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Measuring the communications industry in gross domestic product

Communications is an industry that is challenging for statisticians to keep up-to-date with because of changing technology. This page explains how we measure economic activity in the communications industry, the indicators used, and developments currently underway.

Measuring economic activity

Gross domestic product (GDP) is New Zealand's official measure of economic activity. GDP measures the value of goods and services produced in an economy in a given period.

Activity in the communications industry declined in each of the three quarters up to June 2010, mainly due to lower phone call minutes. This result has been highlighted by some commentators who have sought to better understand the methodology for the communications sector in GDP.

Communications

The communications industry makes up around six percent of GDP in volume terms. The communications industry represents the value added to the economy of providing services to business and household in:

  • postal and courier services
  • fixed line rental
  • fixed line international and domestic toll calls
  • mobile phone calls
  • Internet usage.

To measure activity in these services, Statistics New Zealand collects a range of volume data indicators. For example, we collect the number of fixed line and mobile phone call minutes, the number of fixed line connections, and the number of items posted during the quarter.

Changing technology in the communications industry makes it challenging to measure. An example is the use of the Internet to replace more traditional means of communication. Instead of phoning someone overseas some people may now prefer to use Skype. If this happens then our indicator for international toll minutes may fall, but the phone call will be indirectly captured in our indicators for Internet usage.

Our current indicator for Internet services is a mixture of broadband subscribers and Internet minutes. For future development under ANZSIC06 (the Australian and New Zealand Standard Industrial Classification 2006 used to compile and analyse industry statistics in New Zealand and Australia) we are investigating if we can replace this by a volume measure such as gigabytes of data used. The results of the ANZSIC06 project will be incorporated into quarterly GDP in 2012.

Updating weights

Statistics New Zealand is currently updating annual weights for the communications industry, and the results of this will be incorporated into the September 2010 quarter GDP release, published on 23 December 2010. The weights for the communications industry help align the indicators we collect with the relative importance of what they measure. We determine the weights of various indicators by examining the revenue that communications companies receive from various sources, for example mobile phones, fixed line rental, Internet.

It is important to note that while the relative importance of some parts of the communications industry will change because of this weighting work, the direction and movement of the indicators we use will not. Because these weights were last updated in 2004, and the indicators that we are using do not change, we don't expect the underlying story of the communications industry to change.

Summary

There are always measurement issues, in any economy, in a fast changing industry like communications, when new technologies can come along. However, it's easy to lose sight of the parts of the industry that haven't changed. Communication companies still earn revenue from renting fixed lines, and people making fixed and mobile phone calls.

Statistics New Zealand has very good indicators for these traditional communication methods which still make up the majority of activity in the industry and we are working to update our method for capturing Internet services. Given the small size of the communications industry, and the relative importance of Internet within it, these measurement issues are not significant enough to affect the headline measure of GDP.

Statistics New Zealand thanks the respondents for providing detailed information that allows us to measure activity in the communications industry.

16 November 2010

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