Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) Increasing Broadband Internet Penetration In the OIC Member Countries COMCEC COORDINATION OFFICE February 2017 Standing Committee for Economic and Commercial Cooperation of the Organization of Islamic Cooperation (COMCEC) Increasing Broadband Internet Penetration In the OIC Member Countries COMCEC COORDINATION OFFICE February 2017 This report has been commissioned by the COMCEC Coordination Office to Telecom Advisory Services, LLC. Views and opinions expressed in the report are solely those of the author(s) and do not represent the official views of the COMCEC Coordination Office or the Member States of the Organization of Islamic Cooperation. Excerpts from the report can be made as long as references are provided. All intellectual and industrial property rights for the report belong to the COMCEC Coordination Office. This report is for individual use and it shall not be used for commercial purposes. Except for purposes of individual use, this report shall not be reproduced in any form or by any means, electronic or mechanical, including printing, photocopying, CD recording, or by any physical or electronic reproduction system, or translated and provided to the access of any subscriber through electronic means for commercial purposes without the permission of the COMCEC Coordination Office. For further information please contact: COMCEC Coordination Office Necatibey Caddesi No: 110/A 06100 Yücetepe Ankara/TURKEY Phone: 90 312 294 57 10 Fax: 90 312 294 57 77 E-mail: [email protected] Web: www.comcec.org Table of Contents EXECUTIVE SUMMARY 1 I. INTRODUCTION 8 II. CONCEPTUAL FRAMEWORK REGARDING bROADbAND PENETRATION 11 II.1. Impact of broadband on economic and social development 11 II.2. Differences between developed and developing countries with regards to broadband impact 23 II.3. Technological evolution of broadband 27 II.4. Main challenges regarding fixed and mobile broadband penetration 33 III. BRAODBAND GLOBAL TRENDS 36 III.1. Global broadband industry trends 36 III.2. Global trends regarding broadband development 41 III.3. Main policy, regulatory approaches and implementation for increasing broadband penetration 54 III.4. Best Practices of non-OIC developing countries for increasing broadband penetration 58 III.5. Critical success factors for increasing broadband penetration 66 IV. CURRENT SITUATION OF bROADbAND PENETRATION IN THE OIC MEMBER COUNTRIES 74 IV.1. Broadband Supply in the OIC Member Countries 74 IV.2. Broadband Demand in the OIC Member Countries 88 V. COUNTRY CASE STUDIES 99 V.1. COTE D’IVOIRE 100 V.1.1. Demand for broadband Services 100 V.1.2. Supply of broadband services 108 V.1.3. Institutional structure and policies for promoting broadband 118 V.1.4. Lessons learned 119 V.2. SAUDI ARABIA 122 V.2.1. Demand for broadband Services 122 V.2.2. Supply of broadband services 131 V.2.3. Institutional Structure and Policies for Promoting broadband 138 V.2.4. Lessons Learned 140 V.3. KAZAKHSTAN 141 V.3.1. Demand for broadband Services 142 V.3.2. Supply of broadband Services 147 V.3.3. Institutional Structure and Policies for Promoting broadband 155 V.3.4. Lessons Learned 158 i VI. POLICY RECOMMENDATIONS 160 VI.1. Advanced OIC Member Countries 161 VI.1.1. Promotion of investment of next generation broadband networks 162 VI.2. OIC Member Countries at an intermediate stage of broadband development 163 VI.2.1. Initiatives to promote digital literacy 165 VI.3. OIC Member Countries at embryonic broadband development 167 VI.3.1. Tackling the broadband affordability challenge in low-income countries 167 References 167 ii List of Figures Figure 1: OIC Member Countries: Diffusion of fixed and mobile broadband 8 Figure 2: Social and economic contribution of broadband 11 Figure 3: Information workers an ICT investment 18 Figure 4: Causality Model: ICT innovation and diffusion is driven by the growth of information workforce 19 Figure 5: Conceptual representation of consumer surplus 22 Figure 6: OECD: Percentage of impact of broadband on GDP growth 24 Figure 7: Fixed broadband economic impact vs. fixed broadband penetration 25 Figure 8: The regional effect of broadband on job creation according to different levels of penetration 26 Figure 9: Total telecommunications industry revenues (in US$) (2010-2014) 38 Figure 10: Economies of scale in the wireless industry 39 Figure 11: Difference in scale economies between local and global operator 40 Figure 12: Worldwide Internet adoption (as percent of world population) (2000-2015) 42 Figure 13: Selected Regions: Internet penetration (as percent of population) (2000-2015) 43 Figure 14: Worldwide internet adoption vs. fixed broadband adoption (2000-2015) 43 Figure 15: Selected Regions: Fixed broadband penetration (2000-2015) 45 Figure 16: Selected Regions: Mobile broadband penetration (2007-2015) 46 Figure 17: Correlation between fixed broadband penetration and price elasticity 55 Figure 18: OIC Member Countries: Mobile broadband coverage (3G) (2015) 75 Figure 19: OIC Member Countries: Herfindahl-Hirschman Index of the fixed broadband industry (2016) 81 Figure 20: OIC Member Countries: Herfindahl-Hirschman Index of the mobile broadband industry (2016) 83 Figure 21: OECD versus OIC Member Countries: Internet penetration 88 Figure 22: OECD versus OIC Member Countries: Fixed broadband penetration (2000-2015) 90 Figure 23: OECD versus OIC Member Countries: Mobile broadband penetration (2007-2015) 91 Figure 24: OIC Average: Pricing of selected broadband products 95 Figure 25: Percentage of local internet content by region (2013) 97 Figure 26: Cote d’Ivoire: Comparative adoption of fixed and mobile broadband (2003-2016) 101 Figure 27: Cote d’Ivoire: Unique visitors among sites with > 100,000 visits (September 2016) 102 Figure 28: Cote d’Ivoire: Internet users and facebook members (2000-2016) 103 Figure 29: Sub-Saharan Africa: Telecommunications Affordability Index (2014) 106 Figure 30: Cote d’Ivoire: Mobile broadband market shares (by subscribers) (2012-2016) 110 Figure 31: Cote d’Ivoire: Mobile broadband Herfindahl-Hirschman Index (2012-2016) 110 Figure 32: Monthly subscription of 1 Gb cap USB (in US$) 114 Figure 33: OIC Member Countries: Fixed broadband vs. mobile broadband penetration (2015) 123 Figure 34: Saudi Arabia: Comparative adoption of fixed and mobile broadband (2003-2016) 124 Figure 35: Saudi Arabia: Internet users and social network members (2000-2016) 126 Figure 36: Correlation between internet penetration and electronic commerce as percentage of total retailing (2015) 128 Figure 37: OIC Member Countries: Telecommunications Affordability Index (2014) 130 iii Figure 38: Monthly subscription of 1 Gb cap USB (in US$) 136 Figure 39: Kazakhstan: Comparative adoption of fixed and mobile broadband (2003-2016) 143 Figure 40: Kazakhstan: Internet users and facebook members (2000-2016) 144 Figure 41: Asia: Telecommunications Affordability Index (2014) 146 Figure 42: Monthly post-paid subscription of 1 Gb cap USb (2012-2015) (in US$) 154 iv List of Tables Table 1: OIC Member Countries: State of broadband supply and demand (2015) 5 Table 2: Research results of fixed broadband Impact on GDP growth 13 Table 3: Research results of mobile broadband impact on GDP growth 14 Table 4: broadband construction impact on job creation 15 Table 5: Impact of positive broadband externalities on employment 16 Table 6: broadband communications value chain 27 Table 7: Global presence of MNC broadband providers 41 Table 8: Worldwide Internet adoption (as percent of population) (2015) 42 Table 9: Worldwide Fixed Broadband adoption (as percent of population) (2015) 44 Table 10: Worldwide Mobile broadband adoption (as % of population) (2015) 45 Table 11: Regional fixed broadband coverage (as percent of population) (2015) 47 Table 12: Fixed broadband coverage (by country) (as percent of population) (2015) 47 Table 13: Mobile broadband (3G) Coverage (by region) (as percent of population) (2015) 48 Table 14: Fixed broadband demand gap (2015) 49 Table 15: Mobile broadband demand gap (2015) 50 Table 16: Percentage of households mentioning affordability as a reason for not purchasing broadband 51 Table 17: Percentage of households mentioning digital literacy as a reason for not purchasing broadband 52 Table 18: Percentage of households mentioning cultural relevance or lack of need as a reason for not purchasing broadband 53 Table 19: Impact on penetration level of fixed broadband (FBb) of a price reduction 56 Table 20: Uruguay: “Social” broadband plans 62 Table 21: Selected OIC Member Countries: Fixed broadband coverage (2016) 74 Table 22: OIC Member Countries: Mobile broadband coverage (3G) (2015) (%) 74 Table 23: OIC Member Countries: Mobile broadband coverage and download speed (4G) (2016) 76 Table 24: OIC Member Countries: Breakdown of fixed broadband lines 76 Table 25: OIC Member Countries and OECD: Average fixed broadband speed (in Mbps) (2015) 78 Table 26: OIC Member Countries: Breakdown of mobile broadband subscribers 78 Table 27: OIC Member Countries and OECD: Average mobile broadband speed (in Mbps) (2015) 80 Table 28: OIC Member Countries: Fixed broadband market structure (2016) 80 Table 29: OIC Member Countries: Mobile broadband market structure (2016) 82 Table 30: OIC Member Countries: Presence of global mobile broadband operators (2016) 83 Table 31: Internet Penetration: OIC Member Countries vs. all countries 89 Table 32: Selected OIC Member Countries: Fixed broadband demand gap (2016)