Module 6 of the Broadband Strategies Toolkit focuses on the strategies for stimulating broadband demand. The debate around the digital divide has been, so far, driven by statistics based on the number of households that have a broadband connection and a computer and individuals that have a wireless broadband device, such as a smartphone. Along these lines, policy emphasis has been made, to a large degree, to increase the deployment of broadband networks. While the causality between network deployment and broadband penetration certainly exists, 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 throughout this paper. While the supply gap measures the portion of the population of a given country that cannot access broadband because of lack of service, the demand gap focuses on the potential users that could buy broadband service (since operators offer it in their territory) but do not (see figure 6.1).

Relationship Between Supply and Demand Gap

Tackling the demand gap is critical for policy makers. The research on the social and economic impact of broadband indicates increasing returns to scale derived from enhanced adoption. In other words, higher broadband and ICT penetration benefits the country’s population as a whole. In that sense, stimulating broadband access and usage is critical for social development, economic performance, and overall welfare.

The ideal situation for a broadband market is one in which broadband is deployed and service provided by operators on a commercial basis and that can be subscribed on a voluntary basis. Because broadband is a basic element of societal infrastructure, it is desirable for operators’ business to be sound. Operators will continue to provide broadband service in the long term if they are able to achieve a proper profit under sound market mechanisms that can be achieved by government’s proper supervision. In order to achieve this win-win relationship between stakeholders of users, operators and government, an adequate amount of demand has to exist in the market. Thus it is necessary for policy-makers to enhance demand with the purpose of maintaining the win-win relationship, without distorting market competition. Also, there may be certain areas in which operators cannot make a profit and do not provide their service. This creates a potential digital divide. It is necessary for policy-makers to support those areas.

This module introduces readers to the benefits of higher adoption rates; it examines the progress made so far by countries in the developed and emerging worlds in stimulating broadband demand. It provides an explanation of concepts, such as a supply and demand gap, broadband price elasticity, and demand promotion. In doing so, it also explains differences between fixed and mobile broadband demand gap, introducing the notions of substitution and complementarity between both platforms. Building on these concepts, the toolkit provides a set of recommendations of best practices and potential strategies aimed at promoting broadband demand.

Readers should use this module in close connection with the other modules of the Broadband Strategies Toolkit. In particular, Module 2 – Policy Approaches to promoting Broadband Development, Module 3 – Law and Regulation for a Broadband World, and Module 4 – Extending Universal Broadband Access and Use are all useful inputs to demand stimulation. For example, stimulating demand by breaking the economic barrier and offering low-priced broadband service and addressing needs of rural and isolated populations should be considered tools for stimulating demand and achieving universal adoption (covered in module 3 of the Broadband Strategies Handbook). Similarly, references to the role of government and price regulation will be found not only in this module but also in Modules 2 – Policy Approaches to promoting Broadband Development and Module 3 - Law and Regulation for a Broadband World.

To reiterate, the focus here is not the supply gap, but rather the obstacles for adoption on the demand side. A supply gap is found in places where broadband infrastructure is rudimentary or exhibits limited deployment. This access gap may indeed derive from regulatory policies, but can also come from a lack of interest from investors and telecom operators. Addressing this gap and identifying the common parameters behind it is critical for most national broadband strategies. It is one of the primary themes of Module 4 - Extending Universal Broadband Access and Use.

On the other hand, this module focuses heavily on strategies to affect the behavior of subscribers, whether they are residential users or Small and Medium Enterprises. In this sense, it is less focused on the technological aspects (the subject of Module 5 of the Broadband Strategies Handbook), or even on specific regulatory approaches such as network neutrality (covered in Module 3 of the Broadband Strategies Handbook).

Building on the structure of Chapter 6 of the Broadband Strategies Handbook, evidence and best practices from past projects, and ongoing work in the field of broadband demand stimulation will be described and analyzed to provide a holistic tool and guide regulators and policy-makers. In line with constantly updated information resources, the module has direct links to the sources of information.