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What should be in a national broadband plan?
 
 
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A national broadband plan is as much a social contract as a plan of action to develop the industry base. It can be understood as bringing about a stronger foundation for effective governance, private investment and more active citizenship, leading to a desirable social and economic future.* This article examines the many considerations which go into the formulation of a national broadband plan.

Main characteristics

A broadband plan needs to be forward looking with a detailed outlook of say, five years, which is not too long that technology solutions might have radically changed, but which covers a longer time frame than electoral cycles.

A national broadband plan should become a permanent fixture of economic development and the embodiment of a shared vision. The plan should be resilient to the checks and balances brought about by politics. It needs to be endorsed by all policy-makers at the time of conception. The respective roles of public and private sector participation, and the potential for partnerships, are all important.

Generally, the private sector should assume primary responsibility for investing in the development of broadband. But this may not always be the best solution, and a central role for the public sector may be needed, at least for a temporary period. Addressing market failure and the need for intervention with universal service objectives will remain an important role for government.

As an aggregating anchor tenant, governments can contribute to demand through e-services for health, education, public administration, public safety, and the establishment of expertise centres to spread broadband expertise and knowledge. Demand aggregation through the offering of government services online and capacity building, or training through community centres, are particularly important for developing countries, as can be gleaned from the Dominican Republic.

Addressing goals and targets

Governments need to itemize the different goals which can be achieved through a national broadband plan. Such goals may include: universal access and associated guarantees; incentivizing competition and innovation through policies and regulation; and the creation of new industries, exports and jobs.

The plan also needs to identify realistic targets. Broadband targets should be transparent and amenable to market and social analysis, economically justified by a cost-benefit analysis, and unrelated to political cycles. Broadband infrastructure should be seen as a long-term undertaking.

Targets should be sound, realistic and reasonable, taking into account a country’s national circumstances. Targets can be based on percentage penetration levels, as in many developed and developing countries, or on speeds representing the boundaries of technologies which can be reasonably afforded, a combination of both these objectives, or — most likely — a tiered approach which takes into account geographic factors and market supply responses.

Studies are required to estimate the level of demand at determined prices that are attractive to the population. Following this, an estimate of the minimum level of investment to satisfy this demand can be made, together with estimates of the potential rates of return for investors and operators.

In the case of developing countries, and especially in rural areas, there are barriers to obtaining reliable demand estimates. The difficulties and costs of obtaining primary service data, and the scarcity of historic traffic data can make this problematic.

To overcome these obstacles, some regulators, for example in Peru and the Dominican Republic, use a practical approach which involves superimposing a known working example of rural telecommunications and Internet usage onto the demographic distribution of all rural communities throughout the country. Also of great value to developing countries are the case studies of other developing countries, which may have already moved ahead in developing broadband. Both of these tools can make up for a lack of historical traffic and service data for econometric analysis.

Industry structure and regulatory measures to stimulate the market

The structure of the telecommunications industry is still generally asymmetric, with a strong incumbent matched up against new entrants to the business. The essence of the regulatory challenge is to introduce competitive dynamics into the market, because the instinct of competitors in a healthy market is to grow the business, to increase vertical integration in order not to limit diversity, to continuously innovate, and to maintain investment as technologies and network solutions mature. A strong competitive environment ensures that market forces work to achieve these outcomes, and the benefits which accrue to consumers are a genuine choice in price, quality and range of service.

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In many countries, the tools for regulation of access, interconnection and market behaviour have been introduced, and given to an independent regulator to administer, often through schemes of negotiation or arbitration and lighter regulatory requirements such as codes and standards.

However, given the legacy of services being provided as a natural monopoly, many preliminary efforts to regulate for a competitive market have foundered, resulting in market failure or otherwise disappointing achievements. A number of incumbents have applied their creative talents to the protection of their historic position and purposely avoided significant new investment, which in itself might benefit new entrants.

As a result, some countries have resorted to operational or structural separation of the incumbent in order to reset the industry framework. This has occurred notably in the United Kingdom, New Zealand, Singapore and Australia, where there has been a determined policy choice to augment the regulatory structure. The stick has replaced the carrot — with potential denial of spectrum access, or a threat to future partnership participation in broadband network developments.

A recent lesson is that the regulation of access, interconnection and market behaviour in itself needs to have incentives built in to encourage movement up the value chain by new entrants. And entrants need to acquire capital assets progressively as they achieve customers and revenue growth.

Models for financing broadband infrastructure

The different models of financing the implementation of broadband infrastructure are influenced by legacy infrastructure and this determines the extent of direct government involvement. Ultimately, the primary funding for broadband should be privately based, but many markets are not sufficiently developed to offer sound financial investment opportunities.

Two routes are available to government — direct entry as a service provider and later privatization, or stimulation of the market and taking a share of the risk through partnership arrangements.

Where competition exists between vertically-integrated operators that manage their own network infrastructure and have sufficient stand-alone capacity for investment and innovation, the role of government and the regulator is limited to facilitation of fair market competition and behaviour, and the timely and prudent access to public resources such as spectrum and property rights of way. Regulators have a responsibility to encourage infrastructure sharing among competitors (for example, backbone and towers). This alleviates cost pressures, especially where a mix of broadband infrastructure is not sustainable.

Where private investment is reluctant to enter the market, the government can step in as risk taker and enter into public-private partnerships. These can be contracts with an incumbent or with new entrants, and in effect operate as a temporary wholesale monopoly — though based upon open access principles which differ from the traditional public switched telephone network (PSTN) monopoly — until competition is better established.

An inventive partnership contract devised in New Zealand grants the government an initial 100 per cent stake, which is then progressively bought out by the commercial partner as uptake occurs. Capital is returned to the government through this process, and this can then be reinvested in ultra-fast broadband networks. This arrangement essentially operates as a rotating line of credit.

Many developing countries now impose a universal service levy, and this accumulated resource might be applied in the future to bring broadband to underserved and unserved areas under contractual partnership with government.

The need for cross-sectoral considerations

In promoting broadband adoption, demand-side policies might involve tax incentives, the development of various e-government services, an enabling environment for small and medium-sized enterprises, export incentives, and the development of human capacity and resources.

This calls for an overarching strategy involving the consideration of cross-sectoral measures, and education of the broad base of society and industry in order to enjoy fully the benefits which broadband offers.

In general, it is appropriate for developing countries to consider mobile and wireless broadband as a way of addressing the digital divide. There appears to be a continuous increase in wireless broadband services in developing countries, with the deployment of 3G-enabled handsets and devices.

Some developed countries already have strong interplatform competition between cable-based Data over Cable Service Interface Specification (DOCSIS) systems, fibre-optic systems, and wireless systems evolving to the fourth generation (4G) with Long Term Evolution (LTE) or WiMAX. This forms a firm foundation for healthy competition in the marketplace. Another observation is that while regulatory attempts in those countries have been biased towards service-based competition, they have had less impact (in fact a deceleration of investment) on developing a competitive market than the inherent facilities-based competition already in existence in their markets.

In other developed countries, where optical fibre (for FTTx and backbone needs) is seen as the wholesale platform for future growth of competition, there is nevertheless an acknowledgement that wireless, satellite and cable-based technologies might need to serve at least part of the market, which market demand should be left to determine.

This points to the need for policy-makers and regulators to maintain a neutral stance on the application of technology. It is better not to pick a single technology national champion to implement broadband because of the wide skills required to cover all technologies.

In the long run, the most mature markets, for which consumers will most benefit, are those that enable inter-platform competition, and multiple network providers using separate technologies. In countries where inter-platform competition has emerged, such as in the Republic of Korea, the Netherlands, Japan, Germany, and to a certain extent the United States, there has been no noticeable market failure with regard to the development of broadband.

Where to start?

A national broadband plan is as much a social contract as a plan of action to develop the industry base. It can be understood as bringing about a stronger foundation for effective governance, private investment and more active citizenship, leading to a desirable social and economic future.

There is no total blueprint for best practice, but a systematic approach using a decision tree (see article Drawing up a broadband plan ) will hep to ensure that all relevant factors are considered. Learning from other experiences at each level of decision making is possible. This article may assist with some pointers of where to look when tailoring the cloth to suit a particular set of national circumstances — for both developed and developing countries.

 

A discussion paper entitled “Setting national broadband policies, strategies and plans: A practical step-by-step approach” is expected to lead to fruitful exchanges at the 11th ITU Global Symposium for Regulators, to be held in Armenia City, Colombia, on 21–23 September 2011. The paper was written by Dr Bob Horton, consultant for the ITU Telecommunication Development Sector (ITU–D).

 

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