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Broadband Economics

Broadband Economics. Dr Tim Kelly Lead ICT Policy Specialist, info Dev/World Bank info Dev/CSTD workshop “Measuring the Broadband Economy”, Hammamet, 23 November 2009. Broadband economics: Agenda. The economic impact of broadband Relationship to economic growth (macro-economic)

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Broadband Economics

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  1. Broadband Economics Dr Tim KellyLead ICT Policy Specialist, infoDev/World BankinfoDev/CSTD workshop “Measuring the Broadband Economy”, Hammamet, 23 November 2009

  2. Broadband economics: Agenda • The economic impact of broadband • Relationship to economic growth (macro-economic) • Relationship to productivity (micro-economic) • Government response • Arguments for government intervention • Broadband in economic stimulus packages • Country case studies • What made the different to broadband growth?

  3. Broadband is correlated with Growth Broadband and wealth2007 • The relationship between broadband and economic growth is similar to the Jipp Curve between telecoms and wealth • Outliers doing well include Republic of Korea, Estonia, the Netherlands • Outliers doing badly include Greece, Ireland, USA Source: World Bank Information and Communication for Development Report 2009

  4. Broadband can promote growth • Broadband delivers a bigger boost to economic growth than other ICTs • Impact of Broadband Internet is 57 per cent greater than for narrowband Internet Impact of a 10% increase in the penetration of ICTs on GDP per capita, 1980-2006

  5. Broadband and economic growth: Some evidence Relationship between BB penetration and future productivity Source: Booz & Co • A teleworking trial conducted by BT showed annual savings of ₤60m and 20% higher productivity (BT) • Exports: A 1% increase in Internet users is associated with a 4.3% boost in exports (Clarke & Wallsten, 2006) • Location: Good broadband can enhance the attractiveness of a location for the “creative class” of knowledge workers (Dutta & Mia, 2008) • Productivity: LECG/Nokia show that Broadband accounts for more than 10 per cent of US productivity growth

  6. Role of government: Conceptual Source: Adapted from Peña-López, Ismael (2009) “Measuring digital development for policy-making: Models, stages, characteristics and causes”, unpublished PhD thesis, UOC, Barcelona

  7. Rationale for efficiency goals • Externalities • Spillover effect: Marginal benefits to the economy and society exceed those to the individual or firm • Network effect: Value of the network increases as the number of consumers goes up • Information as a public good • Excludability: impossibility (or very high cost) of excluding those who do not pay • Non-rivalry in consumption (my use does not impact yours) • Imperfect competition • High up-front investment costs required for market entry • Competitive markets depend on absence of monopolies or monopolistic behaviour • Imperfect information • Competitive markets depend on consumers being able to make informed choices

  8. Equity and environmental objectives • Everyone should have access to public services and income opportunities which allow them to fully participate in the life of society • Income equity • Social inclusion • Equal access to public services • Implications for government policy • Public support for the provision of services in remote and rural areas • Regulations to ensure the provision of ICT services to the disabled ************ • Broadband as a clean, green technology • Substituting for the physical displacement of goods and people (e.g., through telecommuting, telepresence and virtual collaboration, online shopping etc) • Assisting countries in meeting targets for reduced greenhouse gas emissions

  9. Broadband in national stimulus • Almost US$50 bn has been committed to broadband investments in stimulus packages • Korea is targeting 1Gbit/s by 2012 • BB is a legal right in Finland, Spain & Switzerland Source: Based on ITU, OECD, World Bank and Booz.

  10. Case study #1: Republic of Korea • Korea’s initial broadband growth appeared to “defy the S-Curve” • Since 1985, six major policy initiatives have helped to promote public/private partnership, including government funding a backbone network for public institutions • Korea has benefited in terms of higher labour productivity and educational attainment as well as a doubling of ICT services as a % of GDP Broadband penetration per 100 inhabitants: Korea, Denmark and Netherlands Source: OECD Data.

  11. Case study #2: UK • In 2005, following an Ofcom review, the UK incumbent, BT, proposed a functional separation of Openreach, the network management art, and the rest of the company • Openreach sells services to all market players (unbundled local loop) on the basis of “equivalence of inputs”, subject to review by the “Equality of Access Board” • Subsequently, the number of broadband accesses in the UK has soared • The UK government is now proposing a £6 per year levy on fixed lines to finance NGN Broadband usage in the UK, millions Source: EU Data. Note, not a uniform data series.

  12. Case study #3: France • France has benefited from a strong competition to the incumbent, France Telecom, from new entrant Iliad (free.fr) • This has enabled it to build a “ladder of investment” strategy, beginning with resale, and passing to bitstream, shared access and eventually fully unbundled local loops (ULL) • France was previously an internet laggard but is now an internet leader in Europe Broadband usage in France, millions Source: EU Data. Note, not a uniform data series.

  13. Case study #4: Singapore • Singapore provides an early example of a country where mobile broadband is overtaking fixed-line broadband • Worldwide, mobile broadband users will exceed fixed-line by end 2009 • However, there are measurement issues: • Is a mobile broadband user someone with a suitably equipped handset? • Or with a USB modem? • Or with a data subscription? Broadband evolution in Singapore Source: IDA

  14. World Bank / infoDev research • Research on the impact of broadband on economic growth • Published in 2009 edition of Information and Communication for Development Report: Extending Reach and Increasing Impact • Joint work between infoDev and OECD • Broadband infrastructure Investment in stimulus packages: Relevance for developing countries • Research paper, published May 2009 • Case study of broadband development in Republic of Korea and other broadband pioneers • Due to be published in late 2009 • Six mini case-studies • Technical assistance programmes and benchmarking • In Egypt, Armenia and elsewhere • Broadband toolkit • Broadband Handbook to be published in 2010 • Full toolkit to cover strategies and policies, regulation and implementation • Core funding from Korea Trust Fund. Other partners welcome

  15. Thank You www.worldbank.org/ictwww.infodev.org

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