Broadband EconomicsDr Tim Kelly

Lead ICT Policy Specialist, infoDev/World BankinfoDev/CSTD workshop

“Measuring the Broadband Economy”, Hammamet, 23 November 2009

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

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 wealth2007

Source: World Bank Information and Communication for Development Report 2009

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

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

Role of government: Conceptual

6

Strategies ICT4D Approach

Push

Infrastructure

1.0ICT Sector

(Digital) Literacy

Pull 2.0Enabling Environment

Applications(content and services)

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Ismael (2009) “Measuring digital development for policy-making: Models, stages, characteristics and causes”, unpublished PhD thesis, UOC, Barcelona

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

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

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.

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 NetherlandsSource: OECD Data.

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.

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, millionsSource: EU Data. Note, not a uniform

data series.

Case study #4: Singapore

13

Broadband evolution in Singapore

Source: IDA

0

1'000

2'000

3'000

4'000

5'000

6'000

Apr 07 Jun 07 Sept 07

Dec 07 Mar 08 Jun 08 Sept 08

Dec 08 Mar 09 Jun 09

Other

xDSL

Cable Modems

Wireless Broadband

•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?

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

Thank You

www.worldbank.org/ictwww.infodev.org