Let’s be courageous, part 19

(… continued from Let’s be courageous, part 18, posted on 8 Nov 2016).

One potential feature of modern life that has been cited as a factor that could dent the passenger demand for HS2 is the facility for teleworking and holding remote meetings made possible by modern telecommunications and information technology (ICT). It seems blindingly obvious, doesn’t it: if you can work from home, why travel to a central office, and if you can look someone in the eye on a video screen, why travel miles to conduct business face-to-face? The problem is though that there appears to be a paucity of hard evidence to substantiate the anecdotal in this case.

This may account for Taxpayer’s Alliance Policy Analyst, Harry Fairhead, not using this particular cudgel to bludgeon HS2 in his briefing paper Rich man’s toy: The case for scrapping HS2. The House of Lords Economic Affairs Committee (EAC), on the other hand, does broach the subject in the report The Economics of High Speed 2, but fails to draw any conclusions in this area (see footnote 1).

The EAC reports opposing views on whether, or not, we can expect the HS2 business case to suffer from the impact of the ubiquity of increasingly sophisticated and powerful information and communications technology. One of the action groups against HS2 is quoted as claiming in written evidence submitted to the EAC that “the concept of physical travel in order to conduct a business, or leisure, interaction will be[come] outdated” (see footnote 2) and Dr Richard Wellings, of the anti-HS2 economic think-tank the Institute of Economic Affairs, told the EAC during his oral evidence that what he termed “disruptive technology”, in which he included “improved teleworking and remote meetings”, presented “an enormous risk” to HS2 (see footnote 3).

On the other hand, Richard Scott, Director of Corporate Affairs at Virgin Trains, told the Committee that he was “not aware of any evidence” regarding the impact of videoconferencing on the demand for rail travel, but “it may be dented if we have a superfast broadband network everywhere, but people will still need to get to work, will still need to do business deals face to face and will still need to go to football matches” (see footnote 4). Speaking as a supporter of a football team that has just suffered a humiliating 6-0 away defeat in the FA Cup, I’m not too sure about that last travel reason, but his point is taken.

But these voices hardly qualify as independent sources, so perhaps we should look to academia for a potentially more disinterested view, and the EAC report quotes from two transport researchers who gave oral and/or written evidence to the Committee. Professor Chris Nash of the Institute for Transport Studies at the University of Leeds told the Committee in oral evidence that currently “there is no evidence of improved communications reducing demand for travel”, but that this view could change as there “are many uncertainties” (see footnote 5). Professor Roger Vickerman, Professor of European Economics at the University of Kent, claims in a written submission that the “evidence … is that generally travel and other communications are complements rather than substitutes” (see footnote 6).

This question of whether ICT and physical travel are substitutes or whether the former complements the latter is reviewed in one of the few academic papers that I have found to be readily accessible (see footnote 7). This paper, originating from the Davis campus of the University of California (UC), is almost fifteen years old, an elapsed time that has seen the video call becoming a no-cost, or very low cost, ubiquitous feature of modern life, but the views of the two academics reported above would indicate, perhaps, that the availability of empirical evidence has not improved much over the same period.

The UC paper furnishes comprehensive definitions of the two terms “substitution” and “complementarity”, but I will attempt a simple abridgement: substitution occurs when the use of ICT allows a journey to be avoided and complementarity results when ICT encourages, or directly involves, travel, or enhances the travel option. The paper argues that “although direct, short-term studies focusing on a single application … have often found substitution effects, such studies are likely to miss the more subtle, indirect, and longer-term complementary effects that are typically observed in more comprehensive analyses”. The paper’s author concludes that “the empirical evidence for net complementarity is substantial, although not definitive, and empirical evidence for net substitution appears to be virtually nonexistent”.

An example, perhaps, of the studies that focus on a single application that are alluded to by the author of the UC paper, is provided by a case study from one of the purveyors of videoconferencing kit – so hardly an independent source. It appears to be of a similar vintage to the UC paper, a time when holding a videoconference involved access to a dedicated “studio” and the use of expensive data circuits. Despite these discouragements, the document reports that use of this technology within the supplier company’s worldwide operation produced savings in travel costs amounting to US$90million over a two-year period following deployment (see footnote 8).

If I may add some anecdote to the evidence base, I was contracted to a UK company in the late 1990s working on the design of telecommunications systems for the Mass Transit Railway (MTR) metro system in Hong Kong. There was frequent use of the cumbersome and expensive videoconferencing equipment of that period to conduct meetings between the UK-based design staff and the field operatives charged with installing and commissioning the kit. However, there was also a constant stream of trips undertaken by staff from both locations. So you could view this as substitution, since the use of videoconferencing was meaning that fewer trips were probably necessary, but you can also see it is complementary in that videoconferencing was one of the tools that had enabled the company to offer a competitive bid to gain the contract in the first place, and that winning the contract had generated a demand for a large number of seats on flights between the UK and Hong Kong.

It would appear that the warnings given to the EAC by the action group and Dr Wellings about the possible disruptive effects of ICT on the demand for HS2 cannot really be substantiated at this time, and that Harry Fairhead was probably well advised to steer clear of this topic in his briefing paper.

(To be continued …)

Footnotes:

  1. See paragraphs 102 to 104 in the report The Economics of High Speed 2, House of Lords Economic Affairs Committee, 1stReport of Session 2014-15, March 2015.
  2. See paragraph 6 in Tonge & Breedon HS2 Action Group—Written evidence, on page 899 in Oral and Written Evidence, Select Committee on Economic Affairs, The Economic Case for HS2.
  3. See under Q92 in Evidence Session 8, Tuesday 4thNovember 2014 in Lords EAC Oral and Written Evidence.
  4. See under Q215 in Evidence Session 18, Tuesday 2ndDecember 2014 on page 656 of the Lords EAC Oral and Written Evidence.
  5. See under Q102 in Evidence Session 9, Tuesday 11th November 2014 on page 713 of the Lords EAC Oral and Written Evidence.
  6. See paragraph 5 in Professor Roger Vickerman—Written evidence, on page 936 of the Lords EAC Oral and Written Evidence.
  7. The paper is Telecommunications and Travel: The Case for Complementarity, Mokhtarian P L, Journal of Industrial Ecology, Volume 6 Number 2, April 2002.
  8. The case study is How Virtual Meetings Provide Substantial Business Value and User Benefits, Cisco Systems Inc.
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