Bandwidth a big driver of economic success, says McKinsey & Co

Connectivity helps drive a nation’s economic performance, McKinsey finds

Gustav Grundin, an associate principle in McKinsey & Co’s Telecommunications, Media and Technology Practice in Asia, claims there is a very close correlation between a nation’s economic performance and its level of connectivity, and says that connectivity is the driver of economic performance.

His comments are likely to stir up the debate in Australia about how much broadband bandwidth the country needs, although Grundin said McKinsey did not have data on the impact of fibre to the home (FTTH) level bandwidths on economic performance — only that of bandwidths up to about 40 megabits per second.

Addressing a session at the CommunicAsia 2016 conference in Singapore, Grundin put up a slide derived from World Economic Forum data that showed a link between increasing economic competitiveness and increasing ICT readiness.

“The first time I saw this chart I thought it was rigged because the correlation is so striking,” Grundin said. “But it is true: The more connectivity, the better the economic performance.”

He dismissed the view that economically successful nations might have better connectivity by virtue of their economic success, saying: “We have looked at that, and it is very clear connectivity is what drives economic performance… Connectivity has massive benefits of various kinds.”

However, Grundin was not able to throw any light on one of the central questions surrounding Australia’s NBN: Whether the bandwidths available over fibre to the node (FTTN) and hybrid fibre-coaxial (HFC) will be adequate, or whether there would be significant additional benefits from FTTH.

He broke down connectivity into four levels: Voice-only, basic connectivity (“something like 3G”); high speed connectivity (“we are talking about 30 or 40 megabits per second: The sort of things you can do with VDSL; watch HDTV without problems, for example”); and ultra-high-speed connectivity, which is “essentially fibre and the most advanced LTE with carrier aggregation.”

Grundin said: “We have no data yet on the last section we don't know what fibre to the home will do but it will do something.”

At the other end of the scale, Facebook vice-president and global access policy lead, Kevin Martin, spelt out to a forum at CommunicAsia 2016 the benefits that basic communications could bring to populations.

“Bringing connectivity in the developing world to the level that in the developed world would create about 450 million new jobs. It would give 650 million children access to information for education that they do not have today. It would save 2.6 million lives in infant mortality,” he said.

He said Facebook had identified three barriers to achieving this: Lack of infrastructure, lack of awareness or perceived need and affordability.

“There about 1 billion people around the globe who do not have access to infrastructure and about half of the 4 billion people around the world who are not connected don’t connect because they are not even aware of it or don’t know what they would do with it, and there are about 1 billion people who simply cannot afford to connect.”

He said that Facebook had come up with ways to address all three of these issues.

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