Providing all Australians with access to broad bandwidth is usually discussed as a social equity issue.

But it's much more than that. It is a debate that goes to the heart of industry policy.

Bandwidth has become one leg of the platform of innovation for the information industries, according to Sun Microsystems vice president and chief technology officer Greg Papadopoulos. And it is a supercharged innovation.

Bandwidth is quite simply the capacity to deliver digital information, whether via telephone lines, cable or satellite. Its the equivalent of water pipes - the bigger the pipe the more that can be delivered, and the greater the ability to put water to industrial use at the end of the pipe. The difference is that there are numerous technologies emerging to deliver more digital data through existing pipes, as well as through new delivery mechanisms.

Papadopoulos argues that the law of expanded bandwidth, which he calls Gilder's Law after veteran technology commentator George Gilder, has overtaken the law of increasing processing speed, Moore's Law, as the most important phenomenon driving technological innovation. See article: An Interview with Greg Papadopoulos.

Where once the innovation cycle was powered by faster processors driving more complicated and demanding software programs, which in turn demanded more processing capacity, the relationship between bandwidth and on-line content is now changing the game.

Bandwidth allows more content – remotely hosted business applications, entertainment content, mass communication vehicles – which demand more bandwidth.

This is not just an issue that bears on Australia's ability to participate in the growth of the information industries. It affects all industries. In the knowledge economy, manufacturers are more than builders of products that are dropped in boxes, sold and never heard of again. Successful manufacturers wrap their products in services and distinguish them by making them smarter. The value of the information technology in a new car exceeds the value of the steel, and auto manufacturers know the value of their business is directly related to how successfully they build on going relationships with their customers. See related articles on Ford.

Many of Australia's most exciting medium-sized companies – the type of companies that have revitalised Australian manufacturing exports in the past decade – understand this implicitly. Numerical machine tools manufacturer ANCA, a former Exporter of the Year, based in suburban Melbourne, diagnoses, repairs and upgrades its clients' machines in factories all over the world by logging onto them remotely.

Bluegum Industries receives constant specification upgrades for its contract manufactured computer and telecommunications products from clients around the world to its factories in Wangaratta and Sydney. See related articles on Contract Manufacturing.

Will these companies continue to have access to the fattest data pipes to ensure that they can continue to receive all the rich content they need to remain internationally competitive in their Bayswater and Wangaratta factories over the next decade? Probably. They have the money to pay for it. But they might also decide it is easier to pack and move somewhere where access is cheaper, easier or more reliable.

But what about the two-person start-up company in Dubbo no one has heard of yet? Or the 13 year-old potential entrepreneur in Elizabeth? That's a more vexed question.

One of the reasons Australia remains an attractive place for big international companies to do business and set-up shop is that the population generally is enthusiastic and savvy when it comes to technology. Combine this with Australians' natural innovativeness and companies such as ANCA spring up, taking existing problems and finding better ways to solve them.

When the personal computer was one half of the innovation platform, anyone with the money could walk into a computer retailer and buy one. Kids sitting at home playing computer games and teaching themselves how to write code provided the backbone of a healthy Australian games industry.

But what happens if those same kids are not exposed to the full potential of the networked world because they are unable to download the applications that are today's cutting edge? If broad bandwidth is not widely available, how will Australia ever know how many ANCAs of the next generation of business never happened?

The Government ultimately needs to decide if the lack of bandwidth is a market dysfunction that requires it to intervene through industry policy. And it would be wasting its time if it asks Treasury to analyse if intervention is required. Opportunity cost does not lend itself to easy quantification. Deeper analysis, policy vision and political courage are called for, not simple arithmetic.