Ovum's David Kennedy


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Ovum's David Kennedy at CommsDay Melbourne Congress 2013

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Ovum's David Kennedy

  1. 1. © Copyright Ovum. All rights reserved. Ovum is an Informa company1 Broadband investment: what’s the role of government? David Kennedy, Research Director david.kennedy@ovum.com October 2013
  2. 2. © Copyright Ovum. All rights reserved. Ovum is an Informa company2 What does economic research tell us about the benefits of broadband?  Economic research on the impact of broadband is a work in progress, but some clear conclusions are already available.  A key problem is the lack of comprehensive cross-country data sets to analyse. Research into computer impacts on productivity faced a similar problem until around 2000.  The research falls into two broad classes: microeconomic and macroeconomic:  Microeconomics is focused at the level of the firm, and studies the impact of broadband on firm behavior, strategy and organization.  Macroeconomics uses the tools of econometric analysis to determine the impact of broadband on overall economic and productivity growth.  Key source: ITU, Impact of Broadband on the Economy, 2012
  3. 3. © Copyright Ovum. All rights reserved. Ovum is an Informa company3 Types of economic analysis  Several kinds of economic analysis have been used to address this issue:  macroeconomic analyses based on statistical regression  microeconomic analyses that measure firm-level efficiencies  qualitative analyses based on firm-level case studies and surveys.  All of these indicate a positive and significant contribution by broadband rollout to economic performance.  Ovum’s view is that the current economic research justifies policy to support broadband rollout.
  4. 4. © Copyright Ovum. All rights reserved. Ovum is an Informa company4 Some key macroeconomic studies  Czernich et al. (2011) focussed on OECD countries from 1996 to 2007. They found a positive link between broadband penetration and national GDP per capita: a 0.9% to 1.5% increase in national GDP per capita for each additional 10% of broadband penetration.  The World Bank (Qiang et al 2009) checked developed and developing markets separately for the period 1980-2002. While developed markets showed an additional 1.21% increase in GDP for each additional 10% of broadband penetration, developing markets had yielded a 1.38% increase.  In its analyses of developing country markets, the ITU found a range of outcomes, which were lower than the World Bank estimates.  However, even taking this into account the ITU found that there was a positive relationship between broadband penetration and growth in every market where a statistically significant result could be obtained.
  5. 5. © Copyright Ovum. All rights reserved. Ovum is an Informa company5 Some key microeconomic analyses  LECG (2009) analysed 15 OECD economies over the 1998-2007 period. It found that a 1.0% increase in broadband penetration delivered an average of 0.13% improvement in labor productivity.  However, the countries with low broadband penetration showed no measurable improvement in productivity  Meijers (2012) studied 162 countries from 1990 to 2008, and found found a 10% increase in national internet penetration corresponded to a 3.9% increase in trade as a proportion of GDP.  Firm-level research shows showed that broadband deployment is associated with improvements in:  speed and timing of business and process reengineering  process automation through network integration  better data processing and diffusion of information and knowledge within organizations
  6. 6. © Copyright Ovum. All rights reserved. Ovum is an Informa company6 What we don’t know  The precise impact of broadband on growth  Estimates, though positive, still vary over a wide range due to measurement and data problems.  How important is data speed?  A joint study on 33 OECD countries by Chalmers University of Technology, consultancy Arthur D. Little and Ericsson estimated that doubling the average broadband speed in a country increased GDP by 0.3% during the 2008-2010 period.  But not much of this would be above 25Mbps  Fixed versus mobile?  Very few studies distinguish between fixed and mobile, but this is likely to be very important in developing markets  Residential versus business?
  7. 7. © Copyright Ovum. All rights reserved. Ovum is an Informa company7 An important result: marginal benefits of raising penetration Marginal growth benefit Penetration Network effect Valuation effect Overall effect
  8. 8. © Copyright Ovum. All rights reserved. Ovum is an Informa company8 What’s the upshot?  Broadband is an economic “good thing”.  There are some important market failures:  Early rollout and the achievement of critical mass.  The digital divide and the achievement of a national market for applications.  The research seems to support rollout targets and universal access policies.  There is firm evidence that business benefits from broadband  The jury is still out on speeds above 25Mbps.
  9. 9. © Copyright Ovum. All rights reserved. Ovum is an Informa company9 Progress against national broadband plans: next- generation broadband (1)
  10. 10. © Copyright Ovum. All rights reserved. Ovum is an Informa company10 Progress against national broadband plans: next- generation broadband (2)
  11. 11. © Copyright Ovum. All rights reserved. Ovum is an Informa company11 National broadband plans: EU5  In August 2010 the Ministry of Industry, Tourism, and Trade announced a €200m plan (Plan Avanza 2) that focused on the development of broadband coverage and infrastructure. The plan offered financial aid to expand broadband coverage at the “basic speed” (1 Mbps) to all areas, and to develop NGN with speeds of more than 50Mbps.  At present, the MITYC reports that broadband at a minimum speed of 1Mbps is available to 100% of the population thanks to a universal service obligation.  In February 2013, the Digital Agenda for Spain adopted the targets of the EC’s Digital Agenda. Targets for 2015 are also set: 50% coverage of 100Mbps speeds (currently 47%), 50% FTTH coverage and 47% HFC coverage (currently 9% and 47% respectively), and 5% uptake of 100Mbps connections (currently 0.4%). Spain In February 2009 the German federal government launched its broadband strategy. It plans to spend approximately €60m on developing broadband access.  The objectives of this plan are: - to achieve a “capable” (i.e. 1Mbps) broadband speed for all by 2010 - to provide 75% of all regions with access to 50Mbps by 2014.  As of mid-2012, 1Mbps broadband was available to over 99.5% of German households. 50Mbps broadband was available to 51.3% – an increase of nearly 30% on the previous year. Germany  In December 2010 the government presented its national broadband strategy, which aims to provide the UK with “the best superfast broadband network in Europe” by 2015. Its aim was nationwide 2Mbps coverage and 90% 24Mbps+ coverage by 2015. Broadband Development UK (BDUK) is responsible for the £530m rural broadband program, which gives grant funding to local bodies to procure superfast broadband services for their areas.  However, in June 2013 the government announced that it would miss the 2015 90% coverage target. The target has been revised to 95% coverage by 2017. At the end of 2012, 2Mbps broadband was available to 99.8% of the country, while superfast broadband reached 70.3%. UK  In October 2008 “France Numerique 2012” was launched. The objectives of this plan are for access at 512Kbps for less than €35 per month to become a universal service, and to ensure broadband access at 512Kbps for 100% of the population by January 1, 2010.  In November 2011, the government presented its digital strategy for 2020. Its key goals are to have 70% high- speed broadband (100Mbps) coverage by 2020 (100% by 2025) and to release 450MHz of spectrum for use by mobile broadband services. France Italy  In February 2009 the government launched a broadband plan aiming at full 2Mbps coverage by 2012 (at least 94% with 4Mbps speeds). However, according to the Ministry of Economic Development, as of December 31, 2012 the coverage of 2Mbps connections was 90.6%, while 55.7% of the population was reached by 20Mbps connections.  The Italian Digital Agenda launched by the government in March 2012 also had a Strategic Project for Ultra Broadband, in line with the EC’s Digital Agenda targets. The plan aims to foster NGA deployment in “white areas” unattractive for the market. Direct intervention, public–private partnerships, and incentives will be used.
  12. 12. © Copyright Ovum. All rights reserved. Ovum is an Informa company12 National broadband plans: Europe (1)  In December 2008 the Finnish government formulated a national broadband action plan for 2009–15. The objectives of the “Broadband 2015” project are: - broadband (1Mbps) as a universal service obligation by 2010. This obligation eventually took effect in July 2010. - super-high-speed (100Mbps) broadband access available to 99% of the population by 2015.  The aim of this project is to ensure that end users are no further than 2km from a 100Mbps fibre or cable network.  As of October 2012, 86% of the population were within 2km of fiber. Finland Austria  The Austrian federal broadband scheme “BBA_13” has targeted bringing 25Mbps broadband to all Austrian citizens by 2013. It aims to stimulate the construction of broadband infrastructure in rural areas and is funded by regional, national, and EU means.  In November 2012 the Ministry for Transport, Innovation, and Technology presented its “Broadband Strategy 2020”. The plan set a target of nationwide 100Mbps coverage by the end of this decade. Estonia  The Estonian Broadband Development Foundation was founded in August 2009.  The foundation then launched “EstWin”, a project to construct a superfast broadband network in order to give all residential houses, businesses, and authorities access to 100Mbps speeds by 2015; 98% of the population should not be more than 1.5km from the network. The projected cost of the network is $93m (€70m), the majority of which is being financed from the EU’s structural funds.  As of 4Q12, 50% of Estonians have access to 100Mbps broadband.  In June 2010 the Danish government set its target for the deployment of NGA. It aims to cover 100% of households with 100Mbps connections by 2020 through a continuation of the market-driven and technology-neutral approaches it has so far adopted in its broadband policies. The government plans to set up an independent external review in 2017 to assess the progress of the plan.  As of mid-2012, 99.9% of households were reached by 2Mbps or higher speeds, whereas 65% had access to 100Mbps connections. Denmark Czech Republic  In January 2011 the Czech government approved its national broadband plan, “Digital Czech Republic.” Its first goal is to ensure universal broadband of at least 2Mbps by 2013. Its second is to provide 30Mbps in urban areas by 2015.  At the end of 2012 standard 2Mbps broadband covered 98.1% of homes; 30Mbps was available to 49.3%.
  13. 13. © Copyright Ovum. All rights reserved. Ovum is an Informa company13 National broadband plans: Europe (3)  The government’s Digital Agenda, approved in March 2013, focuses on ensuring a market- based and technology-neutral broadband policy. There are no coverage targets, excepts that to eliminate the residual digital divide (currently, basic broadband coverage is at 99.7%). Norway already has 50% coverage of 100Mbps connections, and 62% of households have access to 50Mbps connections.  The Dutch government’s digital agenda only focuses on general objectives for competition and investment in the broadband market. There are no coverage targets, because the objectives of the EC’s Digital Agenda have already been met. It is reported that 90% of Dutch households already have access to 100Mbps connections, and 98% can already take up 30Mbps broadband. Netherlands  The Swedish government’s broadband plan target consists of two stages: at least 40% coverage of 100Mbps connections by 2015, and 90% coverage by 2020.  According to the PTS’s 2011 broadband survey, 49% of households are now covered by 100Mbps connections, which means that the first target has been achieved four years ahead of schedule. SwedenNorway Latvia  In 2011 the Latvian government approved guidelines that did not include specific broadband coverage and speeds targets, but that set penetration targets (20% in 2012 and 25% in 2016 for fixed broadband, and, 15% in 2012 and 30% in 2016 for mobile broadband). They also aimed to increase the number of inhabitants who use the Internet regularly to 70% in 2012 and 85% in 2016.  A draft policy paper was under discussion at the time of writing, in line with the EC’s Digital Agenda targets. The EC reports that broadband uptake was 23.1% of the population as of January 2013. Lithuania  Lithuania’s latest broadband strategy is included in the government’s Information Society Development Programme 2011–2019. In line with the EC’s digital agenda target, it aims to achieve 100% coverage of 30Mbps connections by 2020. An intermediate target is set for 2015 (70%). The plan makes no mention of a 100Mbps coverage target, unlike the EC’s agenda.
  14. 14. © Copyright Ovum. All rights reserved. Ovum is an Informa company14  Since 1998 the “Digital 21 Strategy” has set out the government’s vision of developing Hong Kong into a leading digital city. It was reviewed and updated in 2001, 2004, and 2008.  The 2008 edition has five key action areas: facilitating a digital economy, promoting advanced technology and innovation, developing Hong Kong as a hub for technological co-operation and trade, enabling the next generation of public services, and building an inclusive, knowledge-based society. National broadband plans: Asia-Pacific (1)  In July 2009 the government announced the “i-Japan strategy 2015”.  It has four major aims: Easy to use digital technologies, breaking down the barriers that hinder the use of digital technologies, ensuring security when using digital technologies, and creating a new Japan by diffusing digital technologies and IT throughout the country.  The strategy also includes a national coverage target of 100+Mbps for mobile broadband and 1Gbps for fixed broadband by 2015.  In 2006 the KCC announced the “U-Korea Master Plan” in two phases: the establishment phase (2006–10) and the stabilisation phase (2011–15).  In the second phase of the plan, the major initiative is to deploy an Ultra Broadband Convergence Network (UBCN) which aims to provide universal 1Gbps fixed broadband and 10Mbps mobile broadband services by 2013. Japan South Korea China  In February 2012 the government started designing the national broadband strategy for China. A draft version has been submitted to the state council for review, although a final plan had not been released at the time of writing.  The draft plan set a 20Mbps target for fixed broadband availability in urban areas, and 4Mbps in rural areas by 2015. The government aims to increase coverage of FTTH by 35 million households by the end of the 2013.  In 2012 FTTH covered 94 million households. Taiwan Hong Kong  Taiwan’s national broadband plan forms part of the “Digital Convergence Policy Initiative” announced in December 2010. Taiwan aims to have 100Mbps fixed broadband reach 100% of the population in 2013, apart from in the most remote areas. As of May 2013, household penetration of 100Mbps broadband had reached 80%.  The NCC completed the “Broadband for Villages” and “Broadband for Tribes” initiatives in 2007 and 2010, respectively. All tribes in remote areas in Taiwan can now access 2Mbps broadband. Since 2012, NCC has been promoting the increase of broadband speeds in these areas from 2Mbps to 12Mbps; it is estimated that coverage of 12Mbps in remote villages will reach 75% in 2013, 85% in 2014, and 95% by 2015.
  15. 15. © Copyright Ovum. All rights reserved. Ovum is an Informa company15 National broadband plans: Asia-Pacific (2)  “Intelligent Nation 2015” (iN2015) is a 10- year national Infocomm master plan launched in 2006 and led by the IDA.  The IDA has taken an active position in promoting NGA development by conducting tenders for the next-generation national broadband network.  In 2007 the government offered $781m (SGD1bn) to build and operate an FTTH network, with structural and operational separation in passive and active network infrastructure.  In March 2009 the Ministry of Economic Development announced that the government would provide funding to accelerate the provision of ultra-fast fiber broadband (UFB) to 75% of the country’s population by 2019. The level of funding was set at $1.13bn (NZ$1.35bn).  As of 1Q13, 171,886 homes and businesses could connect to the UFB network.  The Rural Broadband Initiative (RBI) is designed to address the 25% of the market outside the footprint of the UFB program. Chorus and Vodafone won an RBI competitive tender in February 2011 to provide rural broadband services. Chorus’s role in the project is to provide fixed infrastructure, while Vodafone is responsible for towers and cell equipment. New Zealand Singapore  In 2007 the Malaysian government launched a national broadband project, the “National Broadband Initiative” (NBI), in partnership with Telekom Malaysia. The NBI achieved its first target of 50% household broadband penetration by the end of 2010.  The NBI coverage strategy for national broadband rollout was divided into three zones and two projects: the High-Speed Broadband (HSBB) project (zone 1) and the Broadband for General Population project (zones 2 and 3).  In March 2010 the Malaysian prime minister officially launched the HSBB project in zone 1. At the end of 2012 the network had passed 1.377 million premises. Malaysia
  16. 16. © Copyright Ovum. All rights reserved. Ovum is an Informa company16 National broadband plans: Americas (1)  On March 16, 2010 the FCC unveiled “Connecting America: The National Broadband Plan” to Congress. To fulfill Congress’s mandate, the plan seeks to ensure that the entire broadband ecosystem (networks, devices, content, and applications) is healthy.  Six key national broadband goals are set for the next decade, including ensuring that every American has access to a “robust” broadband service and that at least 100 million homes have affordable access to 100Mbps broadband.  The plan also calls for increasing wireless spectrum (such as in the 500MHz band) for mobile broadband.  According to a National Telecommunications and Information Administration (NTIA) National Broadband Map statistics report, at the end of 2Q12 99.9% of households in urban areas in the US were able to achieve at least 3Mbps broadband. US Colombia  On October 28, 2010, the Colombian government launched its ICT policy plan for the period from 2010-14. The plan, “Vive Digital”, has a budget of around COP5.5bn ($2.9m) and aims to promote broadband ubiquity and the development of the digital economy in order to promote job creation and social inclusion.  By 2014 the plan aims to achieve 8.8 million Internet connections, 50% Internet penetration for households and SMEs, and 700 municipalities connected to fiber.  There were 6.27 million broadband subscriptions at the end of 2012. Argentina  In 2010, Secom launched a five-year plan called "Argentina Conectada“.  The plan aims for the development of a national fiber optic network that covers 97% of the population with 10Mbps broadband by 2015. The remaining 3% of the population is to be covered by satellite services. State-owned society Arsat will become a wholesale provider, Arsat-Articom, and will sell access to existing operators, SMEs, and local cooperatives. The new operator will also provide retail services in the areas where no operator is present. Brazil  The national broadband plan (PNBL) was approved on May 2010. The PNBL aims to increase the number of households with broadband access, from 11.9 million (in May 2010) to 40.0 million by 2014.  The state-owned company privatized in 1998, Telebras, will manage the national fiber backbone.  Telebras will provide broadband Internet connection services to end users only in areas where the supply of broadband service is “inadequate”.  Agreements between the government and operators aim to offer 1Mbps connections for BRL35 per month. Oi, Telefonica, CTBC, and Sercomtel have so far adhered to the plan.
  17. 17. © Copyright Ovum. All rights reserved. Ovum is an Informa company17 Thank you David Kennedy, Research Director david.kennedy@ovum.com
  18. 18. © Copyright Ovum. All rights reserved. Ovum is an Informa company18 Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of the publisher, Ovum (an Informa company). The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions, and recommendations that Ovum delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Ovum can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect.