The IT experience – Is industry serious about the costs of doing business?

This year the Federal Government held an inquiry into IT pricing in Australia. Ed Husic spoke at the GAP Productivity Summit about the importance of access to new technology for consumers and businesses.

I really appreciate the opportunity to be with you today at the Annual Growth Summit and I’d like to thank Global Access Partners, and in particular Executive Manager Lisa Middlebrook, for the opportunity to speak.

It’s nearly two years to the point I was actually sworn in as a Federal Member of Parliament. What I have learned early on is that getting change and pursuing issues does require an almost obsessive like commitment. I don’t know if being as “stubborn as a mule” is a helpful skill set for a MP but I am very open to the idea of reporting back to his summit on my experiences at some later date.

The ability of MPs to advance issues and find ways to secure support for change is regularly tested, as it should be.

I’d say that this has definitely been the case on an issue that I’ve been focused on for some time – the impact of relatively high prices for Information Technology (IT) in this country. For over 18 months this I’ve pursued this within Federal Parliament, for reasons that will become clearer during my contribution. It’s been challenging to get traction on this matter, especially when some of the big players in the sector having hoped the issue might helpfully dissolve before firmly shut eyes.

However, consumer and business sentiment on this issue ensures that this won’t be the case and I’ve been grateful for the support of Communications Minister Stephen Conroy, who has helped set up an inquiry into the state of IT pricing in Australia. The inquiry has attracted bipartisan support and interest in cooperatively investigating the policy issues at the heart of the inquiry. Some submissions have been eye opening but one aspect that’s intrigued me is the multi-faceted response from the business sector.

You don’t have to look too far in the business pages of most of our press to find sections of industry hum a mantra like chant about the cost of doing business in this country – but then see industry associations in the next breath defending businesses that are actually propping up these costs.

I want to come back to this later but for now it’s important we get a sense of where’s we’re at and what’s at stake.

What are we looking at here?
The number of outstanding facts about the revolutionary changes brought on by the internet is at risk of becoming pedestrian. But I’ll risk dropping one telling fact. Radio broadcasts took 38 years to reach an audience of 50 million people, TV took 13 years to reach the same number. The internet did it in just four. Accessing this technology has not been for the sake of favouring a play-thing.

According to Boston Consulting Group, it has started shattering the cost of production and distribution, reshaping industries long the way. In Australia, we stand on the threshold of a complete and utter renewal of our continent’s technological infrastructure. Few countries in the world are doing what we are doing to improve our ability to seize the advantages flowing from accessing super-fast broadband – delivered by the National Broadband Network. But we’re playing a massive game of catch up.

Our broadband infrastructure has lagged well behind Sweden, the Netherlands, Switzerland, Denmark and Norway. By late last year, we ranked 21st out of 34 OECD countries then it came to fixed broadband take-up. In September 2011 we were rated four places below the OECD average in advertised download speeds across all fixed line technologies and even worse for fastest available advertised able speeds (6th slowest) and DSL speeds (13th slowest). Staggeringly, we’re paying an arm and a leg for it: with OECD stats revealing Australia as the fifth most expensive country in the OECD for low speed, low data cap broadband plans. Getting this fixed is compelling. It’s why the Federal Government is working to ensure that via the NBN 93 per cent of Australian homes, schools and businesses will have access to superfast broadband through optic fibre to the premises, capable of providing broadband speeds of up to one gigabit per second.

The economic benefits of having access to this infrastructure imply can’t be overstated. Google commissioned work via Deloitte Access Economics pointed out that the internet helped generate $70 billion worth f economic value.

The ability to track down information, to be more efficient with our spending, amounts to a saving of about $500 per person – $7bn nationally. We’re more productive because of this: in 2011 business and government generated $27bn in value through productivity benefit. And as 20 per cent more Australian homes are connected to the internet, it will bump up our economic growth by one per cent.

By 2050, IBM’s research estimates that $1 trillion worth of value to our economy could be created through the application of technology, via the internet and taking into account the improved productivity that flows from businesses and governments and communities effectively digitising the way that they operate.

Hand in glove: NBN and business IT investment
I’ve sought so far to give a sense of the breadth and economic value of the infrastructure investment being undertaken at the national level. But the picture is not complete without filling in the detail – that is, the type of investment being undertaken within over two million small to medium sized businesses.

Back in June, Sensis commissioned the “eBusiness Report – the online Experience of Small and Medium Businesses”. They liaised with nearly 2,000 businesses across the country, covering around ten different business sectors. Over 80 per cent of the businesses contacted were small business, the rest are medium sized.

A quick snapshot: some remarkable, others that – at first blush – don’t have the same shine but taken on a greater gleam with after thought:

• 95 per cent of SME’s own a computer – notebook computers starting to shrink in number, but purchase of tablets starting a strong march forward;
• This mirrors what’s happening in our homes with 93 per cent of households having a computer of some description;
• 92 per cent of SMEs are connected to the internet;
• The amount of business done online remaining stable, with SMEs placing over a third of their procurement online;
• Online selling as a share of total sales activity rose to 31 per cent; and
• An average $4,000 spent on website build and maintenance.

• Argued that the cost of doing business in Australia was high;
• Said that fixing this should be left to the market… that is widely recognized as being afflicted by IT price discrimination;
• Pointed to competition law as an avenue to address this; and,
• Then said additional government intervention isn’t warranted.