The value of the internet

The internet is a powerful tool for business, yet for too long we’ve struggled to convince many people of this fact.

It’s all about pornography, stealing copyright material and playing games, they say.

I’m not joking about this – I’ve heard it from government ministers, leaders of business, academics and (most alarmingly) a retiring Telecom board member. Really.

Now, however, we can point to a report that is at the least impartial and well put together. Sure, we’ve had reports in the past of the economic benefits of broadband, but when they’re produced at the behest of companies like Ericsson or Alcatel, they tend to get tarred with the “of course you’d say that” brush.

Today’s release, “The value of internet services to New Zealand businesses” was commissioned by the Innovation Partnership, which consists of InternetNZ and Google among others, but is put together by the economists at Sapere, led by an old colleague of mine, Hayden Glass.

The upshot is, yes having broadband does increase your productivity, improve your bottom line and deliver on all the benefits we’ve talked about for years.

On the other hand, the report also highlights those sectors of the economy where broadband has not made much of a dent – most notably in the rural sector, where farms and farmers seem immune to the charms of having internet connectivity either because they don’t see the value or, more likely in my view, because they’ve never had it and don’t know what they’re missing out on.

A couple of years ago I spoke at a Federated Farmers Nelson branch AGM, and talked about the UFB and RBI proposals and how they’d impact on rural life.

At the tea break, one large burly farmer came over to tell me he saw no value in the internet at all. His wife overheard him, smacked him on the shoulder and called him names. We use the internet, she declared, when it works and we need more of it. The apprentices use it for their studies, the kids use it for theirs and we used it to get the seats to the Rugby World Cup. In fact, so poor was the connection that they nearly missed out because after choosing the seats on the handy online tool, the connection would time out and she’d have to re-book from scratch.

“We nearly missed out on the semi-final,” she told him and he was an instant convert. “We must have more of it,” he declared.

Of course, there’s more to farming’s need for broadband than tickets to the rugby. Irrigation schemes, weather reports, milk yield reports, ongoing education and training opportunities, GPS mapping, health inspections (both people and animals), animal ID tags and so on all rely on better connectivity and on farmers willing to use this new kit.

Every percentage gain in productivity we can deliver in rural New Zealand will have a huge impact on our overall GDP and if that was the only measure, we’d be strongly urging rural New Zealand to get online as fast as they can, but of course it’s not. There’s also the social need – rural society’s cohesion relies on good communications far more so than in the city where we’re face to face on a daily basis.

This is a fight that should shape the next election – finally we have the ammunition we need to direct policy makers in the right direction.

There’s plenty more in the report as well, so do take the time to have a look through it. Well done to all concerned with its production. It’s something we can all use in our ongoing debate about connectivity.

Get secret pricing deals off the table – Consumer, InternetNZ, TUANZ

“Trying to do a deal on prices would undermine the important role an independent regulator has to play in setting them.”

“Customers are poorly served by the telecommunications industry working together in secret to fix the price of wholesale broadband.”
Media release – 13 July 2013

Consumer, InternetNZ and the Telecommunications Users Association responded today to a report in the Dominion Post that the telecommunications industry was seeking to negotiate a price for the wholesale copper broadband service known as UBA.
A Commerce Commission conference to help determine the regulated price of that service concludes in Wellington today, with the telco industry negotiations understood to seek to influence a forthcoming discussion paper on a regulatory review of the Telco Act announced by Communications Minister Amy Adams in February.

TUANZ CEO Paul Brislen says the best way to resolve the issue of pricing rules for a monopoly service like UBA is through open and transparent discussion. “If the report in today’s paper is accurate, it seems that some in the industry would prefer to see a deal done in private, and without the scrutiny of users,” he says.

InternetNZ Acting Chief Executive Jordan Carter says “Industry discussion and input on the policy framework and to help inform the regulatory review is a good thing, because government decisions should be well informed”.
Consumer CEO Sue Chetwin says “A line is crossed if specific prices are being discussed – that moves the matter from an intelligent debate about the best possible policy framework, to what looks like a stitch-up – or worse, a cartel”.
These kinds of back room deals are rarely good for consumers and it puts us in the awful position of the industry sitting down together to set pricing without reference to either customers or to the regulator, say the three Chief Executives.

None of our organisations are in the loop with these conversations, and none of us want to be. We won’t talk about prices, and neither should the industry: that’s a job for the Commerce Commission. We will make our points about the review in public. We urge the industry to take the same view.

“Setting the rules and setting the prices are two different jobs. The review is about reviewing the pricing rules. The regulator has the job of setting the prices. Trying to do a deal on prices would undermine the important role an independent regulator has to play in setting them. Without that protection, consumers are unlikely to get a fair deal,” the CEOs conclude.