does not mean people are connected to the network; just
because people have adopted broadband does not mean they are using the available internetenabled solutions that increases their productivity and business competitiveness.

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It is not just about investing in broadband infrastructure, but driving utilisation Not only is
driving utilisation critical to network sustainability, it is foundational to realiasing full economic and
community benefits from the network investment.
Bolstering rural economies Broadband is essential infrastructure for effective participation in the
economy for urban and rural areas alike, with adoption driven by personalizing the value of
broadband to individual businesses, organisations and households.
A broadband lifecycle approach Maximum returns on broadband investments require looking
beyond the supply-side to make sure that each step of the process is addressed with a holistic
planning approach. This is accomplished by building access, encouraging adoption, and tracking
utilisation, focusing on the demand-side of broadband and understanding how individual
businesses, organisations and households are using the network.
(Source: Blandin Foundation)
8.3
AUSTRALIAS DIGITAL TRANSFORMATION IS UNDERWAY ANALYSIS
One of my arguments in relation to getting a national broadband network underway as opposed to just
discussing it has always been that it will be impossible to come up with a fully-covered cost benefit
plan stretching 10 or 20 years into the future. Based on lessons learned from Australia, the best way is
to agree to a plan that:
has widespread (not necessarily full) support;
is based on a national vision; and
has a flexible strategy attached to it to cater for the changes that will undoubtedly occur over the
period of its implementation.
Back in the 00s I argued that such a leadership approach would lead to action and would stop the
endless political discussion and associated procrastination that takes place in so many countries. When
it is just a plan people tend not to pay much attention, as there is no urgency for them to address the
issue. But as soon as implementation commences people have to start thinking about what it means for
them personally. By mid-2013 nearly half the population had information on when they could expect
the NBN to connect to their home or business.
From the first discussions about the NBN in 2007 to mid-2013; the infrastructure plans had the full
support of the industry and the telecoms engineering community, as well as of 70%-80% of the general
population and businesses of Australia.
Once the physical implementation began and people started to see infrastructure activities in their
towns and suburbs the discussion moved to the social and economic aspects whats in it for me?
The reality of the rollout and the fact that by now everybody believes that FttH is the end solution is
now producing the outcomes we foreshadowed; people are waking up and starting to think about what
this means for them. The effect of this turnaround in thinking is enormous.
And across society organisations also are now looking at what the new infrastructure means for them.
This is helped by the experiences organisations have already had regarding the impact of the internet,
plus the fact that the current financial and economic climate is forcing cost-cutting and improved
productivity. This is particularly critical for resource-rich countries, such as Australia, that have been
enjoying a golden period. But the wealth created in that sector has made them less competitive and less
productive in other areas. This is one of the reasons all the resource-rich countries are now investing
heavily in broadband infrastructure they need to improve their productivity in other sectors to
rebalance their economies.
It is great to see that the debate has shifted to what is needed to transform society and the economy in
order to obtain the benefits of digital productivity.
The NBN is no longer the story. Instead, it has created other, new stories in the many different
components of our society and our economy.

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With slow-growing and stagnating developed economies and increased competition from the highly
productive developing economies there is no way the developed economies can maintain their current
economic and social lifestyle other than to become more productive; and there is no better way to do
this than by utilising smart digital technologies.
Within that context, perhaps the single most important element will be the smart use of big data. As my
research company, BuddeComm, has been saying for many years in our research reports, this is also
why we need the NBN not for the sole purpose of getting faster access to the internet, but to build the
right digital infrastructure infrastructure that has the capacity, reliability, security, etc to allow the
country to increase the amount of data needed to create digital productivity, to create a smart country
not just more data but also the capability to connect that data to achieve smart outcomes. The growth in
M2M will be phenomenal.
Organisations are starting to understand this, and this is certainly stimulating the shift in the debate. It
reflects the increased understanding of people in general regarding the benefits of the digital economy.
We therefore applaud the initiative of Australias national R&D organisation, CSIRO, in investing $40
million annually into a Digital Productivity and Services National Research Flagship, which is aimed at
adding $4 billion per annum to the national economy by 2025.
While that is an impressive figure we believe that the real benefits are more far-reaching, as the
initiative will play a key role in the overall transformation of the economy, a transformation that is
desperately needed to maintain the lifestyle we have created for ourselves since WWII. Most people
have shifted their personal view of their own future from earning more money to securing their
current lifestyle. Unfortunately most economists base progress on productivity gains, not on lifestyle
issues.
One example alone should make everybody sit up and take notice. Currently, 20% of the national
budget (all levels of government combined) is spent on healthcare, and this is set to double over the
next 40 years. This, of course, will not happen, as it is totally unsustainable for example, it would
mean that the total State budgets would have to be spent on healthcare alone.
While it will not happen, the alternative, in a linear scenario, will have to be a very dramatic decrease
in the level of services and the affordability of medical services. For many years BuddeComm has
earmarked healthcare as the key sector that will profit from the gains we can make in digital
productivity.
8.4
THE ISSUE IS INDUSTRY TRANSFORMATION, NOT BROADBAND ANALYSIS

After some five years of public debate about the national broadband network, it is heartening to see that
more and more people are getting the message that the network means more than just fast internet
access. Increasingly, key decision-makers in business and government are reaching an understanding of
the transformation that is underway in the economy.
It started with the music industry, followed by the publishing industry. Also, the retail sector is learning
its lessons the hard way, but it is now beginning to understand the new environment. The
entertainment industry is still trying to stop the tsunami by employing armies of lawyers, but it, too,
will soon be engulfed by the changes. The banking sector is making a much smoother transition, while
the demise of Kodak is another example of missing the boat.
One by one, all sectors of the industry are being confronted with the business transformation that the
internet is bringing, and yet, incredibly, the ICT industry itself is still struggling with it (Sensis (YP),
Nokia, Microsoft, Motorola, Nortel, etc).
Progress in e-education is moving at an enormous pace and already some schools are limiting the
number of printed textbooks some are going totally e-book. With over a million children now with
laptops, it is only a matter of time before the education system switches over. The savings in books and
other printed material alone will pay for this digital revolution. South Korean schools will be entirely ebook-based by 2015.

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Changes in e-health are following the same path, with electronic patient records slowly being
introduced and health insurance schemes starting to re-fund e-health services. This will be a userdriven development as it is more likely that the users will be able to adapt to e-health much faster than
the healthcare system can deliver it.
This will clear the way for a whole new e-health industry, worth billions of dollars. One only has to
look at some of the e-health systems linked to the high-end private hospitals in the USA to see what is
in store. They use their e-health facilities as a major marketing tool to attract customers not just to the
actual hospital, but to all of the other facilities around it. The add-on revenues are significant.
In Australia, the high dollar is having a negative effect on many business activities in traditional
industries such as mass manufacturing, retail, banking, airlines, etc. At the same time, the
unemployment rate remains low. This suggests that it is not so much an economic decline as a shift
towards new jobs in new and different sectors, using new technologies and creating innovations and
value-adds.
A digital infrastructure is essential to manage this transition. One only has to look at manufacturing
Germany, for instance, remains one of the leading global manufacturing countries, thanks to
technological innovations that give it the edge over the countries whose manufacturing industries
continue to operate in more or less traditional ways.
The digital infrastructure plays a key role in German innovation and manufacturing leadership.
Exhibit 10 - Key applications of a digital economy
Economic growth (digital economy, new high-quality employment);

Healthcare from home (certain services);
Work from home (for certain kinds of work);
Education at home;
Shopping from home;
Interacting with the government from home;
Public safety;
Civic participation;
Energy independence/efficiency, management of renewable energy;
Entertainment.
8.5
THE IMPACT ON THE ECONOMY

The initial use of broadband has been to utilise the internet for information search and email
communication. However, the ubiquitous adoption of very high-speed broadband services will enable
all sorts of innovations across different sectors of the economy from business to business, business to
the home, and machine to machine. In turn, these applications will help address social and economic
challenges.
The impact of broadband on the economy is widely understood by the ICT industries.
Interesting statistics surrounding the internet/digital economy include:
It is forecast by the Boston Consulting Group (BCG) that by 2016 the internet economy will reach
$4.2 trillion across the G-20 economies;
BCG also established that the internet economy already accounted for 4.2% of GDP across the G20 in 2010 (the equivalent of $2.3 trillion);
A study by the McKinsey Global Institute in 2011 established that the internet economy accounted
for 3.4% of GDP across the G-8 nations, as well as Brazil, China, India, South Korea, and Sweden.

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Returning to our case study, Australia a 2009 Access Economics report commissioned by IBM
predicted that the widespread adoption of smart technologies in the key sectors of electricity, irrigation,
health, transport and broadband communications would increase the net present value of Australias
GDP by $35-$80 billion over the first 10 years of their deployment.
A more recent study by Ericsson, covering 33 OECD countries, found that doubling the broadband
speed for an economy increased GDP by 0.3%. This built on a previous report from the same company,
which found that for every 10-percentage point increase in broadband penetration, GDP increased by
1%.
A Deloitte report commissioned by Google found that the value of the internet to the Australian
economy rivals iron-ore exports today. The report found that the internet contributed $50 billion in
2010, equivalent to 3.6% of Australias GDP, and predicted a growth of 7% over the next few years, to
reach $70 billion by 2016.
For related information, see separate report:
Australia - National Broadband Network - Digital Economy.
9.
CONCLUSION
People are voting with their feet. They want national broadband networks, mobile broadband,
smartphones, PV systems on their roof, energy management systems in their homes and, soon, smart
cars, to give just a few examples.
But governments do not have a cohesive national policy in place to reap the social and economic
benefits of all of this they, themselves, are trapped in silo thinking. The Australian government has set
an example that governments can take a leadership role in assisting the transformation of their
economy, creating the opportunity of digital productivity and remaining competitive, while supporting
the lifestyle that people have become used to.
But looking around the world, it is not the people but the politicians who are failing to make these
societal changes happen. As we saw in the Arab Spring and the Occupy Wall Street (OWS) movement,
people are increasingly going to bypass their governments and the companies that are blocking
progress. And they will use their ICT devices and services to create their own new structures to make it
happen.
Major change is taking place in society today and to a large extent it is being initiated by the people
themselves. This may be an example of the human instinct for survival, but, whatever it is, our leaders
should start taking much more notice of this. They will need to show leadership in addressing the
current challenges and they can only do this by breaking with the past, demolishing the silos, and
building new horizontal, collaborative structures in partnership with their citizen and their
communities.
10.
PAUL BUDDE CONSULTANCY
Paul Budde provides consultancy services to governments, investment companies and businesses in
relation to the development of National Broadband Plans and the social and economic opportunities
that can be derived especially through digital productivity. Paul provides these services through
briefings, assistance with business and investment plans, customised in-house workshops and trainings.
Key topics include:
Transformation of the telecoms industry investment focus
After deregulations and privatisation, governments are back in telecoms again policy focus
Global developments international focus
Industry and market opportunities industry focus
For more information see: Paul Budde Consultancy

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11.
17/02/2015 17:52
RELATED REPORTS
Australia - Smart Grid Market Overview;
Australia - Smart Cities, Smart Infrastructure;
Global - BuddeComms International Broadband and Trans-sector Activities;
Australia - National Broadband Network - Changing the media model;
Australia - National Broadband Network - Digital Economy;
Australia - National Broadband Network - Industry in transition.
Copyright Paul Budde Communication Pty Ltd, 2015. All rights reserved.
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All BuddeComm research reports are intended to provide general information and strategic insights only, and they do not
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