67620 v2 Overview Broadband Strategies Handbook Editors Tim Kelly and Carlo Maria Rossotto Coordinated by Telecommunications Management Group, Inc. THE WORLD BANK Korean Trust Fund infoDev Washington, D.C. :nnovatc. Cormect ll:!.ns.!oniL This booklet contains the Executive Summary and the introduction of chapter 1 as well as a list of contents from the forthcoming book, Broadband Strategies Handbook. To order copies of the full-length book, published by the World Bank, please use the form at the back of this booklet. The report is also available online at www.infodev. org/broadband. ©2012 International Bank for Reconstruction and Development j International Development Association or The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This volume is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to the work is given. For permission to reproduce any part of this work for commercial purposes, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. The manuscript for this overview edition disseminates the findings of work in progress to encourage the exchange of ideas about development issues. The text is not final and is not for citation. CONTENTS Foreword XI Acknowledgments xiii About the Authors XV Executive Summary XVII Chapter 1. Building Broadband 1 What Is Broadband? 3 Why Is Broadband Important? 4 What MarketTrends Are Fostering Broadband Deployment? 19 How Can Broadband Development Be Supported? 24 Notes 30 References 31 Chapter 2. Policy Approaches to Promoting Broadband Development 37 The Public Sector's Evolving Role in Broadband 38 How to Do It: Implementing Policies and Strategies to Enhance Broadband Development 44 Financing Broadband Development 63 Measurement, Monitoring, and Evaluation: Checking Progress 76 Notes 84 References 87 Chapter 3. Law and Regulation for a Broadband World 91 Licensing and Authorization Frameworks 92 Spectrum Management to Foster Broadband 96 IP-Based Interconnection 104 Access to Infrastructure 111 Opening Vertically Integrated Markets 121 Network Neutrality 124 Security in Cyberspace 129 iii Privacy and Data Protection 134 Regulation of Broadband Content 138 Notes 143 References 147 Chapter 4. Extending Universal Broadband Access and Use 155 Universal Access Strategy and Broadband Development 156 Mechanisms to Drive Universal Broadband Access 163 Instruments of Fiscal Support for Universal Broadband Access 171 Notes 189 References 191 Chapter 5. Technologies to Support Deployment of Broadband Infrastructure 195 Overview of Broadband Networks 195 Basic Technologies for Broadband Connectivity 201 International Connectivity 205 Domestic Backbone 210 Metropolitan Connectivity 218 Local Connectivity 221 Notes 241 References 244 Chapter 6. Driving Demand for Broadband Networks and Services 247 Awareness 249 Affordability 259 Attractiveness 269 Notes 286 References 289 Chapter 7. Global Footprints: Stories from and for the Developing World 295 Broadband and Global Goals for Developing Countries 296 Broadband Bottlenecks and Opportunities in Developing Regions 299 Regional Developments 303 Countries in Special Circumstances 315 Broadband Experiences in Selected Countries 318 Notes 330 References 331 iv Broadband Strategies Handbook Appendix A. Weblinks to National Broadband Plans 335 Appendix B. Policies and Programs for Promoting Broadband in Developing Countries 337 Index 349 Boxes 1.1 Examples of Broadband's Effects on Economic Growth around the World 7 1.2 Examples of Broadband's Potential Impacts on Innovation in R&D and Business Operations 12 1.3 Mobile Health Services in Nigeria 17 1.4 User Trends That Promote Demand for Broadband 23 1.5 Capacity to Absorb Technology and the Economic Impact of Broadband-Enabled ICTs: The Examples of Italy and Sweden 29 2.1 Public Sector's Role in Fostering Broadband Development Key Lessons 43 2.2 Broadband Strategies in Middle-Income Countries 47 2.3 General Elements for Governments to Consider When Creating Policies and Strategies 48 2.4 Experience in the European Union with State Aid for Financing Broadband 70 2.5 Municipal Broadband Initiatives in Italy and the Netherlands 74 3.1 Summary of the Digital Television Transition and Digital Dividend Activities around the World 105 3.2 Challenges and Successes of Implementing an Internet Exchange Point in Kenya 107 3.3 Competition Analysis in the International Internet Connectivity Market in Nigeria 113 3.4 Computer Emergency Response Teams 131 4.1 Rural Broadband Connectivity in the Dominican Republic 161 4.2 Chile's Digital Connectivity Plan 162 4.3 Broadband Development in Remote and Underserved Locations: Lessons from Peru 166 4.4 Universal Service Subsidies in Mongolia 173 4.5 Regional Communications Infrastructure Program in East and Southern Africa 182 4.6 Reform of the USF in the United States 186 4.7 Reform of the RCDF in Uganda 186 Contents v 5.1 Connecting the Maldives to the International Submarine Cable Network 211 5.2 COMA 450 MHz for High-Speed Rural Internet Access 232 5.3 Three 3G Technologies in China 235 6.1 Sri Lanka's Approach to Computer Literacy 253 6.2 Measuring Digital Literacy in Australia 256 6.3 Stimulation of Local Applications Development for SMEs in the Netherlands 259 6.4 Device Price Trends 262 6.5 Promoting Digital Literacy through Primary and Secondary Schools 264 6.6 Trends in Low-Cost Devices 266 6.7 Colombia's 2010 Plan Vive Digital 276 71 The Eight Millennium Development Goals 297 72 The 10 WSIS Targets 298 73 The Third Man: Encouraging Disruption in Broadband Markets 303 74 Impact of Improved Access to International Connectivity: The Case of Moldova 307 75 eLAC2015 Universal Broadband Access Goals 309 Figures 1.1 Effect of Various Information and Communication Technologies on GOP Growth in High- and Low-Income Economies, 2000-06 6 1.2 Estimated Minimum and Maximum Impact on Gross Domestic Product of a 10 Percent Increase in Broadband Penetration 7 1.3 Global Fixed and Mobile Broadband Subscriptions per 100 Inhabitants, 2000-10 20 1.4 Average Broadband Speed in Top 10 Countries 22 1.5 Broadband Ecosystem and Its Impact on the Economy 25 1.6 Examples of the Elements of Absorptive Capacity 28 2.1 Reasons Given for Not Adopting Internet in Brazil and Broadband in the United States 41 2.2 Framework for Government Intervention to Facilitate Broadband Development 51 2.3 Addressing Bottlenecks in Broadband Networks: Policies on the Supply Side 55 2.4 Categories of Broadband Indicators 77 vi Broadband Strategies Handbook 2.5 Wireline Broadband (ADSL) Penetration in the European Union and Turkey, by Technology, 2010 79 2.6 Wireline Broadband (ADSL) Penetration in Turkey, by Speed, 2010 80 2.7 Average Download Speed and Ping Time in Bahrain, January-March 2011 81 3.1 General Elements of a Unified and General Authorization Framework 95 3.2 Example of Multiservice Licensing Framework in Singapore 96 5.1 Broadband Supply Chain 196 5.2 Design of IP Next-Generation Networks 199 5.3 Transition of KPN Netherlands to an AII-IP Network 200 5.4 Internet Protocol Packet Route from Washington, DC, to Gaborone, Botswana 209 5.5 Backbone Networks in Botswana 212 5.6 Internet Exchange Point Models 215 5.7 Metro Fiber Ring 219 5.8 Number of Broadband Subscribers Worldwide, 2007-09, by Type of Wireline Technology 222 5.9 Speed of DSL and Distance from Exchange 224 5.10 Cable Modem Connection Speeds, by Specification 225 5.11 Diagram of Various FTTx Systems 227 5.12 Frequency Bands Used by CDMA2000 231 5.13 Difference between Advertised and Actual Speeds in the United Kingdom, 2009 and 2010 239 6.1 The Three Pillars of Facilitating Broadband Demand 249 6.2 Elements of Digital Literacy 250 6.3 How People Obtain ICTTraining in Europe, 2007 251 B6.1.1 Computer Literacy in Sri Lanka, 2009 253 B6.2.1 Digital Literacy in Australia, by Proficiency Level, 2008 256 B6.4.1 Prices of Computer Hardware in the United States, 1992-2009 262 6.4 Cost of User Devices Relative to per Capita GOP in Selected Sub-Saharan African Countries, 2008 263 6.5 Internet Use by Persons Ages 15-74 in 12 Latin American Countries, by Place of Access, 2007-09 268 6.6 Number of Internet Users Worldwide, by Language, 2010 285 71 Global Broadband Subscriptions per 100 People, Wireline and Wireless (Active), by Region and Income Level, 2010 296 Contents vii 7.2 Global Distribution of Wireline Broadband Subscriptions, 2005 and 2010 299 73 Broadband Connections Relative to Underlying Infrastructure in 2008 or 2009, by Region 301 74 Broadband and Human Development, 2010 302 75 Growth in Wireline Broadband Subscriptions in the Countries with the Fastest-Growing Broadband Markets, 2010 302 7.6 Broadband Country Summaries 319 Tables 1.1 Estimated Broadband Employment Creation Multipliers in Various Countries 9 1.2 Upstream and Downstream Speeds Needed for Various Services and Applications 18 1.3 Wireless and Wireline Broadband Subscriptions per 100 Inhabitants, by Region, June 2011 21 B1.5.1 Internet Adoption Proxies in Sweden and Italy, 2007 29 2.1 Publicly Stated Policy Goals for Broadband Service Delivery and Adoption in Selected Countries 46 2.2 Elements of Broadband Strategies in Select Countries 53 2.3 Checklist of Policies to Promote the Supply of Broadband Networks 60 2.4 Checklist of Policies to Promote Demand for Broadband 62 2.5 Effectiveness of Fiscal Support for Broadband Development 75 2.6 Monthly Prices for Wireline and Mobile Broadband in Selected Countries, 2011 83 2.7 Sources of Official Broadband Statistics 84 3.1 Status of Net Neutrality Initiatives in Select Countries 128 4.1 Information and Communication Services in Low- and Middle-Income Countries, 1980-2010 157 4.2 The Multipronged Universal Access and Service Strategy in the Philippines 164 4.3 Competition among Firms for Subsidies: Factors Critical to Success 175 4.4 Investment in the Broadband Rural and Northern Development Pilot in Canada, by Source of Funds, 2002-06 179 5.1 Optimum Choice of Backbone Technology, by Distance and Capacity 214 5.2 DSL Connection Speeds, by Type of Line 223 5.3 FTTP Access Protocols 228 viii Broadband Strategies Handbook 5.4 EV-DO Peak and Average Speeds 232 5.5 IMT-2000 Radio Interfaces 233 5.6 W-CDMA and HSPA Theoretical Data Rates 234 5.7 Wi-Fi Speeds 237 6.1 Examples of Funding for School Connectivity in Three Countries 255 6.2 Subscriptions to Bundled Services in Switzerland, 2008 and 2009 273 71 Broadband Plans and Policies in Selected South Asian Nations 313 72 Examples of Policies and Programs for Broadband Development, by Country, Region, and Economic Level 320 B.1 Infrastructure Policies and Programs 338 B.2 Services Policies and Programs 342 B.3 Applications and Content Policies and Procedures 344 B.4 Policies and Procedures for Users 346 Contents ix FOREWORD The world is shifting from narrowband to broadband. Services that were only available in the form of static, text-based websites 10 years ago are now offered in full-motion, high-definition video. Usage-based transmission prices that were once prohibitive are now bundled into an affordable monthly "all you can eat" charge. A decade after the dot.com bubble burst because network realities had not yet caught up with user aspirations, a whole new generation of Internet entrepreneurs is ready to take their ideas to the stock market. Nevertheless, a gap remains between the developed and the developing world when it comes to broadband. For instance, not a single one of the top 10 economies by average broadband speed is in the Southern Hemisphere. The digital divide that was once measured in terms of differences in access to communications is now measured in terms of differences in quality of access. Slow speeds for download translate into lost economic opportunity. Yet the evidence seems to suggest that, where broadband is available in developing countries, it is a major contributor to economic growth. For instance, a 10 percent increase in the penetration rate ofbroadband in devel- oping countries is associated with a 1.4 percent increase in gross domestic product (GDP) per capita, higher than the equivalent relationship for devel- oped countries. The developing world has adopted mobile phones much more readily than tethered ones, so as mobile broadband becomes more readily available, a further boost to growth can be expected. A decade ago, infoDev and the World Bank's Information and Commu- nication Technology (ICT) Sector Unit joined forces with the Interna- tional Telecommunication Union (ITU) to develop a handbook for regulators around the world on basic principles of telecommunication regulation. The Telecommunication Regulation Handbook subsequently became a bestseller and was updated and reissued in 2010. It formed the xi basis for the ICT Regulation Toolkit (http://www.ictregulationtoolkit.org), which now delivers around 1,000 downloads daily. This new Broadband Strategies Handbook is intended as a next-genera- tion tool for policy makers, regulators, and other relevant stakeholders as they address issues related to broadband development. It aims to help readers, particularly those in developing countries, by identifying issues and challenges in broadband development, analyzing potential solutions to consider, and providing practical examples from countries that have addressed broadband-related matters. It goes beyond the regulatory issues and looks more broadly at the challenges of promoting and universalizing broadband access. It will also form the basis for a toolkit-http://www .broadband-toolkit.org-that will complement the other toolkits and tech- nical assistance guides available from the World Bank Group. This new handbook has been made possible through the generous fund- ing of the Korea Trust Fund for ICT for Development. We hope that it will meet the requirements of developing-country policy makers and regulators for sound advice on developing national strategies for broadband. But we also hope that it will provide incentives for users to share their own experi- ences, via the toolkit website, of what works well. Consider this handbook, then, as a living resource that will grow as the broadband market worldwide grows. Valerie D'Costa Philippe Dongier Program Manager Sector Manager infoDev ICT Sector Unit xii Broadband Strategies Handbook ACKNOWLEDGMENTS This report was carried out by Telecommunications Management Group, Inc. (TMG) and other consultants under the supervision of Tim Kelly (infoDev) and Carlo Rossotto (ICT Unit) of the World Bank Group. The report has benefited from the inputs, ideas, and review of many World Bank Group colleagues and management as well as peer reviewers. The authors are grateful to Mohsen Khalil, former director of the Bank's Global Informa- tion and Communication Technologies (GICT) Department, for his guid- ance and support throughout the preparation of this report. The authors also thank Valerie D'Costa, program manager, infoDev, and Philippe Dongier, sector manager, ICT Sector Unit, for their comments and support. For their review and comments, the authors and project team thank Francois Auclert, Kevin Donovan, Elena Kvochko, Wonki Min, Victor Mulas, James Neumann, Duncan Wambogo Omole, Christine Qiang, Siddhartha Raja, David Satola, Lara Srivastava, Mark Williams, and Masatake Yamamichi from the World Bank Group as well as external reviewers Michael Best from Georgia Insti- tute of Technology (United States), Yongsoo Kim from the Korea Communi- cations Corporation (Republic of Korea), Mandla Msimang from Pygma Consulting (South Africa), and Paul de Sa from the Federal Communica- tions Commission (United States). As part of our work, we convened an advisory group comprising of Rodrigo Abdalla F. de Sousa, Ben Akoh, Jeff Eisenach, Torbjorn Fredriksson, Sverre Holt-Francati, Parvez Iftikhar, Lars Krogager, James Losey, Youlia Lozanova, Sascha Meinrath, Sam Patridge, Rohan Samarajiva, Nancy Sundberg, Sharil Tarmizi, and Marianne Treschow. We would like to thank these participants for their valuable input and ideas in shaping the initial table of contents and for attending our consultation meeting and "write- shop" in August 2009. xiii Case studies were prepared to support the work of chapter 7. We thank the authors of these case studies-Diane Anius (St. Kitts and Nevis), Samantha Constant (Morocco), Helani Galpaya (Sri Lanka), Michael Jensen (Brazil), Mandla Msimang (Kenya), <,;:agatay Telli (Turkey), and Tran Minh Tuan (Vietnam). In addition, we are grateful for the contributions made by Rob Frieden on financing strategies and technologies to support broadband, by Victor Mulas on absorptive capacity, and by Helani Galpaya and Rohan Samarajiva on measurement, monitoring, and evaluation. We also thank the Organisation of Economic Co-operation and Development (OECD) and the International Telecommunication Union (ITU) for their comments and ideas, especially on the measurement section of chapter 2. This handbook, case studies, and other reports have been generously funded by the Korean Trust Fund (KTF) on Information and Communica- tion Technology for Development (ICT4D). The KTF is a partnership between the government of Korea and the World Bank. Its purpose is to advance the ICT4D agenda, with the goal of contributing to growth and reducing poverty in developing countries. The report has also benefited from funding from the U.K. Department for International Development. The handbook is part of a longer-term project to create a broadband toolkit (see http://www.broadband-toolkit.org), an online resource for regulators and policy makers. Future updates of the handbook, as well as the full text of the case studies, practice notes, indicators, and training materials will be posted there. The authors retain sole responsibility for any residual errors. xiv Broadband Strategies Handbook ABOUT THE AUTHORS This report was prepared and input documents were coordinated by Tele- communications Management Group, Inc. (TMG). TMG is a telecommuni- cations and information technology consulting firm providing regulatory, policy, economic, technical, and financial advice. Established in 1992, TMG is composed of a team of regulatory experts, lawyers, economists, market analysts, business development and investment specialists, engineers, and spectrum management specialists. TMG advises public and private sector clients on issues related to infor- mation and communication technology (ICT) and provides assistance to regulators and policy makers on regulatory and policy reform matters. TMG has advised more than 60 countries on regulatory reform issues in Africa, Latin America and the Caribbean, Asia, Europe, and the Middle East. In addition, TMG has worked on regulatory matters with international and regional organizations involved in ICT issues. The TMG team that worked on this project includes Flavia Alves, Kari Ballot-Lena, Jeff Bernstein, Joel Garcia, Janet Hernandez, Daniel Leza, Sofie Maddens-Toscano, Jorge Moyano, William Wiegand, David Wye, and Amy Zirkle as well as outside consultants Michael Minges, Calvin Monson, and Bjorn Wellenius. XV EXECUTIVE SUMMARY The Broadband Strategies Handbook is a guide for policy makers, regulators, and other relevant stakeholders as they address issues related to broadband development. It aims to help readers, particularly those in developing coun- tries, by identifying issues and challenges in broadband development, ana- lyzing potential solutions to consider, and providing practical examples from countries that have addressed broadband-related matters. The handbook consists of seven chapters and two appendixes that look at how broadband is defined, why it is important, and how its development can be encouraged. Throughout the handbook, broadband is viewed as an ecosystem consisting of supply and demand components, both of which are equally important if the expansion of broadband networks and services is to be successful. In addressing the challenges and opportunities that broadband gives rise to, the handbook discusses the policies and strategies that government officials and others should consider when developing broadband plans, including what legal and regulatory issues to address, what broadband technologies to choose, how to facilitate universal broad- band access, and how to generate demand for broadband services and applications. Chapter 1, "Building Broadband;' introduces the concepts of broad- band by defining the term "broadband" more conventionally (that is, speed or functionality) as well as explaining how this handbook seeks to define the term as broadband comes to be seen as an enabling platform. This chapter examines why broadband, both as an information and com- munication technology (ICT) and as an enabling platform, is important and focuses on how it can help to transform a country's economic devel- opment and improve employment growth, provided that effective poli- cies are put in place that encourage the use of broadband as an essential input by all sectors of the economy. Chapter 1 also identifies the main trends fostering the deployment ofbroadband networks (supply side) and xvii the adoption of broadband services and applications (demand side). Lastly, this chapter offers a framework-the broadband ecosystem-to assist policy makers and stakeholders in viewing broadband policies in a more holistic manner and as a means to ensure the greatest impact throughout the economy and society. Chapter 2, "Policy Approaches to Promoting Broadband Development;' identifies the issues that governments and the private sector will face when developing policies and programs to support broadband development. It discusses policies and strategies for promoting the build-out of broadband networks as well as ways to encourage the use of broadband services and applications, particularly in populations that may have limited knowledge of or interest in broadband. In that context, the impacts of broadband on other sectors (education, health, banking, environment, and cybersecurity) are discussed. The chapter also addresses the options for funding broad- band development strategies and identifies the issues associated with mea- suring the effectiveness of policies designed to promote network build-out and user demand. Chapter 3, "Law and Regulation in a Broadband World;' discusses the key policies and regulatory trends that policy makers and regulators are considering to foster broadband. As the world moves to a converged ICT environment, countries are reforming their traditional legal and regulatory frameworks and developing new laws and regulations to address some of the supply and demand issues associated with broadband development. This chapter covers a wide range of policy issues, including liberalization of licensing frameworks, spectrum management policies to maximize wireless broadband, Internet Protocol (IP) interconnection regulation, policies to promote competition in the various segments of the broadband supply chain, vertical integration in a converged environment, network neutrality, cybersecurity and data protection, and regulation of online content. Chapter 4, "Extending Universal Broadband Access and Use," discusses what roles governments should play in promoting universal broadband access when market mechanisms do not meet goals for broadband access and use on their own. The chapter seeks to define a broadband development strategy capable of addressing market failures, to provide an overview of what policy makers can do to address perceived shortfalls in the market, and to work toward achieving universal broadband service. It discusses the universal service objectives that a government strategy may pursue, the role of private-led competitive markets in achieving these objectives, the role of the government in narrowing or eliminating gaps between markets and the country's development needs, and how effective government strategies can be designed to meet such challenges. It finally examines the use of fiscal xviii Broadband Strategies Handbook resources to support private supply of broadband, including the choice of instruments, use of subsidies, and use of different mechanisms to collect and disburse funds for subsidies. Chapter 5, "Technologies to Support Deployment of Broadband Infra- structure," focuses on the supply side of the broadband ecosystem. It describes the various wireline and wireless technologies now being used to build out broadband infrastructure, including examples of broadband deployments throughout the world. The objective of the chapter is to pro- vide policy makers with an overview of how broadband networks work and their components. It describes the broadband supply chain from a topo- logical perspective, starting from international connectivity and progress- ing to regional, national, and, finally, local access deployment solutions. It describes the technologies being deployed in each of these segments, including fiber optics, satellite, microwave, mobile wireless, and traditional copper wire. Finally, chapter 5 addresses some of the implementation issues associated with these technologies, including open access, quality of service, and spectrum constraints. Chapter 6, "Driving Demand for Broadband Networks and Services;' recognizes that, although supply-side issues are important, simply building networks does not guarantee that they will be used or used most effectively. This chapter thus focuses on the issue of demand facilitation: what govern- ment and the private sector can do to spur the use and adoption of broad- band networks and services by consumers. In particular, this chapter identifies various policies that may be implemented where demand is sti- fled because consumers are not aware of the benefits of broadband, broad- band is not affordable, or broadband is not attractive or relevant to them. This chapter also highlights the importance of public-private cooperation to facilitate demand and increase broadband access to a wider number of users worldwide. Chapter 7, "Global Footprints: Stories from and for the Developing World," addresses the main challenges that developing countries face in deploying broadband networks, including underdeveloped infrastructure, low income, significant differences between rural and urban areas, con- strained inter- and intra-modal competition, and weakness of regulatory and legal frameworks. This chapter assesses the broadband bottlenecks and opportunities found in developing countries and discusses the importance of improving broadband infrastructure and leveraging existing infrastruc- ture to create greater competition in the broadband market. Chapter 7 fur- ther highlights the status ofbroadband development in different developing regions around the world and summarizes broadband experiences in Brazil, Kenya, Morocco, St. Kitts and Nevis, Sri Lanka, Turkey, and Vietnam. Executive Summary xix CHAPTER I Building Broadband In just the past decade, the world of information and communication tech- nology (ICT) has changed dramatically, evolving from a means by which information can quickly travel from point to point into an enabling platform for countless new and expanded personal, social, business, and political uses. In short, the Internet has become an integral part of people's lives. Consumers can use broadband networks to access the Internet at speeds up to or exceeding 100 megabits per second (Mbit/s) over wired connections in their homes and offices, and they can use their broadband-enabled mobile phones and other devices for a wide range of activities, including surfing the World Wide Web, engaging in two-way real-time video chats, purchasing goods and services online, streaming video or music, and conducting finan- cial transactions. But broadband is not just about improving the speed at which users can read online news, play video games, and engage in social networking, although these are useful drivers of demand and do provide benefits to users. It is also an enabling platform that allows developers and individual users to enhance existing services and to develop previously unimaginable tools that improve business and society. The benefits of broadband can expand beyond the ICT sector itself, reverberating throughout the economy and serving as an essential input for all other sectors, including education, 1 health, transportation, energy, and finance. Its role as a transformative tech- nology is similar to the impact that electricity has had on productivity, growth, and innovation over the last two centuries, with the potential to redefine how economies function. Broadband can also be a critical enabler of civic and political engagement and the exercise of fundamental rights such as freedom of expression and opinion. However, in order to achieve broadband's full potential, its reach must be expanded in both developing and developed economies. Governments must implement effective policies that spur construction of broadband networks as well as encourage the uptake of broadband services in all sectors of the economy. The rollout of broadband requires significant investment from the pri- vate sector as well as support from the public sector. It also requires a long- term perspective because the benefits ofbroadband will not occur overnight. For developing countries with limited resources, it may be difficult to focus on broadband when many of their communities do not have schools for chil- dren, safe drinking water, or access to hospitals and health care. However, broadband offers countries an enabling platform and new tools to foster growth, extend public services, enhance businesses, and benefit their peo- ple. Making broadband a priority within a country's development agenda will be necessary to ensure that the digital divide between developed and developing countries does not extend further. In crafting a broadband strat- egy, however, countries should ensure that the use of public funds is sup- ported by sound economic analysis and that the benefits of investing in broadband are weighed against the benefits of investing in other areas, such as energy, health, or education. Market-based solutions for the deployment and uptake of broadband are generally preferable to government invest- ment in order to avoid straining public finances. This first chapter of the handbook is designed to "set the stage" for the discussion in subsequent chapters of the various ways in which government policy makers and the private sector can promote greater deployment of broadband networks and services, particularly in developing countries. It first describes what broadband is and how it may be defined. Next, it explains why broadband is important by identifying how it contributes to the growth and development of a country's economy, noting, in particular, the findings of several studies pointing to broadband's impact on gross domestic product (GDP) and employment. Then, it considers the trends that characterize the development of broadband. Lastly, this chapter addresses the approaches that governments can use to support the develop- ment of broadband, by focusing on both the deployment of broadband net- works (supply-side approaches) and the adoption of broadband services and applications (demand-side approaches). Overall, this chapter seeks to 2 Broadband Strategies Handbook demonstrate that broadband can enable growth and productivity through- out the economy, provided that appropriate and specific policies are designed, developed, and effectively implemented. What Is Broadband? Despite its worldwide growth and promotion by policy makers, network operators, and content providers, broadband does not have a single, stan- dardized definition. The term "broadband" may refer to multiple aspects of the network and services, including (a) the infrastructure or "pipes" used to deliver services to users, (b) high-speed access to the Internet, and (c) the services and applications available via broadband networks, such as Inter- net Protocol television (IPTV) and voice services that may be bundled in a "triple-play" package with broadband Internet access. Further, many coun- tries have established definitions of broadband based on speed, typically in Mbit/s or kilobits per second (kbit/s), or on the types of services and appli- cations that can be used over a broadband network (that is, functionality). Due to each country's unique needs and history, including economic, geo- graphic, and regulatory factors, definitions of broadband vary widely. Traditionally, however, broadband has often been defined in terms of data transmission speed (that is, the amount of data that can be transmitted across a network connection in a given period of time, typically one second, also known as the data transfer rate or throughput). Defining broadband in terms of speed has been an important element in understanding broadband, particularly since the data transfer rate determines whether users are able to access basic or more advanced types of content, services, and applications over the Internet. However, attempts to define broadband in terms of speed present certain limitations. First, broadband speed definitions vary among countries and international organizations, generally ranging from download data transfer rates of at least 256 kbit/s on the low end, as in India, South Africa, the Inter- national Telecommunication Union (ITU), and the Organisation for Eco- nomic Co-operation and Development (OECD), to faster than 1.5 Mbit/s on the high end, as in Canada (see ITU 2009, 22). Second, definitions based on speed may not keep pace with technological advances or with the speeds, services, and applications required for the application to function properly. In other words, what is considered "broadband" today may be regarded as too slow in the future, as more advanced applications technologies are devel- oped. Thus, any speed-based definition ofbroadband will need to be updated over time. Third, such definitions may not reflect the speeds realized by end Building Broadband 3 users, so the speeds advertised by commercial broadband providers may be much higher than the speeds set by the government as broadband or vice versa. For example, while Colombia's broadband speed definition is 1 Mbit/s, its average broadband connection speed is already 1.8 Mbit/s. Due to the limitations of definitions based on speed, some countries (Brazil) and international organizations (the OECD) have decided or pro- posed not to categorize broadband in terms of speed, but are instead looking at broadband in terms of functionality, focusing on what can and cannot be done with a certain type of connection. 1 However, establishing a definition of broadband based only on functionality may make the term overly subjec- tive. A legal definition of broadband Internet access based on speed is easy to apply: if broadband is defined as at least 1.5 Mbit/s of download speed, then a 2 Mbit/s connection is broadband, while a 1 Mbit/s connection is not. When broadband is defined in terms of functionality, the distinction between what is and is not broadband becomes less straightforward. Is being able to watch a You Tube video equivalent to having a broadband con- nection? What if it takes minutes to buffer and starts and stops throughout? In considering what broadband is and how it should be defined, this chapter and the handbook as a whole view broadband more holistically as a high-capacity ICT platform that improves the variety, utility, and value of services and applications offered by a wide range of providers, to the benefit of users, society, and multiple sectors of the economy. From a pol- icy perspective, broadband should be viewed more broadly as an enabling ICT platform that can potentially influence the entire economy and thus may act as a general-purpose technology (GPT) that is used as a key input across sectors. To capture the full range of potential benefits, policy mak- ers may find it useful to consider broadband as an ecosystem comprising both supply-side considerations (network platforms) and demand-side considerations (e-government initiatives, development of services and applications, promotion of broadband use). To encourage the diffusion of broadband-enabled innovations throughout the economy, policy makers should also consider the absorptive capacity of various sectors, including health, education, energy, and transportation. Unless all of these ele- ments-supply, demand, and absorptive capacity-are coordinated, broad- band's impact on the economy as a whole will be constrained. Why Is Broadband Important? With the appropriate policies in place, broadband is a transformative plat- form that affects the ICT sector as well as other sectors of the economy. 4 Broadband Strategies Handbook While some may disagree on the precise economic and social benefits that can be specifically attributed to broadband and may challenge the studies that have found a large impact, few can argue against the fact that broad- band has dramatically changed our personal lives, our businesses, and our economies. Moreover, as an enabling ICT platform and potential GPT, broadband can facilitate growth and innovation in the ICT sector and throughout the economy, serving as a vital input for each sector that strengthens the economy as a whole. The multiplier effect of broadband can drive GDP, productivity, and employment growth; however, policies that support the supply and demand elements of the ecosystem as well as the absorptive capacity to learn and incorporate broadband capabilities into other sectors must all be in place in order to realize such benefits. Impact of Broadband on Gross Domestic Product Due to their potentially wide-ranging impacts and ability to provide easier access to information that increases efficiencies and productivity in the economy, it is unsurprising that increased use of broadband networks and services has been found to produce positive outcomes that reverberate throughout a country, particularly involving GDP. A frequently cited World Bank study found that low-income and middle-income countries experi- enced "about a 1.38 percentage point increase in GDP for each 10 percent increase in broadband penetration" between 2000 and 2006 (Qiang and Rossotto 2009, 45; see also Kim, Kelly, and Raja 2010). This study further found that the development impact of broadband is greater in emerging economies than in high-income countries, which "enjoyed a 1.21 percentage point increase in per capita GDP growth" for each 10 percent increase in broadband penetration. The study also demonstrated that broadband has a potentially larger growth effect than other ICTs, including wireline tele- phony, mobile telephony, and the Internet, as shown in figure 1.1. Broad- band's predominance may be unexpected considering that, over the last decade, mobile telephony has been the fastest-growing ICT worldwide, with a global penetration rate in 2010 of76.2 for every 100 persons. 2 Other studies support the World Bank findings. Management consult- ing firm McKinsey and Company estimated that "a 10 percent increase in broadband household penetration delivers a boost to a country's GDP that ranges from 0.1 percent to 1.4 percent" (Buttkereit et al. 2009). Addition- ally, a study of 0 ECD countries by consulting firm Booz & Company found, among high-income countries, a strong correlation between average annual GDP growth and broadband penetration, wherein "countries in the top tier of broadband penetration have also exhibited 2 percent higher Building Broadband 5 Figure 1.1 Effect ofVarious Information and Communication Technologies on GOP Growth in High- and Low-Income Economies, 2000-06 1.5 1.38 #. ..c 1.0 ~ e Ol ~ 0.5 ~ 0.0 fixed telephony mobile telephony Internet broadband IIIII high-income economies D low-income economies Source: Adapted from Oiang and Rossetto 2009, 45. Note: Measures the percentage point increase in gross domestic product that is associated with a 10 percent increase in different information and communication technologies. GDP growth than countries in the bottom tier of broadband penetration" (Friedrich et al. 2009, 4). Although numerous studies have found a positive impact of broadband on economic growth, the estimate of its actual magnitude varies. For exam- ple, a 10 percent increase in broadband penetration has been found to increase economic growth from a low of range of 0.24 percent to a high of 1.50 percent (figure 1.2). While these studies provide important insight into the growth effects of broadband, data collection and further systematic research and analysis in this area are needed, particularly for developing countries. Currently, there is ample anecdotal evidence of the effects ofbroadband on economic growth, with some cases highlighted in box 1.1. However, these cases provide only limited evidence of the impact that broadband has on the economy as a whole. It is also important to note that investment in broadband or policies fostering its deployment or adoption are unlikely to produce significant GDP gains without complementary investments or policies in other sectors, notably education, innovation, civic participation, and health care. How- ever, even with the implementation of appropriate policies, the impacts of broadband on growth in certain areas may be limited. For example, in seek- ing to improve health outcomes developing countries may be in less need of high-tech, expensive telemedicine and more in need of low-tech, inexpen- sive solutions, such as mosquito nets and deworming pills (Kenny 2011). 6 Broadband Strategies Handbook Figure 1.2 Estimated Minimum and Maximum Impact on Gross Domestic Product of a 10 Percent Increase in Broadband Penetration Katz et al. a McKinsey (average studies) b Analysys Mason c Oiang and Rossetto d 8 Czernich et al. 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 impact on GDP growth (%) IEll minimum !ll maximum I Sources: Czernich et al. 2009; Oiang and Rossetto 2009; Analysys Mason 2010; Beardsley et al. 2010; Katz et al. 2010. a. Includes only Germany. b. Average of five country studies: Australia, the Arab Republic of Egypt, Malaysia, New Zealand, and the United Kingdom; various sources for 2003 and 2004 and Oiang and Rossetto for 2009. c. Limited to mobile broadband impact in India. d. Various countries; upper range applies to developing countries, and lower range applies to developed countries. e. Sample of 20 OECD countries. Box 1. f: l,:xamples. of Broadband's Effects ori' . econorllic G~wth arOund the World . ... . • The fono~;ng exa~;~::·highllght~~;-~;()~d~ ....dr6V:Jth anq developf'l'l~nt,';a~iig~l~fly'·;~'··;Jrai ' bal1d. has ;IT;iJi8vecl,,.economit· oqtcomes in areas. In 2005, for exampl~. Industry Canada.· ···countri~s at all'levels . ·of clevel~pmedt'. as····· '9Pmmlss)Qned;a