1. Setting the Scene: ICT and New Zealand
1.1 A Time of Transition
In 1900, a telephone cable was brought ashore at Cable Bay in the north of New Zealand. The cable stretched across the planet from Porthcurno in Cornwall, joining New Zealand to Europe, and making voice-based telecommunication possible. That first cable was just the start. In the early part of the 20th century, we built an extensive land-based telecommunications network that joined New Zealand communities together.
By the 1960s, the cable-based telephone network was being supplemented by satellite networks. The first computers had been developed during the Second World War, and 20 years later some larger businesses were beginning to use early forms of electronic data interchange. Personal computers took off in the 1980s, rapidly becoming more powerful and almost ubiquitous by the end of the century. At about the same time, the first analogue mobile phone networks were created. With the adoption of Internet Protocols (IPs) in the 1990s, a low-cost platform was built that connected telecommunications and information technology as well as connecting millions of computers right around the globe.
The transformative impact of ICT derives from the ways in which these technologies can provide us with a greatly enhanced ability to create, collect, manage, process, store, move and access information, using networks to do so.
Commerce, culture and learning have always required networks to thrive. The networks enabled by ICT are different, because of their speed, global reach and almost unlimited uses, from data-processing to entertainment. While ICT networks require wires, computers, mobile devices and web sites, these things are not their essence. The value of networks resides in the ways they enable people to interact and share information with one another.
ICT networks have already enabled huge efficiency gains to be made in information-intensive activities. Using networks to access creative, educational and cultural content creates enormous social value. The ability to share information strengthens all communities, makes research and development more efficient, and enables the spread of innovations throughout the economy.
As networks grow, the value of being connected grows exponentially, while the cost to the individual either remains the same or reduces. Economists call this a network externality. To illustrate, a connection to the Internet in 2004, with its 600 million users and four billion Web pages, is much more valuable, yet much less expensive, than a connection to the Internet was ten years earlier. In 1994, the World Wide Web was in its infancy, with a mere six million users and fewer than 20 million Web pages.
Historically, the manipulation and movement of information were constrained by the physical characteristics of the storage medium such as stone tablets, parchment, or printed paper. At the most fundamental level, ICT has enabled information to be freed from the constraints of its physical storage medium. For example, EFTPOS separates money from notes and coins, MP3 files separate music from compact discs or Edison cylinders, and digital photography separates photographic images from film.
General-Purpose Technologies
Technological change is one of the key sources of economic growth. Over the past 100 years, the rate of technological change has accelerated, driving economic growth and social change.
We are familiar with incremental technological change: cars become lighter, safer and more fuel-efficient, gramophones morph into hi-fis, and Sony Walkmans become MP3 players.
Occasionally, however, a new technology is invented that has huge and far-reaching effects on human existence. Thousands of years ago, the domestication of plants enabled us to establish permanent settlements, giving rise to modern civilisation. Later, the development of writing enabled information to be recorded and disseminated without depending on human memory. More recent examples include the various machines that started the Industrial Revolution and led to the harnessing of electricity and the invention of the electric dynamo, which eventually enabled assembly-line manufacturing to develop, and hence mass production.
All these are examples of general-purpose technologies.2ICT, which enables large amounts of information to be processed rapidly and moved around with ease, is another.
Generally speaking, a new general-purpose technology allows greater economic and social complexity to develop. There are three phases to the development of a general-purpose technology:
- the introduction of the new technology;
- a transition in which the technology spreads widely and the necessary infrastructure, policies, education and complementary technologies are developed; and
- consolidation and harvest, during which the economic and social benefits from the new technology are reaped.
In the case of ICT, like the world's other developed economies, we are in the second, transition stage where the technology spreads widely.
1.2 Obtaining the Full Value from ICT
Technological changes affect the structure and functioning of the economy and society.
A transforming general-purpose technology will by its very nature cause (or require) significant changes in society's structures and institutions.
Take a familiar example from our own history: the development of refrigeration. Once freezer ship technology became available in 1882, the economic and social structures in New Zealand were shaped over time to support the production and export of frozen meat and dairy products to markets on the other side of the world.
The availability of refrigeration was not sufficient in itself for New Zealand to obtain economic benefit. Land holdings had to be consolidated into more efficient units and farming practices improved (pastures, stock-breeding and management, to fencing). Abattoirs and dairy factories were built to process meat and dairy products for market, while the government regulated the industry and took oversight of quality control. The government also invested heavily in research into improved farming practices, which in turn improved quality and productivity.
The rise and rapid adaptation of New Zealand protein farming were intertwined with the development of finance, processing, distribution and shipping to form a sophisticated mechanism connecting the farms to their markets.3
Complementary Change Is Needed
ICT is a transforming technology on a much greater scale and with many more applications than mechanical freezers. But, like freezer ship technology, it is not enough by itself to drive sustained economic growth.
Developing ICT infrastructure is a necessary condition for reaping the benefits of ICT, but that's not all that is needed. What is also required is an environment that supports and drives complementary innovations in society's systems, processes and institutions, in business management, and in individual skills and behaviour. In many cases, systems and processes will have to be re-engineered in order to take advantage of the benefits ICT can provide. In addition, policies must be developed to mitigate new risks, such as breaches of privacy and technology-enabled crime.
The policy focus for ICT therefore requires a shift from infrastructure and supply considerations to supporting ICT-driven structural transformation.
Policy development should be considered at several different levels:
- the individual (recognising people's different skills and training or education needs);
- the community (ensuring access to ICT for all; using ICT for better delivery of services and for community building, to ensure effective communication, and to develop community and voluntary groups);
- the firm (changes in business processes, management capability, potential for new products and services);
- the industry sector (ICT may change the functioning and structure of a sector significantly, including the nature of employment); and
- the wider economy (such as the significant change in the telecommunications market with the shift to integrated voice and data services, and the advent of wireless services).
Our current ICT policies reflect this very wide range of requirements, from education, health and community enablement to business assistance, regulatory reform and E-government (see Appendix 1).
1.3 Future Trends in Technology
The developments in ICT over the past 25 years can be characterised by six broad trends:
- The speed and capacity of microprocessors increase and this, combined with the miniaturisation of components and devices, has powered both personal computing and a growing range of task-specific devices and applications, such as the iPod, DVD, EFTPOS, and GPS;
- The convergence of different information and communications technologies increases, seen for instance in the merging of telecommunications, computing, broadcasting and content-producing industries such as publishing, music and film;
- The cost of technology and access decreases, and combined with increased utility, this drives rapid uptake by both businesses and individuals;
- The degree of connectivity increases, in terms both of the percentage of the population connected and of available points of access; with a step change in recent times from fixed-line to mobile wireless communications;
- Bandwidth (that is, the speed and capacity) of networks increases; and
- Unexpected, disruptive technologies, such as the Internet and mobile communications, emerge and are rapidly adopted.
It is likely that these trends will continue for at least another decade, with the following developments being likely:
- computing power will continue to double about every 18 months (Moore's Law);
- broadband uptake will take off as competition improves, costs come down and new applications and uses are created;
- broadband speeds will increase to satisfy the requirements of new applications, including the demands by research and education institutions for gigabit access to high-capacity databases and other e-science tools;
- the cost of fibre-optic networks will decline, and new networks to the office and the home will be built;
- wireless technologies will provide ubiquitous, fast mobile connectivity, any time, anywhere;
- there will be a proliferation of cheap, task-specific connected or electronically readable devices (such as Radio Frequency Identification Devices or RFIDs), particularly for sensing, monitoring and data collection;
- IP networks will replace switched networks, allowing any smart device to be connected to the Internet, speeding the convergence of telephony, television and data transmission;
- organisational processes and procedures will become more adaptive, to take advantage of the new capability provided by ICT; and
- by the end of the decade, new optical technologies will make possible all-optical networks and consequently a vast increase in communications bandwidth, to hundreds of gigabits per second.
Many new devices and applications will follow these developments and drive others, just as we have seen in the past five to ten years with MP3 players, digital cameras, Personal Digital Assistants and DVDs.
Technological development constitutes an opportunity that can be turned to the advantage of New Zealanders. The government's actions should therefore be directed towards creating a preferred future for New Zealand, rather than accepting an inevitable future.
1.4 The Current State of Play
Strengths
By any international yardstick, New Zealand is near the forefront in adopting ICT. We have been in the top ten countries in the world for Internet access on a per capita basis since 1993. Recent surveys show that 75% of New Zealanders are regular Internet users, the highest rate in the world. We have been the highest spenders in the world on IT equipment per capita for a number of years. We combine access to advanced technology with a low cost-base - a combination that is attractive to foreign investors.
We are resourceful and keen to exploit the advantages offered by ICT. We are developing an international reputation in the area of creative digital content in film, animation and Web design.
Our national heritage institutions have developed programmes to digitise their collections.
We have successfully piloted the use of ICT tools to strengthen and improve the capability of our communities, and have developed world-class programmes for cyber-safety.
Our local communities have access to a wealth of information from a variety of sources for learning, research and business purposes. Public investment in public libraries is currently over $200 million per year.
We have established world-leading e-government services, such as online customs services, online company registration and electronic management of land transactions. Owing to the electronic management of tax, many of us no longer need to file a tax return.
Our regulatory environment is open and transparent. Our shared history and our small size enable us to respond quickly to calls for change and co-ordinate our efforts to solve our problems.
Weaknesses
However, offsetting these strengths are some weaknesses to be addressed. We lack sufficient people with management experience, leadership skills and entrepreneurial e-commerce skills. We produce insufficient graduates in some technical disciplines to meet local demand.
We have a very high proportion of small and medium-sized enterprises (SMEs), and many of our firms are not yet connected to or integrated with global business networks. Smaller New Zealand firms sometimes struggle to keep up with technological developments, especially the ways in which ICT is changing processes and demand factors in their key markets. In some quarters, there is a poor understanding of the opportunities ICT offers for social and economic gain.
There is an uneven distribution of infrastructure capability at reasonable cost, particularly in our rural communities. Whilst our general rate of ICT uptake has been rapid and comprehensive, our uptake of broadband to date has been slow and is uncharacteristically low by OECD standards.
Although our Internet usage is high, some 45% of New Zealanders have no Internet access at home, particularly the elderly and those living on low incomes or outside cities. There are pockets of ICT-illiteracy in our communities. Some 2% of mainly low-income households lack a telephone line, the most basic of ICT devices.4
Opportunities
New Zealand has a diverse and vibrant culture with rich voices and histories. ICT is one way in which our many different communities can grow, strengthen their linkages and communicate their stories to the rest of the world.
ICT opens up opportunities for New Zealand businesses to create new services and products. Our small firms can use ICT to link with partners in New Zealand and elsewhere, to build critical mass and supply customer needs in global markets. Clusters of SMEs can use ICT to compete with large incumbent firms.
ICT offers new avenues for New Zealanders to exploit the rapidly developing market for creative content. It provides tools to unlock our information assets, such as the cultural, scientific and technical information in our libraries, archives, museums, databases and research institutes. In research and education, an advanced network delivering gigabit speed capacity will enable immediate, real-time connection and collaboration with advanced overseas research facilities.
Cheap remote-sensing devices will enable us to develop new applications to support our core industries, such as pasture management, food monitoring, environmental sensing, distribution network logistics and inventory tracking.
ICT enhances collaboration between government agencies. By efficiently managing information, we can deliver integrated, customised services to individuals and businesses, improve the service quality and access, and reduce compliance costs. ICT can also significantly improve the quality and delivery of health care, including remote monitoring of medical conditions.
On its completion, Project PROBE will provide all schools and associated communities with access to broadband, enabling better access to e-government services, digitised heritage collections and other resources for learning.5 Broadband will also act as a catalyst for the local development of innovative applications to meet regional business and community needs.
Threats
If we are to achieve the goal of returning New Zealand to the top half of the OECD ranking by per capita income, we must use ICT and information to enhance innovation and create value, to attract new investment and retain key industries, to preserve our cultural capital, and enable our communities to prosper. If not, our standard of living will decline and with it our public services, particularly health and education.
The main economic threat to New Zealand is that our productivity and competitiveness will suffer if we fall behind in adopting new technologies. For instance, tracking technologies using RFID create savings in transport and inventory control. It is likely that similar technologies, used to trace the components of a food product from farm to consumer, will become mandatory in key markets. New Zealand businesses must keep abreast of such changes or risk being locked out of important markets.
We need to maintain the same quality of infrastructure and knowledge as our main trading partners, just to remain in the game. The rate of technological change is increasing, and our management practices may fail to keep up. Similarly, policy-makers will need to be aware of the implications of emerging ICT.
ICT also brings risks. It facilitates the unauthorised use of copyright material, while providing rights' owners with the means to impose controls over access to intellectual property to an extent that may conflict with the requirement for legitimate access to information. Patent law is being used to erect barriers to competition, increasing the cost of doing business and limiting the diffusion of new innovations. The ease with which personal data can be created, mined and misused constitutes a significant risk to privacy.
The principal social and cultural threat is the dilution of our national identity and culture. The advent of cheap international communication has made it easy for us to consume entertainment and cultural products that are produced elsewhere and marketed globally. The risk is that they may swamp or supplant our indigenous culture.
Finally, ICT wastes arising from old ICTs that are dumped in landfills generate waste that is highly toxic. Its improper disposal creates health and environmental hazards, which must be adequately managed.
Back to Top