2.2

The Role of Government

The Public Sector's Evolving Role in Broadband

Governments have various ways to promote the development of broadband networks and services in their countries. In most cases, the most effective government strategies are those that seek to harness the power of private sector investment to spur broadband growth. This handbook examines four broad categories of government action in this regard: (a) legal and regulatory policies and reform, (b) universal access policies, (c) support for private sector broadband network build-out, and (d) policies to stimulate demand and spur adoption. These areas are discussed in more detail in chapters 3, 4, 5, and 6, respectively.

  • 2.2.1 General Approaches to Promoting Broadband

    As policy makers seek ways to promote the development of broadband in their countries, certain general lessons can be learned from those countries with more developed broadband networks and services. This section briefly describes the general elements that governments should be aware of as policies and strategies are created.

    • 2.2.1.1 Establish Specific Plans and Policies

      Based on an evaluation of the supply and demand challenges that exist in a country, the next step is developing specific policies and strategies to address those challenges. This will entail setting concrete, measurable objectives for improving the supply of broadband through infrastructure build-out as well as promoting demand for broadband services and applications. Setting specific plans or policies will provide a clear sense of direction that will encourage investment as well as provide a blueprint for long-term action.

      A good plan should aim to promote efficiency and equity, facilitate demand, and help to support the social and economic goals of the country. The most successful plans will start with a clear vision of what broadband development should be and contain well-articulated goals that can be used to develop specific strategies to achieve success. Such frameworks can launch or revise ambitious national broadband visions, including definitions of broadband, service goals (including national and rural coverage), transmission capacity, service quality, and demand-side issues such as education and skills development. The government of the Republic of Korea, for example, was one of the early broadband leaders. It has developed six plans since the mid-1980s that have helped to shape broadband policy in the country. The Korea example shows that policy approaches can effectively move beyond network rollout and include research, manufacturing promotion, user awareness, and digital literacy. It also highlights the possibilities for sector growth based on long-term interventions focused predominantly on opportunity generation rather than on direct public investment.

      For many countries, the development of an extensive national broadband plan or strategy is an important step toward elaborating more specific broadband development policies. The countries highlighted in Table 2.1 have national broadband strategies containing specific broadband development goals.

      Image
      TABLE 2.1
      Publicly Stated Policy Goals for Broadband Service Delivery and Adoption in Selected Countries

      Source: Rob Frieden for the World Bank and Telecommunications Management Group.

      As Table 2.1 shows, however, countries differ in their approach to setting targets and goals. Some focus on improving access, while others set specific targets for data transfer speeds.

      But policies and programs to spur broadband development have not been confined to developed countries. Other countries have also sought to develop national broadband strategies, as shown in Box 2.2.

      Chile was the first Latin American country to announce a national broadband strategy. The strategy identifies ICT as a priority for economic development. Chile has also planned and implemented ICT policies from both the supply and demand sides. On the supply side, the government has authorized four Worldwide Interoperability for Microwave Access (WiMAX) operators as regional providers, and the regulator plans to award additional spectrum to a new 3G operator. The demand-side strategy has included programs for e-literacy, e-government, and ICT diffusion. For example, almost all taxes are filed electronically, and government e-procurement more than doubled the volume of transactions processed between 2005 and 2008. The government has also promoted broadband use by municipalities. By 2008, almost all municipalities had Internet access, and 80 percent had websites. In May 2010, Chile’s wireline broadband penetration was 10.66 percent, while mobile broadband penetration was less than half that, but growing at a much faster rate.

      Turkey’s government recognizes the importance of a vibrant telecommunications market and is keen to promote the spread of broadband. For instance, many educational institutions have been given broadband access. The Information Society Strategy for 2006–10 aims to develop regulation for effective competition and to expand broadband access. Targets include extending broadband coverage to 95 percent of the population by 2010 and reducing tariffs to 2 percent of per capita income. The regulator has also considered issuing licenses for the operation of broadband fixed wireless access networks in the 2.4 gigahertz (GHz) and 3.5 GHz bands. In June 2010 Turkey had penetration rates of 9 percent for wireline broadband and 4 percent for mobile broadband.

      Malaysia developed its Information, Communications, and Multimedia Services (MyICMS) 886 Strategy in 2006, setting several goals for broadband services. One was to increase broadband penetration to 25 percent of households by the end of 2006 and 75 percent by the end of 2010. Although these targets were not met, the results have been impressive: the household broadband penetration rate in the country topped 53 percent in October 2010. Now the government is focusing on WiMAX, 3G, and fiber to the home (FTTH) platforms to boost broadband adoption. To that end, the government is funding a fiber optic network that will connect about 2.2 million urban households by 2012. The network will be rolled out by Telekom Malaysia under a public-private partnership, where the government will invest RM 2.4 billion (US$700 million) in the project over 10 years, with Telekom Malaysia covering the remaining costs. The partnership is expected to cost a total of RM 11.3 billion (US$3.28 billion).

      BOX 2.2
      Broadband Strategies in Middle-Income Countries

      Sources: Kim, Kelly, and Raja 2010; Cisco, “Broadband Barometer for Chile,” Press Release, February 8, 2011, http://newsroom.cisco.com/dlls/2011/prod_020811.html; “Broadband Penetration Target for 2010 Exceeded, says Muhyiddin,” Malaysian Insider, October 27, 2010, http://www.themalaysianinsider.com/Malaysia/article/broadband-penetration-target-for-2010-exceeded-says-muhyiddin/.

    • 2.2.1.2 Allow Ample Opportunity for Stakeholder Input on Plans and Policies

      The development of broadband plans should involve the participation of all relevant stakeholders, both public and private. As such, governments should provide for a public consultation process that allows ample opportunities to obtain input from the private sector, consumers, and other relevant stakeholders. Given the complexity, varied issues, and broad impact of broadband, these transparent discussions are an important part of bringing stakeholders to the table in an open, objective, and neutral manner so as to maximize cooperation between the public and private sectors. Such services make it much easier for all parties, but particularly ordinary citizens, to learn about and comment on the issues being considered. A variety of mechanisms can be used to foster stakeholder input—presentation of filings by stakeholders, workshops, hearings, and inputs made through an online comment mechanism on a regulatory website or blog. Moreover, as e-government services have expanded, the effectiveness of public consultations has grown as well. The broadband development process will benefit from the broader range of perspectives that can now be presented to regulators and policy makers. Consultations and discussions are also proven mechanisms for helping regulators and ministries to understand the varying challenges and potential opportunities that are part of the reform process, for increasing capacity and knowledge, and for exchanging ideas in an open, transparent setting.

    • 2.2.1.3 Recognize and Take into Account That Implementation of the Plan Will Take Time and Persistence

      In many cases, the success of programs that have increased broadband adoption has simply been the result of longevity. Some countries prioritized broadband in the 1990s or early 2000s and have been promoting broadband for quite a number of years, giving them a meaningful head start over other countries. For example, in 2000 Sweden enacted an information technology (IT) bill, which established the pillars of its ICT strategy as “competencies, confidence, and access.” Sustained, focused efforts with continual updates over a number of years contribute to the long-term success of any broadband strategy. Conversely, seeking a “one-shot” solution that can be achieved with minimal time and resources is not likely to produce the best long-term outcome.

    • 2.2.1.4 Develop Research Mechanisms to Track Progress of the Plan

      As broadband technologies and applications evolve over time, the various segments of the broadband market will change as well. Further, notions of digital literacy and underserved populations will also be in flux. Various agencies and organizations are already tracking various parts of the broadband equation. To keep up with this dynamic and ever-changing sector, governments may wish to create an ongoing, multiyear, broadband-specific research program that tracks population use, ongoing barriers, and levels of digital literacy (Box 2.3). This program could complement the ministry’s or regulator’s efforts to encourage the supply-side parameters of broadband (for example, network build-out, speeds, and capabilities). The program could be housed within the agency responsible for broadband development or could be run out of one of the existing government agencies that perform such research. The ongoing issues of measurement and assessment, including international benchmarking, are discussed in more detail later in this chapter.

      • Establish specific plans and policies that define broadband development and contain concrete, measurable objectives that can be used to develop specific strategies to achieve success
      • Ensure that plans address mechanisms for improving the supply of broadband through infrastructure build-out as well as for promoting demand for broadband services and applications
      • Allow ample opportunity for stakeholder input in developing the plan
      • Be realistic when establishing objectives: recognize and take into account that implementation of a plan will take time and persistence
      • Focus on long-term success by developing sustained, focused efforts (with continual updates) over a number of years
      • Avoid seeking a “one-shot” solution that can be achieved with minimal time and resources, as this approach is not likely to produce the best outcome
      • Consider developing an ongoing, multiyear broadband-specific research program for tracking use, ongoing barriers, and levels of digital literacy and for determining whether objectives are being met or modifications are needed
      • Assign one coordinating agency responsibility for implementation of the plan.
      BOX 2.3
      General Elements for Governments to Consider When Creating Policies and Strategies

      Source: Telecommunications Management Group.

      Pilot projects can play an important role in ongoing research and development (R&D) efforts related to broadband deployment. Such projects can help to demonstrate the viability of a new technology or service, but, even more important, they may help to identify those policies and strategies that do not work very well. Pilot projects may be a cost-effective approach to broadband development, as they allow concepts, plans, and methods to be tested on a small scale before committing larger amounts of resources. In the United Kingdom, for example, Broadband Delivery U.K., a unit of the government, gives out grants (supplemented with private funds) for pilot projects to build or upgrade broadband networks in rural areas. Once the upgrades have been completed, Internet service providers (ISPs) gain access to the infrastructure, which may use any technology, on a wholesale basis.

  • 2.2.2 Provide a National Focal Point for Broadband and Develop Broadband Capacity

    To optimize the benefits of broadband, it is essential to have a comprehensive national-level focus on promoting broadband use, a clearinghouse for successful projects, and a consistent evaluation of what works and what does not. An important part of establishing and maintaining that focus over time will be developing capacity-building programs for government officials to provide education on how broadband can provide benefits across many sectors of the economy. Such programs, in turn, can help to shape the design of effective broadband development strategies throughout all levels of government—from local training programs to national network regulatory regimes.

    Numerous countries have established agencies or special offices specifically to oversee broadband development issues. In Sweden, for example, the IT Policy Strategy Group recommended the creation of an internal strategic coordination function to oversee “holistic” IT policy development and implementation. This internal coordination function was also envisioned to improve coordination between central government, local authorities, county councils, and the business sector. The United Kingdom now has a minister of digital inclusion. Brazil has appointed a digital inclusion secretary housed within the Ministry of Communications, which will be in charge of the National Broadband Plan as well as of all digital inclusion projects that are currently being carried out by various branches of the federal government.

    Often, broadband development efforts are overseen by the ministry responsible for communications or the regulator. In many cases, this responsibility is exercised in conjunction with a comprehensive broadband development plan. In Singapore, for example, the government developed and is actively pursuing its Intelligent Nation 2015 master plan, which is designed to transform Singapore into “an intelligent nation and a global city, powered by info-communications” (IDA 2009). As part of that plan, a next-generation nationwide broadband network (NBN) is being developed to bring fiber to homes and businesses across the whole territory. A wireless broadband network is also part of the strategy. All of these efforts are being overseen by the Info-communications Development Authority of Singapore (IDA), which is providing government leadership in the development of these networks. In India, the Ministry of Communications and Information Technology established an advisory group with members from telecommunications companies, industry associations, and various government departments (including health, education, and rural development) to help to guide India’s plan for a national fiber network that is envisioned to reach all villages and towns with more than 500 people. India’s approach is particularly noteworthy because it recognizes not only the importance of a central focal point, but also the cross-cutting impact of broadband on various sectors of the economy and the need for a coordinated approach that involves all relevant agencies.

    The decision regarding whether to set up such an agency or office will depend on the local situation in each country and will need to take into account existing laws and institutional responsibilities as well as the ability of the government to provide adequate funding for such an activity. For developing countries with limited financial and human resources, devoting a whole agency or branch of government to broadband development may seem ambitious. Nevertheless, given the importance of broadband development and its potential role as a general-purpose technology (GPT) capable of supporting advances in many sectors of any economy, developing such human resource capacities will be critically important.

    The issues surrounding the development of effective broadband policies are extremely complex and cover a wide range of disciplines, including engineering, law, and economics, among others. This will require governments to build capacity so that trained, knowledgeable professionals can guide the implementation of a country’s broadband plan from concept through construction and adoption. Without such leadership, even the best laid plans may fail through inattention and neglect.

  • 2.2.3 Develop Policies for Both Sides of the Broadband Coin: Supply and Demand

    The experience in high-penetration countries shows that successful broadband diffusion requires that both supply- and demand-side factors be addressed (Figure 2.2). While supply-side policies focus on promoting the build-out of the network infrastructure over which broadband applications and services can be delivered, the main goal of demand-side policies is to enhance the awareness and adoption of broadband services so that more people will make use of them.

    Image
    FIGURE 2.2
    Framework for Government Intervention to Facilitate Broadband Development

    Source: World Bank 2010.

    The interaction of both supply- and demand-side factors is crucial to achieving the highest penetration and adoption of broadband. However, these factors do not always appear naturally, as market failures may hinder their development. For instance, broadband diffusion can be limited if the market is not able to reach the required critical mass that leads to a sustainable growth cycle. More important, even if both types of factors (that is, supply and demand side) are present in an economy, they will not reach their full potential if they are not coordinated, as lack of coordination may result in slow supply of broadband infrastructure or in poor demand and uptake once networks are available. For this reason, countries with high rates of broadband penetration have comprehensive broadband policies that coordinate both supply- and demand-side actions.

    In assessing the strategic options for improving broadband build-out and adoption (supply and demand), it is important to remember that many factors are involved and that no two countries have followed identical routes. Nevertheless, it is possible to recognize common elements in national broadband success stories (Table 2.2). In reality, most countries will use a mix of policies, with supply-side policies generally focusing on how to stimulate private sector investment in networks, especially in the early years, and demand-side policies being more long term and focusing on how governments can help to drive broadband demand and adoption.

    Strategy Brazil Colombia Finland France Japan Oman Singapore South Africa United States

    Establish open-access wholesale networks

    P

     

    P

    P

       

    P

       

    Encourage private sector investment

    P

    P

    P

    P

    P

    P

    P

    P

    P

    Include broadband under universal service definition

    P

       

    P

     

    P*

    P

    P

    P

    Encourage demand for broadband services

    P

    P

    P

    P

    P

     

    P

    P

    P

    Promote, improve, and expand public-private partnerships

    P

    P

       

    P

     

    P

    P

    P

    Subsidize local (citywide), regional, or national ventures

     

    P

     

    P

     

    P

    P

    P

    P

    Promote facilities-based resale competition

         

    P

    P

     

    P

    P

    P

    Mandate local loop unbundling (LLU)

    a

    P

    P

    P

    P

    P

    P

    b

    TABLE 2.2
    Elements of Broadband Strategies in Select Countries

    Source: Rob Frieden for the World Bank and Telecommunications Management Group. For a list of weblinks to each of these national broadband plans, see appendix A in this volume.

    a. Article 155 of Brazil’s Telecommunications Law, as well as various other regulatory instruments issued by Anatel, notably Order no. 172 of May 12, 2004, issued by the Superintendent of Public Services of Anatel, requires wireline providers to unbundle. However, due to the fact that wireline network unbundling prices are high, in practice, unbundling does not really occur in Brazil. Anatel has identified as a short-term priority the need to review its policies with regard to LLU, as well as to adopt a pricing model for the use of the network so that LLU can be mandated.

    b. Under consideration as of 2011.

  • 2.2.4 Build Infrastructure: Promoting the Supply of Broadband

    Most developing countries have not yet seen their broadband markets penetrate more than a very small segment of their population. Hence the government’s role is even more important in promoting and accelerating growth of the broadband market. Promoting the build-out of broadband networks throughout a country will likely require governments to pursue multiple strategies, depending on local circumstances. As each country has its own unique history, regulatory structure, economic conditions, social goals and expectations, and political processes, the path a country follows to improve broadband networks and services will necessarily have to reflect its specific advantages and disadvantages.

    Nevertheless, some general policy approaches may be applicable across the world. First, it is generally accepted that the private sector should be the primary driver of broadband development in most cases. Particularly when government debt is high and resources are limited, sufficient public money may not be available for broadband infrastructure spending. Consequently, policy makers and regulators must consider how best to attract and encourage private sector involvement and investment in broadband. This, in turn, will require governments to conduct an honest evaluation of the extent to which their country represents—or can be made into—a profitable market opportunity for private sector investors and operators. Questions to be answered may include the following: Are companies willing to invest? If not, why not? Will such companies drive the broadband market forward on their own, or will they need help? What government strategies, policies, and regulations can foster and support private sector initiatives, and what policies may hold back investment? Many countries have taken this approach: they have attempted to facilitate and, where possible, accelerate, broadband rollout through regulatory measures rather than more direct forms of intervention such as investment.

    In the context of a private sector–led approach to broadband development, it is recognized that allowing competition to flourish will usually lead to greater deployment and efficiencies in network build-out. Competition in broadband supply is crucial for reducing prices, improving quality of service, and improving customer service (ITU 2003). It has a positive effect on market growth, as it expands access, increases affordability, and augments the value proposition. Conversely, lack of access to infrastructure and high prices can act as strong barriers to broadband diffusion. If no broadband infrastructure is available, consumers cannot access the service. Even if a network is available, it will be of little use for consumers if the service is not affordable. The government, therefore, should place a priority on developing enabling policies that will facilitate competition throughout the supply chain to encourage deployment and lower consumer prices.

    However, in certain instances competition and market forces will not be sufficient for broadband to develop. In those cases—due to factors such as geography or low population density, for example—private sector players will be unwilling to invest capital where they perceive that they will get a low (or no) return on their investment. For these areas, it will be necessary for the government to intervene more directly to ensure that un- and underserved areas and populations are able to get access to broadband networks and services.

    • 2.2.4.1 Use Competition to Promote Market Growth

      A key lesson from countries surveyed in Kim, Kelly, and Raja (2010) is that competition is critical to successful broadband market promotion. Each country studied used different mechanisms to spur competition and promote broadband market growth. Some focused primarily on fostering facilities-based competition, while others focused more generally on increasing the level of competition at the service level. The presence of established, competitive telecommunications operators in many countries also contributed to broadband market development.

      In the long term, liberalization and promotion of competition among facilities are the best ways to guarantee lower costs. For example, the initiation of the Southern and East Africa Cable System (SEACOM) network that links Kenya, Madagascar, Mozambique, South Africa, and Tanzania resulted in Kenya Data Networks (KDN), a Kenyan data services provider, announcing that it would reduce its Internet prices by up to 90 percent.* However, liberalization may be difficult in some developing countries, particularly those that have small populations, are geographically isolated, or are small island developing states (SIDSs)with limited access to multiple sources for connectivity. Specific countries may exhibit features that make developing competitive markets in certain segments of the supply chain particularly difficult.

    • 2.2.4.2 Develop Enabling Policies to Eliminate Bottlenecks in the Broadband Supply Chain

      Broadband networks are not simple systems; they consist of multiple components, all of which must work together in order for broadband services to be delivered to end users in the most efficient and effective way possible. The technologies that make up the “broadband supply chain” are discussed in detail in chapter 5, while the legal and regulatory issues associated with each level of the supply chain are addressed in chapter 3.

      In order to be most effective, competition must be present throughout the different levels of the broadband supply chain (Figure 2.3). If not, bottlenecks will arise and the benefits of broadband diffusion will be severely reduced. As such, it is important to develop enabling policies to eliminate bottlenecks across the broadband supply chain. For instance, if domestic and local levels are competitive, but access to international connectivity is limited or too expensive because there is only one provider of submarine cable, broadband prices will remain high and diffusion will not achieve its potential. The same can happen if all levels of the supply chain are competitive, but local connectivity is limited to a single operator.

      Image
      FIGURE 2.3
      Addressing Bottlenecks in Broadband Networks: Policies on the Supply Side

      Source: Adapted from World Bank 2010, 56 and World Bank 2009, Chapter 4, Advancing the Development of Backbone Networks in Sub-Saharan Africa.

      Recognizing the role of competition, high-penetration countries tend to address competition issues throughout the supply chain. However, the particular conditions in each country may lead to the creation of different bottlenecks and require different policy approaches applicable to their specific broadband market. As a result, not all countries have identified the same bottlenecks in the supply chain, nor have they adopted the same policies to ensure competition in these markets. Governments can foster competition in each level of the supply chain through various public policy options. Additional information on these issues can be found in chapters 3 and 5.

    • 2.2.4.3 Promote Effective Competition and Encourage Investment

      Some issues involved in promoting competition do not apply to one particular part of the broadband supply chain, but rather involve the interaction between different levels or policies that may be applied in a complementary fashion across levels. Furthermore, the dominant service providers in a country often operate at several levels in the supply chain. Thus policies may be needed to ensure that they do not use their dominance in one market segment to affect other levels of the supply chain. For example, policies that foster open access to network infrastructure can be implemented at all levels, and interconnection agreements are needed between operators at all levels as well (see chapter 3 for more detailed discussion of these issues).

    • 2.2.4.4 Access to Infrastructure

      Network operators and service providers wishing to enter the downstream market (that is, building access networks and offering services to customers) must either build their own backbone network or access the network of another operator. The terms under which operators can obtain access to the backbone networks of other operators will have a significant impact on the success of their business and will influence whether effective competition in the downstream market develops. At the same time, the demand created by these down­stream operators will affect the financial viability of the backbone networks, since they are the entities that generate traffic and rev­enues on those networks. Thus, by promoting effective competition in the downstream market, governments will help to stimulate backbone network development.

      The role of the regulator is crucial, since it often defines and enforces the terms of access. The decision about whether to regulate directly the terms of access to infrastructure has a major effect on the investment incentives. In Europe, for example, where the incumbent operator historically dominated both the local loop and the backbone markets, the priority for regulators was to provide access to these operators’ networks for companies entering the markets, since this was seen as crucial to the development of competi­tion. Subsequently, as competition has grown, regulators have developed systems for determining which operators should be regulated and how, and these systems are based on a well-established framework of general competition regulation. In developing countries (for example, most countries in Sub-Saharan Africa), such frameworks often do not exist. Regulators therefore need to develop alternative sets of guidelines to govern how access to the infrastructure of private operators in competitive markets is regulated. This involves a trade-off between support­ing the development of competition in the downstream market and maintaining the incentives to invest in upstream infrastructure. In areas of a country where public support is provided for backbone infrastructure, this trade-off is relatively straightforward, since one of the conditions of public support typically includes the provision of wholesale services on regulated terms. In other areas of the country and in other parts of the infrastructure, the trade-off may be more difficult to determine.

    • 2.2.4.5 Infrastructure Sharing

      Many governments have sought to encourage deployment of networks and improve the overall competitive situation by allowing or, in more limited instances, even requiring infrastructure sharing. In most cases, infrastructure sharing has been instituted in areas where having competing physical infrastructures was not considered economically viable (such as in rural or remote areas) or where the construction of competing infrastructures could prove unacceptable for social or political reasons (too much disruption from repeated construction projects). By sharing network infrastructure, builders of networks can significantly reduce costs and make investment in them more commercially viable. This is particularly relevant for fiber optic networks in rural areas, where the revenues generated by such networks are low. In some cases, operators have a commercial incen­tive to enter into these sharing arrangements. For example, in Nigeria, where there has been extensive fiber optic cable network rollout, operators have entered into a variety of network-sharing agreements aimed at reducing costs and improving the quality of supply. In addition, operators may also be required to install multiple fibers in their cables, even if they only need one. These additional “dark” (unused) fibers may not be used initially, but may be held in reserve for future use by an existing operator or new entrant. This may be a very cost-efficient way to manage fiber optic networks because installation (and the associated civil works costs) only needs to be done once as opposed to multiple rounds of digging to install multiple fibers.

      Including broadband in land use planning efforts may also promote build-out and reduce costs. For example, requiring all new housing and building developments to include broadband infrastructure, particularly fiber cables, alongside other utility requirements, including electricity and water, can help to lower long-term costs by ensuring that broadband infrastructure is laid at the outset, which avoids the higher costs associated with retrofitting.

      With wireless networks, particularly in low-density areas where the economics may not support multiple competing infrastructures, carriers can share cell towers and some backhaul facilities as a way of reducing network build-out costs and bringing competition to such areas more quickly. Such arrangements have slowly been gaining acceptance in both developing and developed countries, particularly as carriers seek to manage costs as they expand their networks or upgrade their services to support higher-speed broadband.* However, in some cases, it may be necessary to overcome resistance from incumbents or dominant operators, since they are likely to accrue relatively little benefit from sharing with competitors.

    • 2.2.4.6 Access to Rights-of-Way

      Most of the cost of constructing wireline networks lies in the civil works. By lowering the barriers to and costs of accessing the rights-of-way associated with public infrastructure (for example, roads, railways, pipelines, or electricity transmission lines), governments can significantly increase incentives for private investment in broadband networks at all levels of the supply chain. Such incentives can be achieved in several ways, but primarily by (a) making rights-of-way readily available to network developers at low cost, (b) simplify­ing the legal process and limiting the fees that local authorities can charge for granting rights-of-way, and (c) providing direct access to existing infrastruc­ture owned by the government through state-owned enterprises (for example, a railway company partnering with one or more operators to build a fiber optic cable network along the railway lines). Such access can also be valuable to wireless operators as they seek to locate towers to expand services.

    • 2.2.4.7 Accounting and Functional Separation

      In those countries where bottlenecks persist in the supply chain, and especially where the historic monopoly provider still retains a dominant position in the backbone, middle-mile, or local access segments, governments have intervened even more directly. To bring added transparency to the operations of a dominant provider, regulators have sometimes required the provider to separate the accounting for different parts of its business—keeping wholesale and retail accounts separate, for example. This better enables stakeholders to identify unfair discrimination against nonaffiliated providers and can help to ensure that competition takes place on fair and equal terms.

      One of the most severe remedies imposed by regulators is functional separation. Functional separation requires the incumbent operator to establish a new business division—separate from its other divisions—to manage the network and provide wholesale services to all retail service providers on a nondiscriminatory basis. Functional separation is not the same as (and is less severe than) structural separation or the spinoff and sale of network operations: the incumbent operator maintains ownership of the network division, but it must be independent from the operator’s retail and commercial divisions. In many cases, other regulatory obligations are used as a complement to functional separation, such as local loop unbundling (LLU) or bitstream obligations. As (fiber) broadband networks are being deployed, governments have begun to consider whether similar obligations should be placed on those new or upgraded networks. Finally, as a last resort, full structural separation may be warranted if the government does not believe that anticompetitive conduct—either by an incumbent or by a new broadband or fiber optic network operator—can be otherwise controlled. This entails the creation of a totally separate entity—for example, to build and manage the network’s physical infrastructure. The various types of separation policies and examples are discussed in chapter 3.

      Table 2.3 presents an overview of some of the policies that can be used to promote the supply of broadband. For a more in-depth view of the various policies and programs for promoting the build-out and uptake of broadband, see appendix B to this volume.

      Goal Policy

      Promote competition and investment

      • Implement policies or regulations to create conditions to attract private investment in broadband networks

      • Implement technology- and service-neutral rules or policies giving operators greater flexibility

      • Promote effective competition for international gateways and possible policies for service-based competition for gateway operators to provide access to their facilities on a wholesale nondiscriminatory basis

      • Develop policies to facilitate interplatform competition

      Encourage government coordination

      • Adopt common technical standards and facilitate the development of international, regional, and national backbones

      • Incorporate broadband planning into land use and city planning efforts

      Allocate and assign spectrum

      • Assign additional spectrum to allow new and existing companies to provide bandwidth-intensive broadband services

      • Allow operators to engage in spectrum trading

      Promote effective competition and encourage investment

      • Encourage multiple providers to share physical networks (wireline and wireless), which can be more efficient, especially in low-density areas

      Facilitate access to rights-of-way

      • Facilitate access to public rights-of-way to ease the construction of both long-distance (backbone) and local connections

      • Develop policies that provide open access to government-sponsored and dominant-operator networks to enable greater competition in downstream markets

      Facilitate open access to critical infrastructure

      • Develop policies that provide open access to government-sponsored and dominant-operator networks to enable greater competition in downstream markets

      • Consider implementation of local loop unbundling if necessary to facilitate competition

      TABLE 2.3
      Checklist of Policies to Promote the Supply of Broadband Networks

      Source: Telecommunications Management Group.

  • 2.2.5 Encourage the Adoption of Broadband: Promoting Demand

    Countries are beginning to view broadband promotion not only as a problem of supply of broadband (access to networks), but also as a problem of demand for it (adoption by businesses, government, and households). As a result, demand facilitation is becoming an important part of broadband development strategies and policies. Chapter 6 discusses demand-side policies in more detail.

    Most of the experiences to date in stimulating demand for broadband applications and services come from developed countries. Similar policies may work more or less well in developing countries, where economic and social conditions differ; the ability to adapt the lessons learned and successful policies to local needs will be critical. This particularly applies to policies that are focused on demand-side issues, where culture and socioeconomic status are important variables. For example, with the first availability of broadband services, demand (measured by subscriber growth, for example) may be initially very high—reflecting pent-up demand among users who previously had no broadband access. In such cases, governments may decide that there is no need to stimulate demand. In Kenya, for example, at the end of September 2010, broadband subscriptions increased to 84,726 subscribers from 18,626 in the previous quarter (a growth rate of over 450 percent) without any specific attempt by the government at demand-side stimulation (CCK 2011).

    As time passes, however, growth in demand is expected to slow down as the potential pool of users evolves from motivated early adopters to potential users who do not necessarily understand all that broadband has to offer and may be concerned with the potential threats to privacy and data security. This is when government policies to stimulate demand may have the most beneficial impact. By educating users through digital literacy programs, governments can help to drive adoption to a broader user base and educate them at the same time. Such programs may become increasingly important as adoption rates rise in order to avoid the social and economic inequities associated with broadband “haves” and “have nots.” One important issue that policy makers should consider as they address broadband demand development is the opportunity cost of using (limited) public moneys for broadband demand programs as opposed to other worthy public uses. In some cases, governments have decided that stimulating broadband demand was important enough for reaching national economic and social goals. This may not be the case in all countries, particularly in countries with the fewest resources to spare.

    The role of government in stimulating demand will vary by country. In some countries, with populations that are more technically literate, there may be less need for direct government intervention. The appeal of social networking and video streaming as an entertainment source may be more self-evident than more mundane uses such as e-government or multimedia mail. In such cases, demand will be driven by attractive offerings made available by private sector developers. In other cases, however, basic illiteracy, lack of understanding of what the Internet can do, or costs may require governments to step in to fill out and aggregate demand, particularly among at-risk groups. Policies to support digital inclusion will be an important leveler to ensure that broadband can bring benefits to all segments of the population.

    Efforts to increase demand typically fall into three categories: awareness, affordability, and attractiveness. In order to drive broadband adoption and use, policies must address these three categories, especially targeting those populations that are generally less likely to adopt and use broadband Internet services. Mechanisms to address awareness include improving digital literacy and encouraging the use of broadband in education and by small and medium enterprises (SMEs), efforts to address affordability focus on the costs of both hardware and services, and attractiveness initiatives include promotion of services, applications, and local content as well as delivery of government services over the Internet (e-government). E-literacy and e-skills, in particular, are vital for broadband diffusion to succeed. Recognizing this, governments with high penetration and adoption rates have been very active in trying to raise e-literacy. The three main barriers to broadband adoption are discussed in further detail in chapter 6.

    Table 2.4 provides an overview of some of the policies that governments can use to promote demand for broadband applications and services, including programs to provide users with a place where they can obtain access.

    Focus Policy

    Infrastructure

    • Connect schools to broadband networks

    • Make government an anchor tenant

    • Expand access to underserved communities with universal service fund support

    • Construct community access centers

    • Consider expanding universal service to include broadband

    Services, applications, and content

    • Undertake government-led demand aggregation

    • Provide e-government applications

    • Promote creation of digital content

    • Implement reasonable intellectual property protections

    • Ensure nondiscriminatory access

    Users

    • Provide low-cost user devices in education

    • Develop digital literacy programs for citizens

    • Address content and security concerns

    • Facilitate affordability of broadband devices

    • Monitor service quality

    • Support secure e-transactions

    • Provide training to small and medium enterprises

    TABLE 2.4
    Checklist of Policies to Promote Demand for Broadband

    Source: Telecommunications Management Group.

  • 2.2.6 Consider Other Sectors of the Economy and Society

    As policy makers and regulators consider policies and strategies to promote broadband development in their countries, it will be important to consider the issues in the broader context of larger economic and social goals. Broadband applications and services are increasingly intersecting with virtually every other major sector of the economy—including education, health, banking, the environment and climate change, and cyber security—and broadband policy makers and regulators will likely need to coordinate their efforts with their counterparts in other areas of the government to achieve larger policy objectives, whether they be social, economic, or political.

    Tackling such cross-sector goals will require close coordination among various regulators so that policies and approaches support each other. It will also require policy approaches and regulatory frameworks that are broad enough to allow policy makers to consider the relevant interrelated issues as well as a high degree of committed leadership at the most senior levels to ensure that all parts of government work together to promote the development of broadband as part of the more general goals of promoting social and economic growth. Despite increasing recognition of the importance of broadband and its impact on the policies and implementation of programs in other sectors, most countries’ laws do not typically address the jurisdictional issues related to other sectors of the economy vis-a-vis broadband. As a result, it will be increasingly important for governments to adopt provisions outlining the cooperative arrangements between the broadband regulator and other government agencies. For agencies that are not used to working together—and that come to the same issues with vastly different points of view—such guidelines or arrangements will be crucial to ensuring that policies and decisions are mutually supportive of both broadband development and sector-specific goals and programs. This section briefly describes how broadband development policies interact with policies in other key sectors of a country’s economy. Specific examples of such collaboration and the ways broadband can support other sectors of the economy are found in chapter 1. To view how applications and services developed within these other sectors can help to drive demand for broadband, see chapter 6.