Strategies to Promote Broadband Demand

Reflecting the shift in emphasis from supply to demand, many national broadband plans now prioritize demand stimulation over infrastructure deployment. In general, this shift is more prevalent in developed nations, where the broadband coverage challenge has been addressed to a large degree.

The differences in targets can, in many cases, be related to the lack of rigor in setting them up. It is critical that countries follow a consistent an structured approach to defining targets.

The first area to be addressed regarding demand stimulation in national broadband plans pertains to the stipulation of adoption targets, which should complement the supply side (e.g. coverage of service) targets. These will have to be categorized in terms of residential, social (educational and health delivery institutions), enterprises (particularly SMEs), and public administrations. Furthermore, targets will have to be specified for both fixed and mobile broadband. In order to highlight broadband demand stimulation targets, it is advisable to structure goals on the basis of the following matrix (see table 6.53).

Supply targets: The first step in setting up broadband targets is to define the network coverage objective. This should be conducted for wireline and wireless networks. To a large degree, the social and residential coverage objectives have an impact on those of enterprises and the public administration sector, since population and economic and administrative units tend to overlap. Accordingly, if the objective is to cover 100% of the population, it is highly likely that this goal will address 100% of firms and public institutions.

In general term, coverage target setting is conducted a priori on the basis of social policy imperatives. The notion that broadband is a public service that needs to be provided to the whole population of a given country is gaining currency. Forty countries have so far stipulated in their policies and regulatory frameworks the need to provide universal access to broadband services (among them, Brazil, China and Spain). Some countries go even further declaring broadband a human right (e.g. Finland, Estonia). Broadband plans of developed countries tend to define coverage targets for 100% of population, while many emerging countries propose reaching 75%. 

Residential demand targets: Once coverage is established, demand targets need to be defined. This requires implementing different approaches for residential, social, enterprise and public administration. In the case of residential demand targets, four methodologies could be used:

• Extrapolation of historical growth in penetration rates: this approach allows grounding residential target setting on a realistic base; however, it is important to consider potential saturation points when implementing this approach. For example, due to its late start, mobile broadband has been growing quite significantly in the past two years. Consequently, an extrapolation of penetration growth rate of this technology could overestimate future adoption (see example in figure 6.45)

• Correlation between economic development and broadband penetration: this methodology is based on a simple approach of determining whether the country under analysis is falling behind in broadband penetration when considering its level of economic development; target setting is defined in terms of penetration to be achieved in order to reach the level expected by its economic development level (see example in figure 6.46). 

• Comparison with neighboring nations: this approach, while risking under- estimated the target, a target that aligns the nation under consideration to regional penetration levels (“catch up approach”).
• Country vision: an alternative approach to residential demand target setting stipulates that, based on broadband economic impact, the target should aim to grow its penetration in order to maximize its economic impact; this could be modeled by relying on econometric models of economic impact and assuming alternative impact scenarios. In other words, this methodology would establish a residential penetration target if the objective is to contributes by x% to growth of the GDP (see figure 6.47). 

These four methodologies allow defining, by triangulation and validation, a consensus residential target.

Social demand targets: the determination of targets for educational, cultural, research and health institutions can be conducted by relying on the recommendations set up by International Telecommunication Union (see table 6.54).

Enterprise demand targets: the determination of broadband targets in the enterprise sector requires segmenting the sector by size of company and industrial sector. This segmentation is particularly relevant in the SME sector since there are firms that, despite their small size, are ICT intensive and require good broadband connectivity to fulfill their objectives. On the other hand, there are others that, due to their position in low-value added domestic segments, are not necessarily in need of broadband.

This differentiation leads to the determination of different adoption targets by firm size and industrial sector.

Download speed targets: download speed targets have to define by segment. While the minimum speed for universal residential broadband is one target, goals for social and enterprise applications will need to be differentiated by segment. For example, the targeted speeds for social institutions are driven by the broadband applications and their bandwidth intensity (see table 6.55).

After defining all targets, national broadband plans could construct a matrix such as the one below, developed for Ecuador’s National Broadband Plan (see table 6.57). 

Once targets are determined, national broadband plans have to identify specific policies to stimulate demand and bridge the gap. Whether explicit or implicit, there appears to be a link between broadband demand stimulation programs and national strategies focused on broadband or digitization. A large portion of regional European Union digital literacy initiatives can be traced back to national strategies, such as the United Kingdom’s “Empowering Citizens, Connecting Communities,” or “Implementing the Information Society in Ireland,” as well as regional plans, like the Lisbon Agenda and the Riga Declaration.   

A classical country case in point is that of Finland, where the document “Finland – Towards an Information Society – A National Outline 1995-2000” served as a framework to defining a host of digital literacy initiatives. In addition, other policy initiatives formulated at a later date, such as the “Governmental Information Society program, 2003-2007” put additional emphasis on the deployment of initiatives aimed at promoting usability, inclusion and quality of life.

In the linkage between demand stimulation initiatives and national broadband plans, two differing philosophies exist. Some countries tend to deploy national and regional initiatives that are centrally managed and that have been defined in the national plans. In general, national centrally managed demand stimulation initiatives tend to originate within either the Ministry of Education or the Ministry/Secretariat for ICT/Communication. In their review of digital literacy initiatives, Hannan et al. (2009) conclude that most initiatives, especially those led by public organizations, are generally driven by centralized policies at the national or regional level and are seen as strategically linked to government objectives. In particular, many initiatives and the rationales behind them can be traced back to either the economic or the social ramifications of a developing information society and government’s priorities in response to these changing circumstances. A critical advantage of national centralized programs is that they can tackle potential synergies and overlaps among demand stimulation initiatives.

In other nations, it is common for some initiatives to emerge at the local level, once the guidelines have been formulated nationally. Local initiatives are initiated at sub- sovereign levels (province, department, district, and even, municipalities). These local initiatives have an active participation of non-governmental organizations and community interest groups. In that regard, the key advantage of locally driven programs has to do with their closeness with the communities being targeted. This feature allows the program to carefully tailor content and implementation dynamics to the needs of the targeted population. As a counter-example, a digital literacy program targeting SMEs in rural Canada was criticized for emphasizing training in presentation (e.g. powerpoint) applications, not necessarily a critical need of participants.

A critical element in defining a successful demand stimulation program has to do with its long-term sustainability. In fact, according to Hannan et al. (2009) sustainability remains a big concern, since according to their study of 464 programs across 32 countries, only 40% have been identified as still running, transferred or expanded beyond the initial timeframe. Similar concerns were raised in the implementation a municipal WiFi program in Brazil, where once the hardware was installed, financing difficulties emerged in covering the ongoing operating costs of the facility. This has to do with the ability to implement the initiative until its objectives are accomplished. Hannan et al. (2009) have identified five factors that are critical in driving program sustainability:

• Composition of stakeholders involved: the findings in this regard are quite clear. Digital literacy programs with higher chance of sustainability are either sponsored by a private company, the partnership of an NGO and a private company, a public-private partnership, or a public-private partnership including an NGO; on the other hand, if a project is exclusively sponsored by the public sector, chances are that it will not be sustainable. An obvious explanation of the linkage between private sponsorship and sustainability is the financial and infrastructure support, although a non-intuitive factor is that the private entity provides more focus in achieving the program objectives. In addition, in demand programs that are centrally managed but locally implemented, the number of stakeholders increases substantially, thereby raising the likelihood of program sustainability. Finally, the reliance on NGOs (local associations, community groups, voluntary organizations) drastically raises the probability of long term sustainability because of the intrinsic interest of such entities in improving the livelihood of the population that lacks broadband access.
• Level of implementation: national programs, driven by a country policy or strategy appear to have a higher likelihood of sustainability (although the difference with regional and local programs is not that significant).
• Whether the initiative requires payment or not by the user: 60% of analyzed digital literacy campaigns are free of charge to the users.
• Whether the initiative is being evaluated as part of a larger project: while being a positive contributor to the program success, research indicates that evaluation is only conducted in the context of large-scale national initiatives.