Driving Demand for Broadband Networks and Services

314 Pages·2014·5.731 MB·English

by  Raul L. Katz, Taylor A. Berry (auth.)

Signals and Communication Technology
Raul L. Katz
Taylor A. Berry
Driving Demand
for Broadband
Networks and
Services
Signals and Communication Technology
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Raul L. Katz Taylor A. Berry
•
Driving Demand for
Broadband Networks and
Services
123
RaulL. Katz
Taylor A.Berry
TelecomAdvisory Services
New York, NY
USA
ISSN 1860-4862 ISSN 1860-4870 (electronic)
ISBN 978-3-319-07196-1 ISBN 978-3-319-07197-8 (eBook)
DOI 10.1007/978-3-319-07197-8
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Preface
AnearlierversionofthisstudywasdevelopedaspartoftheinfoDev/WorldBank
Broadband Strategies Toolkit,1 with generous funding from the Korea ICT4D
TrustFund.TheauthorsthanktheWorldBankforauthorizingitspublication.We
are grateful for the comments received while developing the original material,
particularly the feedback from the following World Bank professionals: Tim
Kelly, Lead ICTPolicySpecialist; CarloRossotto,Lead ICTSpecialist, Regional
Coordinator, ECA, and MENA; and Masatake Yamamichi, consultant—ICT
Sector Unit. Additional reviewers of the original material included Wonki Min,
Ministry of Information and Communication—Republic of Korea; Toru Nakaya
andAtsushiOzu,MinistryofInternalAffairsandCommunications—Government
of Japan; Phillippa Biggs, Corporate Strategy Division—International Telecom-
munication Union; Akshaya Sreenivasan, Pennsylvania State University, John
DeRidder, Independent Consultant, Australia; Suraj Ramgolam, National
ComputerBoard—Mauritius;JohnRoman,DirectorofBroadbandandRegulatory
policy—Intel’s Global Public Policy Group; and Renee Wittemeyer, Director of
Social Impact—Intel.
Thisversioncontainsnumerousupdatestotheoriginalcasestudies.Inaddition,
whenever possible, data have been updated to reflect the rapidly changing land-
scape of broadband technology.
Alargeportionofthematerialcontainedinthisstudywasgeneratedthroughout
the course of multiple consulting engagements supporting the development and
implementation of national broadband plans for Costa Rica (Estrategia Nacional
deBandaAncha)andEcuador(PlanNacionaldeBandaAncha)aswellasdigital
agendas for Colombia (Plan Vive Digital) and Mexico (Estrategia Digital
Nacional). The authors are grateful for the fruitful collaboration with numerous
individuals that occurred throughout the implementation of those projects. In
particular,theythankHanniaVega(formerViceMinisterofTelecommunications
of Costa Rica), Ana Valdiviezo (Head of Ecuador National Telecommunications
Council), Diego Molano (Minister of ICT of Colombia), and Alejandra Lagunes
(Coordinator of Mexican National Digital Strategy).
1 The original source material and additional case studies can be retrieved at http://
broadbandtoolkit.org/en/home.
v
vi Preface
Additionally, portions of the work were developed while completing multiple
studiesfortheInternationalTelecommunicationsUnion.Theauthorsacknowledge
theirworkwithNancySundberg,SeniorProgramOfficer—RegulatoryandMarket
Environment Division and Youlia Lozanova, Telecommunication—ICT Regula-
tory Analyst, both from the Telecommunications Development Bureau.
Finally, this study benefitted from numerous collaborations with a number of
academics in the field of telecommunications policy. We thank, in particular,
Prof. Hernan Galperin, from the Universidad de San Andres (Argentina); Prof.
Alison Gillwald, from the University of Capetown (South Africa); Prof. Judith
Mariscal,fromtheCentrodeInvestigación yDocencia Económica(México);and
Prof. Eli Noam, from Columbia University (United States).
Several colleagues at Telecom Advisory Services worked with us in engage-
ments that served as a basis for parts of the work contained in this study. In
particular, we thank Dr. Ernesto Flores-Roux, Dr. Pantelis Koutroumpis, and
Fernando Callorda.
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2 Assessing the Broadband Demand Gap. . . . . . . . . . . . . . . . . . . . . 5
2.1 Measuring the Broadband Demand Gap. . . . . . . . . . . . . . . . . . 5
2.1.1 The Fixed Broadband Demand Gap . . . . . . . . . . . . . . . 6
2.1.2 The Mobile Broadband Demand Gap . . . . . . . . . . . . . . 8
2.1.3 Demand Gap and the Interrelationship Between
Fixed and Mobile Broadband. . . . . . . . . . . . . . . . . . . . 10
2.2 Understanding the Residential Broadband Demand Gap. . . . . . . 14
2.2.1 The Affordability Barrier. . . . . . . . . . . . . . . . . . . . . . . 16
2.2.2 Limited Digital Literacy . . . . . . . . . . . . . . . . . . . . . . . 24
2.2.3 Lack of Content Relevance or Interest. . . . . . . . . . . . . . 29
2.2.4 Broadband Diffusion Cycles and the Importance
of Adoption Structural Factors . . . . . . . . . . . . . . . . . . . 31
2.3 Understanding the Enterprise Broadband Demand Gap . . . . . . . 33
2.3.1 The Economic Barrier. . . . . . . . . . . . . . . . . . . . . . . . . 37
2.3.2 Limited Technology Training. . . . . . . . . . . . . . . . . . . . 37
2.3.3 Slow Assimilation of Broadband. . . . . . . . . . . . . . . . . . 38
2.4 Broadband Demand Gap Diagnostic . . . . . . . . . . . . . . . . . . . . 39
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3 Creating Awareness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.1 Developing Basic Digital Literacy. . . . . . . . . . . . . . . . . . . . . . 44
3.1.1 Digital Literacy Through Formal Education Programs. . . 45
3.1.2 Targeted Digital Literacy Programs. . . . . . . . . . . . . . . . 62
3.2 Community Access Centers . . . . . . . . . . . . . . . . . . . . . . . . . . 90
3.2.1 Types of Shared or Community Access Centers. . . . . . . 90
3.2.2 Economics of Shared Public Access Centers . . . . . . . . . 101
3.2.3 Ancillary Access Centers. . . . . . . . . . . . . . . . . . . . . . . 101
3.2.4 Stand-Alone Public Access Centers. . . . . . . . . . . . . . . . 104
3.3 Advanced ICT Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
vii
viii Contents
3.4 Small and Medium Enterprises . . . . . . . . . . . . . . . . . . . . . . . . 107
3.4.1 Training for SMEs . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
3.4.2 Consulting Services for SMEs . . . . . . . . . . . . . . . . . . . 112
3.4.3 Broadband and New Firm Formation. . . . . . . . . . . . . . . 115
3.5 Sponsorship Structures of Awareness Programs. . . . . . . . . . . . . 121
3.5.1 Public Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
3.5.2 Multilateral and Public Donors. . . . . . . . . . . . . . . . . . . 123
3.5.3 Public-Private Associations . . . . . . . . . . . . . . . . . . . . . 127
3.5.4 Private Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
4 Achieving Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
4.1 Economics of Broadband Adoption . . . . . . . . . . . . . . . . . . . . . 136
4.2 Broadband Service Pricing as a Barrier to Adoption . . . . . . . . . 137
4.2.1 Cross-Country Comparisons of Fixed and Mobile
Broadband Pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
4.2.2 Broadband Price Elasticity. . . . . . . . . . . . . . . . . . . . . . 139
4.2.3 The Effect of Competition on Broadband Pricing . . . . . . 146
4.2.4 The Role of Mobile Broadband in Lowering
the Affordability Barrier at the Bottom
of the Pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
4.2.5 Policy Initiatives Aimed at Reducing the Cost
of Broadband Service . . . . . . . . . . . . . . . . . . . . . . . . . 161
4.3 Device Ownership as a Barrier to Adoption . . . . . . . . . . . . . . . 178
4.3.1 Programs to Reduce the Cost of Purchasing Personal
Computers, Laptops, and Netbooks. . . . . . . . . . . . . . . . 181
4.3.2 Programs to Reduce the Cost of Purchasing Mobile
Devices, Smartphones, and Tablets. . . . . . . . . . . . . . . . 188
4.4 Taxation as a Barrier to Adoption. . . . . . . . . . . . . . . . . . . . . . 193
4.4.1 Programs Aimed at Reducing Taxation
on Access Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
5 Developing Applications to Drive Broadband Demand. . . . . . . . . . 203
5.1 The Multiple Dimensions of Content Relevance . . . . . . . . . . . . 204
5.2 Network Effects Applications Driving Broadband Demand. . . . . 206
5.2.1 Social Media Platforms . . . . . . . . . . . . . . . . . . . . . . . . 206
5.2.2 Games and Gamification . . . . . . . . . . . . . . . . . . . . . . . 215
5.2.3 Mobile Broadband Applications . . . . . . . . . . . . . . . . . . 219
5.3 Broadband-Enabled Services with High Social
and Welfare Impact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
5.3.1 E-Government Services. . . . . . . . . . . . . . . . . . . . . . . . 224
5.3.2 e-Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
5.3.3 Broadband-Enabled Financial Services . . . . . . . . . . . . . 238
Contents ix
5.4 Content to Drive Broadband Demand. . . . . . . . . . . . . . . . . . . . 246
5.4.1 Local Content Promotion Policies. . . . . . . . . . . . . . . . . 246
5.4.2 Digital Content Promotion Policies. . . . . . . . . . . . . . . . 251
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
6 Launching Services to Drive Broadband Demand . . . . . . . . . . . . . 257
6.1 Internet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
6.2 Voice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
6.3 Video. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260
6.4 Bundling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
7 Broadband, Firms, and Employment . . . . . . . . . . . . . . . . . . . . . . 263
7.1 Broadband and Job Creation. . . . . . . . . . . . . . . . . . . . . . . . . . 263
7.1.1 Job Creation Through Network Construction . . . . . . . . . 265
7.1.2 Broadband Spillovers on Business Expansion
and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
7.1.3 Broadband and Employment in Developing Countries. . . 279
7.2 Broadband, Productivity, and Firm Efficiency. . . . . . . . . . . . . . 285
7.3 Industrial Sectors Most Impacted by Broadband . . . . . . . . . . . . 286
7.4 Broadband and Enterprise Relocation. . . . . . . . . . . . . . . . . . . . 287
7.4.1 Broadband and Entrepreneurship. . . . . . . . . . . . . . . . . . 289
7.4.2 Broadband as an Impact on Employment Structure
and Distribution on a Global Scale . . . . . . . . . . . . . . . . 290
7.5 Potential Negative Impact of Broadband on Employment
and Management Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . 292
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
8 Strategies to Promote Broadband Demand . . . . . . . . . . . . . . . . . . 295
8.1 Determining Adoption Targets in National Broadband Plans. . . . 295
8.2 Identifying and Managing Demand Stimulation Programs . . . . . 301
Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
About the Authors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Chapter 1
Introduction
Thisbookfocusesonthestrategiesforstimulatingbroadbanddemand.Thedebate
aroundthedigitaldividehasbeen, sofar,drivenmainlybystatisticsbasedonthe
numberofhouseholdsthathaveafixedbroadbandconnectionandacomputer,and
individualsthathaveawirelessbroadbanddevice,suchasasmartphoneortablet.
Along these lines, policy emphasis has been made, to a large degree, to increase
thedeploymentofbroadbandnetworks(inotherwords,thesupplyside).Whilethe
causalitybetweennetworkdeploymentandbroadbandpenetrationcertainlyexists,
it is important to consider that a substantial portion of the digital divide is also
explained by the demand gap, the reasons for which will be discussed in-depth
throughoutthisbook.Whilethesupplygapmeasurestheportionofthepopulation
of a given country that cannot access broadband because of lack of service, the
demandgapfocusesonthepotentialusersthatcouldbuybroadbandservice(since
operatorsofferitintheirterritory,eitherthroughfixedorwirelessnetworks)butdo
not (see Fig. 1.1).
According to Fig. 1.1, the supply gap is defined by the number of households
whereeitherfixedormobilebroadbandisnotavailable(bb),whilethedemandgap
is measured by the non-subscribing households of those where broadband is
available (dd). Accordingly, the concept of digital divide represents the sum of
both groups (bb + dd). While policy discussion has been intense regarding the
needforprovidinguniversalcoverage(andtherefore,eliminatingthesupplygap),
the demand gap has not benefitted from an equal level of attention.
Tackling the demand gap is critical for policy-makers, since even in some
maturecountriesitcanreachcloseto30 %ofservedhouseholds.Theresearchon
thesocialandeconomicimpact ofbroadband indicates increasing returnstoscale
derivedfromenhancedadoption.Inotherwords,thehigherthebroadbandandICT
adoption, the more important the economic andsocial benefitsare.1 In that sense,
1 ForanassessmentofreturnstoscaleinICT,seeRollerandWaverman(2001),Koutroumpis,
(2009),KatzandKoutroumpis(2013).
R.L.KatzandT.A.Berry,DrivingDemandforBroadbandNetworksandServices, 1
SignalsandCommunicationTechnology,DOI:10.1007/978-3-319-07197-8_1,
(cid:2)SpringerInternationalPublishingSwitzerland2014