1. Broadband Economics Dr Tim Kelly Lead ICT Policy Specialist, infoDev/World Bank infoDev/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? 2

3. 3 Broadband is correlated with Growth 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 Broadband and wealth 2007 Source: World Bank Information and Communication for Development Report 2009

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

5. 5 Broadband and economic growth: Some evidence 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 Relationship between BB penetration and future productivity Source: Booz & Co

6. Role of government: Conceptual 6 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Ismael (2009) “Measuring digital development for policy-making: Models, stages, characteristics and causes”, unpublished PhD thesis, UOC, Barcelona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 7 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. 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 9 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 10 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 11 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 12 Broadband usage in France, millions Source: EU Data. Note, not a uniform data series.

13. Case study #4: Singapore 13 Broadband evolution in Singapore Source: IDA 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?

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 14

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