A government official from one of the South Pacific islands asked me recently why there frequently seems to be so little discussion of the role 5G can play in promoting economic development in the South Pacific.
There are a couple of practical reasons. Economic activity, almost always, hinges on population. Most economic activity occurs where there are substantial numbers of people. High rates of economic growth require other inputs as well, but population mass is the foundation, since perhaps 70 percent of all economic activity is generated by consumer spending.
So policy makers confront the fact that total population in the South Pacific is small, perhaps 2.3 million people, scattered across 10 million square miles.
In other words, as a practical matter, ask yourself whether the absolute best communication facilities--fast internet, low retail costs, ubiquitous terrestrial coverage, big modern data centers, 100-percent fast mobile internet coverage--can make a big difference in terms of spurring economic development, in areas of low population, in areas remote from population centers.
Producers and suppliers go where the people are, fundamentally. So economic activity tracks population. On the scattered South Pacific islands, gross domestic product can be quite low, by global standards.
With the exception of Australia, New Zealand and Papua New Guinea, GDP on any single island is quite small, orders of magnitude smaller than on the two bigger islands and the continent of Australia. GDP on a global scale also is quite small.
That being the case, even 100-percent adoption of any technology in the South Pacific does not move the global needle. Conversely, what happens in India and China, right now, drives both growth of fixed and mobile internet access globally.
At a more granular level, and ignoring contribution to global output, assume that there are no gaps whatsoever in small South Pacific island technology supply or take rates, and that supply is equal to that found among the top 20 countries globally.
We all commonly believe that broadband causes economic development, and that, to the contrary, its lack retards economic growth. Let us be clear, the two are correlated. What nobody can prove is the thesis that better broadband “causes” faster economic growth or more growth. But we all behave as though this were the case.
But it might not be true. It is entirely possible that strong economic growth itself creates the demand for better computing and communications assets and deployment.
In other words, wealthy consumers in areas with high job growth and economic growth demand--and can afford--better internet. That, in turn, creates the supply.
In rural U.S. or any other markets, we might note that the business case for more investment is sharply limited, precisely because the pool of customers is sharply limited.
What could change? How much more economic output is possible? Economists always point out that consumer activity accounts for 70 percent of gross domestic product. So people matter, and that is the ultimate point. Even supplied with the absolute best computing and communications resources, the South Pacific islands are too thinly populated and too remote from other population centers to become much-bigger platforms for economic activity.
How much more job creation, retail spending, use of edge computing, warehouse siting, transportation facilities, factories or business activity is possible, even with the absolute best computing and communications facilities being in place?
In other words, as much as policymakers should always strive to make high-quality communications available in rural and remote areas, the actual potential economic upside is probably sharply limited. The social and educational benefits are another matter.
Still, we generally overestimate the effect high-quality computing and communications can have, where it comes to economic development, in lightly-populated areas remote from large population centers.
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