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Connectivity - the engine of growth of the knowledge economy?

by Gari Owen, Annwvyn Solutions

"Convergence programmes...would have a strong emphasis on building the knowledge economy so that our small, clever country can compete even more successfully on the world stage..." - First Minister, Brussels, 26 February 2008 ^[1]

image of woman using laptop and phone The knowledge economy is seen as the key to transform Wales. To support the knowledge economy, it is assessed that a high quality ICT (Information and Communications Technology) infrastructure is required. Does this exist in the case of Wales? First, however, it might be instructive to consider what is meant by the knowledge economy in the context of the economy of Wales. Knowledge economy is a rather vague term that refers either to an economy of knowledge focused on the production and management of knowledge, or a knowledge-based economy. The second meaning is the more frequently used and refers to the use of knowledge to produce economic benefits ^[2].

Examples of economic activities are shown below - all of these require a highly developed ICT infrastructure, but are they all representative examples of the knowledge economy? Is a call centre consistent with the aspirations of a knowledge economy? Some would argue that it is a low wage activity and the modern equivalent of the Victorian sweatshop.

Which of these are within the knowledge economy?

The manufacture of high technology aircraft wings at Broughton ^[3].
The manufacture of high-quality furniture in a rural area, requiring the use of the Internet for global reach of sales. What if Lord Linley ^[4] were to relocate to Llandysul?
A lone scientist home-working in a rural area, but requiring high-quality connectivity for global communications with his/her peers.
A traditional industry such as steel manufacture requiring highly developed communications for sales and marketing and was a pioneer of the use of computers in the pre-Internet age ^[5].
A small software company in a rural area requiring good connectivity for collaborative work and delivery of products.
A call centre in a rural area requiring connectivity to provide information to customers.

The general perception of the knowledge economy is that it will "unlock talent" and provided high-quality jobs. The recent report ^[6] on innovation from the Department of Innovation, Universities and Skills (DIUS) stresses the importance of ICT for collaboration and data analysis and as a catalyst for knowledge creation and innovation. For this reason, it is perceived desirable to provide an improved ICT infrastructure in Wales.

Western Mail graph Let us consider the breakdown of the types of employment in Wales. According to recent research from the Welsh Assembly Government ^[7], nearly a third (32%) of people in Wales are employed in micro-businesses-ranging from sole traders to those employing less than 10 staff. Large companies, categorised as employing 250 or more account for 43.1% of the private sector workforce in Wales, compared to UK average of 43.2%. The public sector in Wales accounts for around 24% of employment.

The chart illustrates that micro-businesses are typically located in rural areas. It is also perhaps not surprising that this is where connectivity is poorest. A European Commission report ^[8] states that Wales lags behind the rest of the UK broadband deployment due to its geographical isolation, mountainous terrain and low population density. This seriously affects the ability of small and medium-sized enterprises to compete in the global knowledge economy. To address this issue, the Broadband Wales programme was launched. There are several initiatives in Wales, as shown in the list below ^[9].

There is little prospect of market players making any investment in Wales to create an alternative wholesale infrastructure. The economics of such an investment do not meet the return on investment criteria for telecommunications operators due to the high cost of installing infrastructure and the comparatively small and geographically dispersed market, from which could extract revenue to provide a return on investment ^[8].

Recent data from The National Office of Statistics for Internet access ^[10] shows that Wales compares favourably with the remainder of the UK. Broadband access in Wales is reported to be 49% of households in 2007 as compared to 27% of households in 2005. The corresponding UK average for 2007 figure is 51%, London being the highest with 60%. Based on the statistics Wales does not appear to be doing so badly. However, Rhodri Williams, Director of Ofcom Wales, stated at the ITWales ICT Forum in Llanelli on the 12 November 2007 that "whereas a Cardiff consumer might have 20 MB per second access by Virgin, this is not the case in Tregaron". Perhaps this summarises the perception of broadband access in Wales.

Of course, Wales is not the only region of the UK with broadband access problem. There are also EU initiatives in Yorkshire ^[11] and frequent complaints, often from the Home Counties that broadband coverage is patchy. Commenting on the initiatives in Wales, one Home Counties resident has written ^12]: "Nice for Wales, but I live in Hertfordshire, 17 miles from London and there are no plans to upgrade our rural exchange.."

Broadband initiatives in Wales

The Regional Innovative Broadband Support Scheme (RIBS) - The purpose of this scheme is to enable all areas of Wales previously deemed as broadband "notspots" to have access to first-generation broadband services.
Public Sector Broadband Aggregation (PSBA) - This seeks to establish the most effective way of procuring broadband connectivity across the public sector in Wales.
Lifelong Learning Network (LLN) - This is the Wales-wide high bandwidth network funded by the Welsh Assembly Government. Designed to address the aggregated broadband connectivity requirements of public sector organisation, the network connects schools, libraries and ICT and learning centres to broadband across Wales.
FibreSpeed - The FibreSpeed Project funded by the European Structural Fund is designed to provide very highly speed broadband access to initially 14 business parks in North Wales.
Exchange Upgrade - There is also a scheme to upgrade 35 exchanges in Wales that had previously been excluded on economic grounds. However, this scheme will not provide benefit to those living far away from exchanges.

With an increasingly mobile workforce and the implementation of home-working, wireless technology is becoming more important. Indeed, many large organisations have now moved away from the office environment and workers rely on laptops and mobile phones. According to a report from Ofcom, the digital divide across the UK is narrowing ^[13]; there are more WiFi spots per million people (193) than in the other UK nations (171 in England, 125 in Scotland and 84 in Northern Ireland). Wales also ranks higher than Germany, the USA and Japan. It could be argued that such figures are misleading since the WiFi spots are distributed over a larger area in Wales and are thus less accessible. The use of WiFi is now widespread for home and business use.

Coverage maps provided by mobile network providers ^[13] illustrate that access to broadband through their high-speed (3G) networks is rather patchy in nature. As might be expected, ubiquitous connectivity tends to be limited to the more densely populated areas, as found in South-East Wales. Other technologies such as WiMax (effectively a long range WiFi) are still in its infancy in the UK and are probably now facing stiff competition from 3G networks.

In conclusion, major strides are being made within Wales to ensure fixed-line broadband connectivity that rivals any country in the world. This is despite the topographical nature of the country, and dispersed rural communities. This does not however appear to extend to mobile connectivity at present. In 2002, the Economic Development Minister said ^[12]: "To build a more prosperous Wales for the future, we must have a strong communications infrastructure". However, a knowledge-based economy requires more than connectivity. It requires skills, particularly in science and engineering. There is a shortage of skills in these disciplines, not just in Wales, but throughout the rest of the United Kingdom. This is illustrated by a the fall in the number of students studying subjects such as physics at university, and the subsequent closure of some prestigious physics departments. Therefore connectivity is the only part of the answer and although it will undoubtedly help rural businesses, it will not necessarily lead to high quality jobs, unless the users are skilled and have products and services that the market requires.

On 1 May 1840, the Penny Black ^[15], the world's first adhesive postage stamp was issued leading to universal postal delivery regardless of location. What will lead to the Penny Black of connectivity - intervention or market forces?

Acknowledgements
I am grateful to Ms Beti Williams, Director of ITWales for suggesting this topic and to Professor John Tucker, Head, School of Physical Sciences, Swansea University for drawing my attention to Ref 5.

References

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