Nº 6 2015 > Broadband
Policy options for promoting high-speed broadband
By Samer Mourad, Principal, and Stéphane Piot, Partner, Analysys Mason
It is now widely recognized that broadband is an essential pillar of a successful economy, and that the widespread availability and use of broadband has both economic and social benefits. Therefore, governments are now looking to promote next-generation broadband networks as economies become increasingly reliant on digital networks.
Governments are implementing national broadband plans that define specific goals and the different policy instruments required to reach them. Indeed, governments have a large pool of policy options that they can use to support the development of high-speed broadband. The objectives set out in these plans typically address two areas: coverage and take-up.
In most countries, reaching ubiquitous or near-ubiquitous coverage of high-speed broadband is likely to require public funding, as the high costs of rolling out broadband infrastructure reduce the economic viability of high-speed broadband in low population-density areas.
Based on an existing methodology, refined over decades of experience with the telecoms industry, Analysys Mason recently carried out research to explore the commercial viability of broadband coverage, defined as the maximum household/population coverage that could be achieved economically for each broadband technology (i.e. excluding public intervention or public funds) in several countries. As shown in Figure 1, the incremental costs for Fibre-To-The-Home (FTTH) and Fibre-To-The-Cabinet (FTTC) increase quickly beyond household/population coverage of 40–50 per cent, resulting in a negative Net Present Value (NPV) after such levels. Conversely, Long-Term Evolution (LTE) maintains a positive NPV even with household/population coverage of more than 90 per cent.
1. An illustrative example of commercial viability assessment when developing national broadband strategy
Source: Analysys Mason, 2015.
According to this commercial viability assessment, the deployment profile and commercial viability of broadband technologies differs greatly as roll-out extends from the early stages of deployment (most often in densely populated areas) towards near ubiquitous coverage (most often in low population-density areas).
Besides public funding, various policy options have been identified by governments, which can be classified under three main headings, as presented in Figure 2:
- general measures aimed at improving the overarching regulatory and policy framework
- measures to develop the supply side — aimed at increasing the availability of broadband to end-users
- measures to develop the demand side — aimed at increasing citizens’ interest in broadband services and fostering take-up.
2. Main types of policy to promote the demand for and supply of broadband networks
Source: Analysys Mason, 2015.
These different types of policy vary in terms of their impact on broadband development, as shown in Table 1.
Table 2 presents examples of supply-side measures that can be taken to promote the supply of broadband networks and services, and high-speed broadband in particular. Regulators may need to work closely with operators and other policy-makers to ensure that coverage obligations or sharing requirements are fully understood, and that adequate follow-up and enforcement mechanisms are available.
Table 3 outlines examples of measures that can be implemented on the demand side, to facilitate the use of broadband by the largest number of citizens possible and increase the amount and attractiveness of digital content and services in order to foster citizens’ interest in ICT. In certain developing countries, it may still be necessary to demonstrate the proven benefits of ICT services (e.g. to gain access to online services, provide remote diagnosis, news reporting or entertainment) to help create more demand for broadband take-up.
Governments and regulators clearly have a broad range of supply- and demand-side policy options that they can use to support the development of broadband — particularly high-speed broadband. It is important for governments to select the most relevant policies that reflect their own particular market situation and to assess each policy in terms of its potential impact and the difficulty of implementing it, as these factors vary considerably.
Figure 3 illustrates how such an assessment might be presented. Typically, many regulators and governments could begin by implementing the “Quick wins” in the immediate term before moving onto the “Important, but difficult actions”, followed by the “Nice to have actions” over the longer term. The “Less necessary actions” may also be considered (as they have some impact), depending on the resources available, but the difficulty of implementation could make them unlikely to be addressed, depending on the market.
3. High-level classification of suggested policies, based on impact on future market development and difficulty of implementation
Source: Analysys Mason, 2015.
This article represents a synopsis of the Working Paper prepared by Analysys Mason for the Broadband Commission
Samer Mourad, Principal at Analysys Mason, has been working in the telecoms and media sector for more than 13 years. Samer supports clients on a range of strategic, technical, financial, regulatory and operational issues. Samer has led and managed numerous broadband market sizing assignments, economic viability analyses of different fixed and mobile broadband technologies and policy options for the development of broadband.
Stéphane Piot, Partner at Analysys Mason and Head of Paris Office, has been working in the telecoms and media sector for more than 15 years. Stéphane has led and managed projects across a broad range of areas, including strategic assessments and business planning, regulatory projects and due diligence assignments. Stéphane is an expert in the economics of next-generation access (NGA) network and the development of broadband plans.