Taxpayers Union says Motu study shows UFB a waste of money

The Taxpayers Union has seized on the findings of a study into the productivity benefits of the Ultra Fast Broadband network, saying it shows the $2b spent by the Government on the network was “money down the toilet.”

However the findings in the study, undertaken by Motu Economic and Public Policy Research, under a grant from the Ministry of Business, Innovation and Employment, are rather more nuanced.

The Taxpayers Union says the Motu research “shows that none of Steven Joyce's promised economic productivity gains have resulted and is a major blot on the Government’s corporate welfare empire.”

Taxpayers Union executive director, Jordan Williams, said the $2b spent by the Government was actually an understatement of what New Zealanders had been forced to pay because the Government held up the price of copper services so as to artificially subsidize fibre.

“This is what happens when politicians decide something based on emotion, buying votes and wanting to support sexy industries,” Williams said.

“Steven Joyce refused any cost benefit analysis prior to the UFB announcements and swallowed the Kool-Aid being provided by the telecommunication providers who benefited from the rollout money."

He claimed that lower cost hybrid fibre/copper networks would have been more appropriate. “Of course every New Zealander wants fast internet. But the Government chose to roll out fibre when many experts were pointing out that developments in copper technology meant that for the vast majority of households, advanced ADSL technologies were more than suitable."

Williams concluded: “The Taxpayers’ Union has long labelled the UFB scheme as ‘corporate welfare’. Steven Joyce has even mocked us for that characterisation. This report shows that the Union was absolutely right.”

The Motu study concluded that UFB on its own had no effect on the performance of an enterprise, even for those enterprises where fibre usage might be expected to produced particularly high returns, such as firms saying connection speed was important, or those with higher than average computer capital intensity.

Complementary gains possible

However the study noted prior research saying it showed that “complementarities may exist between ICT investments and organisational decisions.

It acknowledged the possibility that “UFB adoption coupled with changes in organisational procedures may yield productivity improvements,” adding “We find evidence of a relationship between improved productivity and investments in complementary investments by firms that adopt UFB. … We find that UFB-adopting firms making these complementary investments have an increased likelihood of achieving a range of improved business outcomes such as better sales and marketing methods and improved efficiency of production processes.”

It concluded: “The strength and consistency of these results coupled with the systematic patterns in the self-reported outcomes suggest that there is a causal impact on firm productivity from joint adoption of ultra-fast broadband and complementary organisational investments.”

This finding contradicts the Taxpayers Union’s claims that investment in the UFB was a waste of money, but the study failed to confirm this link, or to quantify any benefits. This despite its stated objective: “Our unique contribution … is to estimate whether there are productivity gains from UFB adoption and whether any gains are higher when firms undertake complementary organisational investments.”

Copyright © 2016 IDG Communications, Inc.

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