Above: Kids in an Internet Training Center in Dominican Republic
(The following is the translation of an article that was published in the AHCIET magazine in 2010. The article in Spanish is available here)
Introduction
The first country to declare broadband access a civil right was Finland, in October 2009. A month later, Spain granted the right to broadband as well. Both countries pledged to have connections of at least 1Mbps available to all citizens at affordable prices by 2011.
These two cases, for some rather extreme, only reflect a trend that has been building strong momentum in recent years, driven in many cases by governments in developed countries. Australia, for example, published in May 2010 the report behind the National Broadband Plan, an ambitious project of up to USD38 billion (AUD43 billion) that intends to build the National Broadband Network (NBN). NBN will provide fiber connections to about 90% of households in the country (the rest of the country would be covered with wireless technologies).
On the other hand, the United Kingdom passed the Digital Economy Act on 8 April 2010. Among other things described in the report "Digital Britain", the UK government proposes the creation of a Next Generation Fund to help bring broadband services through next generation networks to all homes and small businesses in the country. It is easy to find a parallel between these objectives and those of some Universal Service Funds in Latin America and Africa.
In the case of the U.S., the National Broadband Plan was published on March 17, 2010. The Plan puts emphasis on regulation, competition policy, infrastructure sharing and spectrum management, but it also proposes the creation of the Connect America Fund which will ensure in the next 10 years that broadband services of up to 4Mbps download speed are available to all, and the Mobility Fund to ensure that wireless broadband services are available throughout the country.
It is worth mentioning that this trend is not exclusive to developed countries. The Department of Telecommunications (SUBTEL) of Chile has been conducting major projects in broadband access in rural areas nationwide. It is expected that by year end 2011 more than 90% of the population will have access to wireless broadband services. Brazil announced on May 7, 2010 a Broadband Plan of approximately R$13.2 billion (USD7.5 billion). In Africa, the World Bank is supporting the development of national backbone networks in several countries.
The whole idea behind these initiatives is the belief that broadband connectivity is becoming a critical component for the sustainable development of countries, improving productivity and competitiveness of local firms, and improving the quality and transparency of services provided by governments. Governments who initiated this strategy years ago (anyone said Korea?) are now reaping the fruits of those investments.
There are still many undecided observers wondering if these huge investments are really necessary and - more importantly - whether they would stand a robust economic analysis (ie, whether ultimately they create economic benefits that surpass the required investments). For the vast majority, however, the relevant question is not whether or not to invest in national broadband networks, but how to carry out these investments in an efficient and effective way.
Digital Inclusion
It is probably still too early to identify "best practices" in terms of broadband development policies, since most of the existing programs have been launched recently. On the other hand, among those countries that have implemented broadband initiatives, we could indeed identify "good practices", ie, policy decisions that have shown positive results. And among these, there is a constant element: the approach has not been one solely focused on broadband infrastructure investment, but a more holistic one of "Digital Inclusion". That is, these strategies have included components of infrastructure investments (supply-oriented), but they have also included activities and initiatives aimed at stimulating demand and generating relevant content, which increases the overall broadband market and generates more benefits to society.
Supply
In the case of the supply side, we begin by analyzing the supply chain for broadband (see Figure 1). The first level is international connectivity, traditionally done through submarine cables or satellite connections. The next level is the national backbone networks that carry traffic from the international landing point to the main locations across the country. The third level is the "intelligence" behind the networks. Then we found the access network that connects the network with the end user. Finally, a number of services the network needs to function (metering, customer service, billing, etc.).
Figure 1. Supply Value Chain
Source: Mark D.J. Williams (2010)
An analysis of each of the links in the production chain will allow the identification of bottlenecks in the supply side. Once identified the bottlenecks, the underlying causes have to be analyzed (for example, lack of deployment of a national backbone network can be the result of a non-competitive environment or that there are not enough commercial incentives due to high concentration of population in urban areas). It is the identification of underlying causes what will allow policy makers design policy instruments that will address the issues directly and help increase the development of broadband infrastructure.
Following, some examples of how some countries have managed to overcome some barriers in each of the stages of the broadband supply chain.
International Connectivity
Few regions in the world still lack international connectivity at competitive levels. In some cases, old monopolies in international connectivity are gradually being eliminated through regulation and open markets, but there are others where there is just no competition on the supply side.
Take the case of east Africa. Until 2009, this region had no connectivity to the global broadband network. No submarine cable had been laid along the east coast of Africa, and international access was very expensive and not competitive. With the support of the World Bank and the International Finance Corporation, the Eastern Africa Submarine Cable System (EASSy) was created, which eventually funded the first fiber to serve these countries. Now that EASSy has proven to be feasible and profitable, two other fiber providers are serving the region. All of them - including EASSy – funded by private partners. On the other hand, in the case of the Pacific Islands, where demand is extremely low and it is somewhat harder to make a business case, governments funds may be needed to attract private operators to serve the area.
National Backbone Networks
Many countries have recognized that the National Backbone Network is an essential element in the development of broadband equitable across the country. Ensuring open access to these networks has become a topic of discussion between operators and governments, and network extensions to rural and low income areas are increasingly common among broadband plans under development by many countries.
In case of Korea, to encourage the expansion of the National Backbone Network, the Government conducted a tender for a long-term connectivity contract with all government offices nationwide. The contract required that the winning provider built a nationwide fiber optic network. At the same time, the contract reduced the uncertainty of cash flows for the provider. Australia, on the other hand, is taking a different approach. The National Broadband Network study considers the construction of national backbone network with public resources, and operated by a state-owned company (NBN Co.). This approach – according to the study – is adopted to minimize anti-competitive practices. Singapore, instead, held a bid for the passive infrastructure of the network and another one for the active infrastructure, both providing open access to competitors.
Access Networks
In many countries, the demand for connectivity between major cities has resulted in the co-existence of several national transport networks that compete with each other. However, the investment required to actually reach end users is extremely high, and is still a privilege that remains usually with the incumbent. Therefore, many countries have regulated access networks to promote competition in final services.
However, in the UK it was found that despite open access regulations that were in place for access to the "last mile", complaints of non-price discrimination were still received. Ofcom then agreed with British Telecom (BT) in the creation of Openreach, a division within BT that would have different directors and structure of incentives linked to the wholesale business rather than the retail one. In Italy, Telecom Italia is evaluating a proposal for the structural separation of its wholesale business. In the meantime, many other countries are using the potential of wireless networks to avoid dependence on wireline access networks. In Guatemala and Nicaragua, among other countries in Latin America, fixed wireless service companies compete without using the access network of the incumbents.
Demand
From the demand side for broadband services, one way to approach the analysis would be to analyze the consumption pattern of end users. Under this approach, we can identify three stages in the consumption pattern to take into account: (i) awareness, (ii) trial, and (iii) subscription / purchase. (See Figure 2).
Figure 2. Some policies from the Demand Side
Source: Victor Mulas (2010)
Awareness
For this stage, the main channel to reach end users is through training and education (at schools, or working with specific sub-segments of society) and through general dissemination programs about broadband and its benefits (with small and medium enterprises). In the case of Korea, for example, specific training programs were created as part of the strategy to close the digital divide. Programs targeted at housewives, senior citizens, and disabled citizens were developed, as these were the segments identified as those who were not exposed to broadband at work or at school. Such programs helped increase awareness of the benefits and potential uses of broadband and are mentioned frequently by Korean authorities as a significant component of the Strategy for Internet Development in the country.
Trial
For those consumers that have a notion of what is broadband, it is necessary to offer them the opportunity to try the service. At this stage, it is important (i) that the service has good quality and a reasonable price (a consumer with little experience can easily become frustrated downloading interactive applications over narrow bandwidth connections at very high prices), (ii) that consumers are familiar with information and communication technologies in general, and (iii) that consumers already have basic digital literacy skills to maximize the experience. In many countries, the main location of trials are community telecentres, many of them funded by the government. It is therefore important to ensure that telecentres have induction programs for people who are experiencing broadband services for the first time, including digital literacy training and broader training in how to use basic tools or available online services (such as eGovernment services).
Subscription or Purchase
For end users to buy the service, the value proposition of the service should be enhanced. To do this, relevant applications in local languages that are actually valuable to the potential consumer have to be created. In this context, it is very important for governments that want to promote broadband in their countries to understand the needs of their citizens, so that broadband service provision is accompanied by applications and contents that are valuable to them. This exercise is quite easy for users in urban areas, who are the focus of most existing applications, but becomes quite complicated in the case of rural areas. Understanding the needs of rural users is probably the most important component of any program aimed at promoting broadband services in rural areas.
Conclusion
Many countries worldwide are implementing broadband strategies that focus on expanding broadband infrastructure. While this is a necessary component in any broadband strategy, it is proving to be not sufficient. Experience in several countries shows that to accelerate the adoption of broadband services by the population, a comprehensive approach that simultaneously stimulates demand to maximize the value of the applications that ride on the network is also needed.
On the supply side, it is important to review the different components of the value chain for broadband services, so that effective interventions that promote further expansion of networks, better services and better prices for the end user can be designed. On the demand side, policy makers have to remember that, unlike other telecommunications services, broadband is a distribution channel of sorts for other services (paradoxically, voice services are in many cases the main application used by subscribers to broadband services). To stimulate demand for broadband services policy makers need to increase public awareness, design training programs, and create relevant applications and contents that are valued by end users.
References
ICT Regulation Toolkit, infoDev
Kim, Yongsoo, Tim Kelly, and Siddhartha Raja: "Building Broadband: Strategies and Policies for the Developing World", World Bank, 2010
Muente Kunigami, Arturo and Juan Navas Sabater, "Options to Increase Access to Telecommunications Services in Rural and Low-Income Areas", World Bank, 2009
Mulas, Victor, "Potential for Broadband Diffusion in Latin America", forthcoming (2010)
Williams, Mark DJ, "Broadband for Africa", World Bank, 2010
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