How to Achieve the Goal of Broadband for All
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HOW TO ACHIEVE THE GOAL OF BROADBAND FOR ALL Morten Falch, Dan Saugstrup & Markus Schneider Center for Tele-Information, Technical University of Denmark,Building 371,DK-2800 Lyngby, Denmark Email: [email protected], [email protected], [email protected] 1. ABSTRACT The paper is based on ongoing work in WP3 of the BREAD project (Broadband in Europe for all: a multi disciplinary approach), which collects information on ongoing regional and national initiatives in Europe and around the world. The paper focuses on identification and analysis of drivers and barriers towards the development of broadband for all. The purpose is to provide input for an assessment of various policy measures aiming at stimulation of the growth in penetration of broadband services. The analysis builds on experiences with broadband development in four countries, which varies form market leaders (Canada, Denmark and South Korea) to average penetration regarding broadband services (Germany). 2. INTRODUCTION The penetration of broadband connections has on a global scale increased dramatically during the past few years. However, the growth has been very uneven distributed among countries. South Korea is by far the global leader in penetration of broadband with Canada, and some Scandinavian countries in a second tier. In the other end, countries like Ireland, Luxembourg, and Greece are considerably lagging behind the other OECD countries. What explains the huge national differences in penetration of broadband? In order to answer this question, the first part of this paper outlines a number of factors considered to be decisive for penetration of broadband. The second part uses these factors to explain why development has differed in a number of countries. In this paper we will categorise the decisive factors according to three different dimensions: The first dimension distinguish between factors affecting supply and factors affecting the demand. These factors are of course interrelated. The demand depends on how and on what conditions broadband services are supplied. High quality services offered at low cost generates more demand than poor services offered at high costs. On the other hand a certain level of demand is necessary to stimulate investments enabling supply of broadband services. The second line of division goes between content and infrastructure. Broadband networks are essential for any economy and information society: Inter alia Broadband networks connect buyers with sellers, callers with receivers, and public authorities/institutions with legal (e.g. companies) and natural citizens. Just as railroads and highways, Broadband networks are the technological means which enable people/machines to meet and interact virtually with other people/machines. However, high penetration of broadband networks as such are never an end in itself, but rather have the overall purpose of enabling communication and two-way interaction between all groups within a society. The stage of development of broadband services is most often (also in this paper) measured by the number of connections, and not the content delivered via the broadband infrastructure. Development of content and infrastructure may stimulate each other. But for our purpose it is important to distinguish between the factors stimulating content development and those stimulating the infrastructure development. Technological, economic as well as political/cultural factors are affecting both supply and demand conditions for both content and infrastructure development. The technological aspects include development of new transmission technologies and development of new types services that can be transmitted via a broadband infrastructure. Economic factors include market condition such as the overall market size and the level of competition. Cultural/political factors include regulation and 1 other types of policy intervention as well as differences in lifestyles. All these aspects are addressed in our third line of division, which distinguishes between technical, economic and political/cultural factors. This ends up with a typology as depicted in table 1. Table 1, Typology of factors affecting penetration of broadband services Supply Demand Technology Technology Content Economy Economy Culture/policy Culture/policy Technology Technology Infrastructure Economy Economy Culture/policy Culture/policy Not all of these 12 different categories are equally important. This paper will address most of the categories, but the primary focus will be on infrastructure supply. Using the typology presented above we have identified a number of parameters, which we think are the most relevant in explaining national differences in diffusion of broadband, and which can be used as a starting point for identification of interesting policy measures. Table 2. List of parameters affecting penetration of broadband services Supply Demand Supply of new services Income level and income distribution Development of new business models Penetration of IT (e.g. PCs, Internet, mobile phones) in households and Pricing businesses Content Number of Internet hosts Lifestyle Number of digital broadcasting channels Attitudes towards new technologies incl. Web TV Penetration of broadband connections Legal issues (e.g. copyrights) Lack of harmonisation (legal) Standardization of standards Existing telecom and cable networks Income level and income distribution (availability/penetration/capacity) Penetration of IT (e.g. PCs, Internet, Existing wireless infrastructures mobile phones) in households and businesses Demography of users Lifestyle Cost of capital and financial strength of Infrastructure operators Attainment towards new technologies Level of competition Driving applications (what are people actually using) Ownership of competing infrastructures Initiatives by local communities to invest in broadband Market price for broadband services These parameters are further detailed below. Section 3 discusses different types of policy parameters. 2 2.1 Supply of content The content layer relates to the provisioning of online information services and applications which are to be transmitted over broadband networks to the receiver. Broadband enables distribution of a host of new services that either was non existing or only available off-line. Convergence is an important aspect of this. Broadband infrastructure offers a transmission platform that due to its high capacity can be used for delivery of services originating from a wide range of industries. Current examples are online music platforms, Video on Demand (VoD), Voice over IP (VoIP) and web- based software applications. Important future applications are expected to be Video-conferencing, broadcast multi-casting and increasingly interactive content. An important driver is here the ability to develop new converging services combining features from services used to be distributed through separate delivery channels. There is however a number of economic and political challenges related to this. For instance, VoIP is threatening to cannibalize revenues of established (incumbent and new entrants,) telecom operators and the availability of (audio)-visual content is considerably affected by intellectual property protection in form of law and technology. Development of new business models and pricing schemes are important drivers for both generation and demand for content. One of the drivers behind the success of the Internet has been a charging mechanism, where the end-user pays distance independent price and where most content is free. On the other hand this model has had clear limitations with regard to content generation, as it seems difficult for users to accept payment for certain types of content. Supply of content is difficult to quantify and compare. In theory the supply of content is the same from everywhere, as one will be able to access the same content once the infrastructure is in place. But different languages and preferences towards locally produced content imply that users may experience national differences. Relevant measures for supply of content, which can be used for international comparisons, include number of digital broadcasting channels available, number of Internet hosts etc. But these numbers will never tell the full story and can only be used as indicators. 2.2 Supply of infrastructure The infrastructure aspects relates to the broadband network itself. The development of supply depends on existing network facilities as well as the level of investments. Network operators are mostly commercially oriented companies that assess their investment opportunities according to the return of investments. The viability of investments in broadband depends on the level of total costs compared to expected revenues. The point of departure for creating an infrastructure, which can offer broadband for all, is very different within countries. First of all, there are differences in demography and geography. For instance will densely populated areas usually be cheaper to supply with broadband than rural areas. Secondly, the quality and capacity of existing telecom networks vary from country to country. Even though most countries within the OECD area provide more or less national coverage for basic communication services, the point of departure for upgrade towards higher bandwidth is very different. The differences in the extent of cable-tv networks are even more visible. While countries like the Netherlands offer almost universal access to cable TV networks, Cable TV plays only a very limited