Telecoms & Broadband Business Newsletter - September 2015

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Last updated: 8 Sep 2015 Update History

Report Status: Archived

Report Pages: 16

Analyst: Paul Budde

Publication Overview

Published since 1983, Australia’s first telecommunications and new media newsletter covers national and international business strategies and government policies in relation to fixed and wireless broadband and other smart infrastructure, the digital economy, digital and mobile media, smart grids, e-health and e-education.

Executive Summary

Editorial:- Is Australia ready for the shifts in the Asian economies?

The Chinese economy went from one based on agriculture to the current one, based on manufacturing. And it is estimated that this development will peak around 2020; after that the focus will start to shift towards a more service-oriented economy.

Interestingly, this development is based on the use of steel in the economy. This measurement provides good indications of where an economy sits in its manufacturing stage. Obviously this shift will have an effect on countries that deliver raw materials to China. Currently the Australian economy depends on shipping its raw materials to China, India and other countries in Asia.

Once the Chinese economy starts shifting this will also lead to increased competition with the developed economies, which have all shifted their economies already to one based on service – Australia, of course, being one of them.

Interestingly, at the same time China also aims to maintain its leading position in manufacturing and is preparing for the shift that is inevitably going to take place by rapidly deploying robots and other ICT-based technologies. The investments the country is making in this ICT transformation is mindboggling.

The rapid growth of the Chinese and Indian economies is generating a global shift in economic gravity. The centre is moving away from the Atlantic, where the dominance was in the hands of the USA and Europe. It is moving southeast and is currently hovering above Saudi Arabia as the economies in the east pull the centre of the global economy in their direction. It will end up somewhere between India and China.

Potentially this is a great opportunity for Australia, as it is well-positioned close to the new centre of economic gravity. But with resources becoming less important the country will have to diversify its economy. Current conservative politics, however, are preventing this from happening in a speedy fashion. Vested interests want to hang on to the status quo, preferring to slow down progress towards a more diversified economy, rather than stimulating it. This is evident in policies on energy, renewables, the digital economy, and, perhaps even more importantly, the essential R&D needed for this economic transformation.

Another difficulty for Australia is that, while it pays a lot of lip service regarding the opportunities it sees in Asia, it lacks the political will and leadership needed to actually become part of Asia and, as such, part of this new centre of economic gravity.

The other major problem Australia is facing is its worsening level of productivity. Australia’s productivity has slipped dramatically on the world scale and unless we address that issue we eventually will have to pay the economic price for this.

In this respect there is no option but to increase digital productivity, yet these words ‘digital productivity’ are seldom uttered in political circles – or, for that matter, in the Australian boardrooms and executive suites. Over the last five years there have been more American companies than Australian ones championing some of the Australian national digital economy initiatives. The Australian organisations simply keep their heads down in order not to be caught in the partisan political debate on this issue, apparently not realising that this is all about their own economic future.

There will be exponential growth in productivity driven by robots, AI and the networking economy; and the Chinese example regarding the future it sees for its manufacturing sector shows that it is willing to put its money where its mouth is.

The exponential growth that can be achieved from digital productivity is already visible if we look at the digital native companies – their productivity is many times higher than that of the traditional companies.

Exponential growth and the chess board with grain story

The wheat and chess problem appears in different stories about the invention of chess. One of them has the inventor of chess request that his ruler give him wheat according to the wheat and chessboard problem. The ruler laughs it off as a meagre prize for a brilliant invention, only to have the court treasurers report that the unexpectedly huge number of wheat grains would outstrip the ruler's resources.

If a chessboard were to have wheat placed upon each square so that one grain was placed on the first square, two on the second, four on the third, and so on (doubling the number of grains on each subsequent square), how many grains of wheat would be on the chessboard at the finish?

The problem may be solved using simple addition. With 64 squares on a chessboard, if the number of grains doubles on successive squares, then the sum of grains on all 64 squares is: 1 + 2 + 4 + 8... and so forth for the 64 squares. The total number of grains equals 18,446,744,073,709,551,615, much higher than what most intuitively expect. (Source Wikipedia)

If Australia wants to become part of Asia it will have to start looking very seriously at digital productivity. This will require political and economic leadership and a willingness to wean ourselves off our dependence on resources and start with a far more active policy aimed at diversifying the economy.

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