Is there a link between connectivity and GDP?

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Chinese equipment manufacturer Huawei introduced Global Connectivity Index (GCI) at the Huawei Cloud Congress (HCC). It's an interesting study that suggests a direct link between connectivity and gross domestic product (GDP).

better GDP through connectivity

According to Huawai, this is the first (though both the ITU and Ericsson may disagree) quantitative assessment of connectivity and its value from both national and industrial perspectives, Huawei’s analysis claims that for each GCI percentage point increase a nation’s GDP per capita increases 1.4–1.9 percent, relatively higher for emerging countries.

This finding broadly reflects a previous ITU study, which said: “The higher penetration of broadband, the more important is its contribution to economic growth,” which also makes for “a positive contribution of broadband to job creation in developed and developing countries. “

The importance of such connectivity will only increase as connected devices proliferate - Huawei forecasts that by 2025, as many as 100 billion connections will be generated globally, 90 percent of which will come from intelligent sensors.

a new industrial revolution

“By leveraging connectivity to streamline business processes, reduce costs and improve efficiency, enterprises will drive innovation and move the focus from a consumer driven internet to an industrial one,” Huawei said in its press release announcing the report.

The report rated each nation’s connectivity score on the basis of 16 factors, including broadband speed and availability, smartphone connections, and apps downloads. Germany topped the table because of its widely available low-cost high-speed broadband and rapid adoption of Internet services.

A previous Ericsson study concluded, “Doubling broadband speeds for an economy can add 0.3 percent to GDP growth, in a simulation relative to the base year 2008.”

Finance, education, oil and gas, and manufacturing industries are driving the growth of mobile and fixed Internet services, while customer satisfaction improvements, reduced operational costs and productivity are driving further investment.

Communications privacy is a concern. Healthcare professionals recognize the importance of ICT to health, but raised doubts concerning the quality and security of existing digital ecosystems.

exponential growth

Along with the top-level confirmation of the importance of connectivity to national GDP, the report also included numerous interesting statistics, for example:

  • Huawei estimates total data traffic during 2012 was 391 Exabytes (EB). This will increase tenfold by 2025.
  • Global ICT spending will increase to approximately $5 trillion by 2020.
  • 65 percent of enterprises plan increased ICT investment over the next two years.
  • 46% of surveyed retailers use digital channels for sales, (highest among surveyed industries); 78% believe ICT has significantly improved efficiency in supply and delivery logistics.
  • The number of Internet users will reach 6.5 billion by 2025.
  • There will be 8 billion smartphones in use by 2025, up from 1.7 billion today.

William Xu, Chief Strategy and Marketing Officer, Huawei, said: "It is our hope that the GCI will not only indicate ICT investment and development in various countries and industries but, more importantly, serve as a reference for industry policymakers and enterprise decision-makers.”

CIO check list

The report’s recommendations for enterprise decision-makers include:

  • Embrace digital reformation of infrastructure, organization, and strategic priorities to adapt and prosper in a Better Connected World.
  • Do not treat ICT merely an efficiency tool, utilize it to create value and facilitate transformation of your business model.
  • Take customer-centricity to the next level through proper use of ICT, whether it be through big data analytics, real-time engagement, or an inspiring experience that makes business feel personal.

Huwei’s findings do differ a little in comparison to previous studies, though the research methods also differ. They also reflect a different point in time: accelerating adoption of connected devices across multiple industries will inevitably increase bandwidth demands, posing further strain on existing connectivity deployments.

You can download the complete report (PDF) here.

Stewart Baines

I've been writing about technology for nearly 20 years, including editing industry magazines Connect and Communications International. In 2002 I co-founded Futurity Media with Anthony Plewes. My focus in Futurity Media is in emerging technologies, social media and future gazing. As a graduate of philosophy & science, I have studied futurology & foresight to the post-grad level.