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Broadband Broadband

Issue
Broadband infrastructure is critical to enable the growth of new advanced Internet applications. Its deployment is a key measure of success in the information economy and is crucial to the future growth of productivity. Some of the issues slowing deployment include (1) absence of a fully competitive market; (2) disagreement between traditionally regulated industry and new technology industries over terms of entry to the market, investment in new infrastructure, and use of existing infrastructure; and (3) the legitimate need to ensure universal access to broadband services. Although a few countries, such as Korea, Japan, Taiwan and Hong Kong, have achieved significant broadband penetration, most countries lag far behind.

For example, the United States has fallen from 4th to 11th in broadband penetration and stands to fall even further. Broadband penetration in Latin America varies greatly from country to country, but as a whole, the region's progress towards having widespread high-speed Internet use remains sluggish. Moreover, with few exceptions, most of the broadband infrastructure available today consists of relative slow connections in the 500kbps to 3Mbps range. A few countries, such as Korea and Japan, have plans to take their broadband infrastructure from current levels to next generation speeds of 100Mbps. In Japan, it is already a reality as many Japanese consumers can now get a 100mbps connection for approximately US$38 per month.

Broadband Defined
Broadband definitions vary widely. However, "broadband" is commonly understood as a reference to high speed, always-on communication links that can move large files much more quickly than a regular phone line. "Broader" lines carry more information faster. Broadband Internet access is available over a variety of platforms including, at present, cable modems, digital subscriber lines (DSL), wireless, satellite, powerline (BPL), fiber optics to the home(FTTH), or Long Reach Ethernet (LRE).

Because telecommunications is one of the most intensely regulated industries and it has a legacy of decades of government involvement, regulatory policy significantly affects broadband infrastructure investment. Regulators and government impact investment through the application of legacy regulation to new technologies, through attempts to artificially create competition, through spectrum allocation, through universal service subsidy systems and through direct government investment and tax incentives.

Impact to Business
Broadband deployment offers opportunities for business, large and small. Deployment and management of broadband systems represents new business prospects. Further, the industry applications enabled by broadband development generate productivity and growth in numerous Internet related industries including e-learning, telemedicine, entertainment, and e-commerce, among others. These productivity benefits spill over to economies at large as well. Accenture estimates that universal adoption of next generation broadband could produce economic benefits of US$9.25 billion to US$25 billion per annum to Australia. In the United States, studies have that building a "robust, nationwide network" would expand employment by 1.2 million new, permanent jobs1.

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Status
Cable, telephone, wireless and satellite companies are working to deploy broadband-capable networks globally. Network providers are investing billions to upgrade their infrastructures and increase their bandwidth capacity. Similarly, Internet Service Providers (ISPs) globally are offering high-speed access over cable, DSL and wireless. As deployment proceeds, government approaches to stimulate broadband vary.

In the US, industry has encouraged further deregulation and market driven policies to promote competition. Efforts to stimulate broadband deployment have been hindered by discussion of how and who to regulate (or not regulate), as well as legal hurdles, such as right-of-way issues for deployment across multiple legal jurisdictions. More recently, however, a major hurdle to broadband deployment in the US has been the issue of digital rights management - technological protections to prevent copying of digital content carried over the Internet. Several legislative initiatives are underway in the new Congress to stimulate broadband deployment through deregulation and targeted tax incentives.

The U.S. Federal Communications Commission (FCC) released its most recent report on Broadband penetration in the United States on September 9, 2004. At the end of 2003 in the US, there were 28.2 million broadband access lines in service with a speed of at least 200k. The majority of FCC Commissioners also concluded that broadband deployment was proceeding at an adequate pace considering other technology adoption rates. Two of the Commissioners, on the other hand, dissented by pointing out that the US is 11th in the world in broadband penetration and that the FCC's 200k definition of broadband is too slow given advancement in technology.

On March 26, 2004, President Bush set a national goal of making broadband available to all Americans by 2007. Cisco's President and CEO John Chambers applauded President Bush for his vision of universal, high-speed broadband access in the United States and his recognition of the positive impact that broadband could have on the nation's education and healthcare systems - two of our country's top priorities. Cisco believes that having affordable broadband for all Americans will help ensure the nation's competitiveness for decades to come. On June 24, 2004, President Bush reiterated that goal and added an additional goal of making America #1 in broadband penetration, up from its current #11 international ranking.

Additional world leaders are incorporating broadband into their national platforms. On September 28th, 2004 U.K. Prime Minister Tony Blair, speaking at the Annual Labour Party Conference, said that a third term for his government would mean "ending the digital divide by bringing broadband technology to every home in Britain that wants it by 2008."

On the European Union (EU) level, the European Commission continues to recognize the importance of broadband deployment. For example, the eEurope 2005 Action Plan seeks to accelerate the rollout of broadband. Countries have been instructed to use the EU's existing Structural Funds (regional and social funds, etc.) to facilitate broadband access in remote and rural areas. In addition, "the EU countries should eliminate legislative barriers [and] promote investments in broadband notably by easing 'right of way' restrictions." All Member States submitted national broadband plans by the end of 2003. They now need to provide an up-date of their national strategies to promote the use of broadband by the end of 2005.

As such, national broadband strategies in Europe are led by a common approach:
Recognition of the primary role of the market in the expansion of broadband
The role of public intervention to address supply and demand side when there is market failure; and
Understanding of the importance of competition and convergence across alternative platforms.

Over the past few years, the European Union has made significant progress in raising participation in the Information Society. In the past year, for instance, the number of broadband connections has nearly doubled and now reaches nearly 25 million households. The EU, including the accession countries, has the second largest global broadband region.

Belgium, Netherlands and Denmark lead the way. These countries have a competitive cable platform to DSL provided by the incumbent and have broadband penetration rates close to 15%. Finland and Sweden are also high-performers. The UK, while a slow starter, was among the fastest growing markets in Europe in the first half of 2004. France is showing strong growth in DSL connections over the last few months, namely due to regulatory intervention to decrease the price of unbundled local loops. Germany, Spain and Italy are clearly falling behind. DSL in Europe continues to represent around 74% of the total connections with cable around 22% while other technology platforms are still in the early stages. EU countries are feverishly working to catch up to Asia Pacific's dominant broadband global market share.

Market penetration figures indicate that broadband penetration in Asia-Pacific continues to be extremely strong. The latest figures confirm that South Korea maintains its global lead of market penetration. It is considered the greatest deployment success story because of a series of government investments and market enabling policy efforts. Through this effort, the South Korean government successfully stimulated one of the highest broadband penetration rates worldwide - a whopping 75 percent. The Government has made about $77 million in loans available to fund private networks since 1998. The South Korean government plans to invest $926 million by 2005 to continue the broadband deployment effort. Hong Kong ranks second in the world by penetration with Taiwan at sixth and Japan at ninth.

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Cisco Position
Broadband policies should promote competition, investment and innovation through appropriate deregulation of existing technology and non-regulation of new technologies.
Cisco believes that deployment of next generation broadband infrastructure should take priority over most competing interests when deciding regulatory policy as the private sector will be the major source of funding.

Key Messages
Leading countries must develop comprehensive national broadband infrastructure deployment plans and advance policies to implement them. A national broadband plan should include policies to:
Incent Private Sector Investment in Broadband Infrastructure
Promote Deployment of New Technologies and Applications
Encourage Innovation and Entrepreneurship
Make Spectrum Available for Wireless Broadband Services
Connect the Unconnected through Universal Service and Fiscal Policy

Vital regulatory policies to implement these goals include:
Removing regulatory requirements to unbundle networks from new investment in broadband infrastructure
Keep onerous telecommunications regulation from alternative providers of broadband services such as cable, wireless and powerline.
Avoid imposing legacy regulation on new technologies and applications such as VoIP, IP video, and other Internet applications
Refrain from choosing technology winners and losers.
Dedicate spectrum to high speed broadband access applications
Transition universal service programs from circuit switched voice focus to broadband connectivity

Additional Resources
TechNet
US FCC
Ministry of Information and Communications, Korea
Information Technology Industry Council
Broadband in Europe: Initiatives and Action Plans
Organization of Economic Cooperation and Development (OECD), "Broadband Infrastructure Deployment: the Role of Government Assistance", 22-May-2002
EEurope Benchmarking Report, February 2002

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As of January 2005

1Accenture, Innovation Delivered - Broadband for Australia, An Economic Stimulus Package, 2001, p8.; Building a Nationwide Broadband Network: Speeding Job Growth" by Stephen B. Pociask, pg. 1.