NZIER and Chorus find economic potential in rural connectivity

A new NZIER report has highlighted the potential for rural households and businesses to see benefits totalling NZD$16.5 billion over the next ten years if they had access to the same digital connectivity as those within urban areas.

Commissioned by Chorus, the "Rural Connectivity: Economic Benefits of closing the rural digital divide" report found that simply having access to digital technology is not enough and that constraints on capacity and reliability will discourage the use and the degree to which New Zealand can capture the economic benefits.

'Digital parity' is a concept heavily mentioned in the report, which involves calculating the economic benefits that flow from rural households and businesses having parity with urban.

The report says the mainstay of the value from the availability of high-capacity networks will go to rural households, who could each expect an annual benefit, or cost savings, of about $6,500. 

These savings are primarily due to better access to more employment opportunities and the ability to use telehealth services, as well as the ability to conduct easier online transactions with government agencies and banks.

There will also be a significant benefit for rural businesses, with the report estimating rural businesses' annual benefit in time savings to be $344 million. In addition, NZIER estimates that productivity gains from access to connectivity with unconstrained capacity increase output yearly by at least $189.5 million for rural businesses.

JB Rousselot, Chief Executive, Chorus, says that as demand grows for better services in rural areas, there needs to be more focus on how successful rollouts and strategies can be implemented.

"The report illustrates the need for a broader discussion about the right mix of private and public investment that can deliver these benefits over the coming years," he says.

"There's a growing demand for unconstrained, high-capacity broadband and a renewed case to take fibre further and reach many of the predominately rural homes and businesses not yet covered.

"Giving all New Zealand households and businesses access to the same high-capacity digital connectivity will improve productivity and business output and encourage innovation. Taking fibre further will positively impact the economy and help bridge the growing connectivity gap between rural and urban areas."

Christina Leung, Principal Economist at the NZ Institute of Economic Research agrees, saying that improved connectivity promotes new innovation and a healthier and more prosperous technological climate.

"The pandemic highlighted the importance for people of having access to reliable technology," she says.

"Access to high-capacity networks improves the way we live and work. NZIER has estimated the benefits of closing the urban-rural digital divide for households and businesses. Our findings suggest a total benefit of around $16.5 billion over the next ten years.

"As our estimates only capture the benefits based on the current state of the economy, we would expect that as improved connectivity encourages the development of new innovations, the benefits would grow over the years."