1. No category

HOW TO ACHIEVE THE GOAL OF BROADBAND FOR ALL
Morten Falch, Dan Saugstrup & Markus Schneider
Center for Tele-Information, Technical University of Denmark,Building 371,DK-2800 Lyngby, Denmark
Email: [email protected], [email protected], [email protected]
1. ABSTRACT
The paper is based on ongoing work in WP3 of the BREAD project (Broadband in Europe for all: a
multi disciplinary approach), which collects information on ongoing regional and national
initiatives in Europe and around the world. The paper focuses on identification and analysis of
drivers and barriers towards the development of broadband for all. The purpose is to provide input
for an assessment of various policy measures aiming at stimulation of the growth in penetration of
broadband services. The analysis builds on experiences with broadband development in four
countries, which varies form market leaders (Canada, Denmark and South Korea) to average
penetration regarding broadband services (Germany).
2. INTRODUCTION
The penetration of broadband connections has on a global scale increased dramatically during the
past few years. However, the growth has been very uneven distributed among countries. South
Korea is by far the global leader in penetration of broadband with Canada, and some Scandinavian
countries in a second tier. In the other end, countries like Ireland, Luxembourg, and Greece are
considerably lagging behind the other OECD countries. What explains the huge national differences
in penetration of broadband?
In order to answer this question, the first part of this paper outlines a number of factors considered
to be decisive for penetration of broadband. The second part uses these factors to explain why
development has differed in a number of countries.
In this paper we will categorise the decisive factors according to three different dimensions:
The first dimension distinguish between factors affecting supply and factors affecting the demand.
These factors are of course interrelated. The demand depends on how and on what conditions
broadband services are supplied. High quality services offered at low cost generates more demand
than poor services offered at high costs. On the other hand a certain level of demand is necessary to
stimulate investments enabling supply of broadband services.
The second line of division goes between content and infrastructure. Broadband networks are
essential for any economy and information society: Inter alia Broadband networks connect buyers
with sellers, callers with receivers, and public authorities/institutions with legal (e.g. companies)
and natural citizens. Just as railroads and highways, Broadband networks are the technological
means which enable people/machines to meet and interact virtually with other people/machines.
However, high penetration of broadband networks as such are never an end in itself, but rather have
the overall purpose of enabling communication and two-way interaction between all groups within
a society. The stage of development of broadband services is most often (also in this paper)
measured by the number of connections, and not the content delivered via the broadband
infrastructure. Development of content and infrastructure may stimulate each other. But for our
purpose it is important to distinguish between the factors stimulating content development and those
stimulating the infrastructure development.
Technological, economic as well as political/cultural factors are affecting both supply and demand
conditions for both content and infrastructure development. The technological aspects include
development of new transmission technologies and development of new types services that can be
transmitted via a broadband infrastructure. Economic factors include market condition such as the
overall market size and the level of competition. Cultural/political factors include regulation and
1
other types of policy intervention as well as differences in lifestyles. All these aspects are
addressed in our third line of division, which distinguishes between technical, economic and
political/cultural factors. This ends up with a typology as depicted in table 1.
Table 1, Typology of factors affecting penetration of broadband services
Supply
Demand
Technology
Technology
Economy
Economy
Culture/policy
Culture/policy
Technology
Technology
Economy
Economy
Culture/policy
Culture/policy
Content
Infrastructure
Not all of these 12 different categories are equally important. This paper will address most of the
categories, but the primary focus will be on infrastructure supply. Using the typology presented
above we have identified a number of parameters, which we think are the most relevant in
explaining national differences in diffusion of broadband, and which can be used as a starting point
for identification of interesting policy measures.
Table 2. List of parameters affecting penetration of broadband services
Supply
Content
Demand
Supply of new services
Income level and income distribution
Development of new business models
Pricing
Penetration of IT (e.g. PCs, Internet,
mobile phones) in households and
businesses
Number of Internet hosts
Lifestyle
Number of digital broadcasting channels
incl. Web TV
Attitudes towards new technologies
Penetration of broadband connections
Legal issues (e.g. copyrights)
Lack of harmonisation (legal)
Standardization of standards
Existing telecom and cable networks
(availability/penetration/capacity)
Existing wireless infrastructures
Demography of users
Infrastructure
Cost of capital and financial strength of
operators
Level of competition
Ownership of competing infrastructures
Income level and income distribution
Penetration of IT (e.g. PCs, Internet,
mobile phones) in households and
businesses
Lifestyle
Attainment towards new technologies
Driving applications (what are people
actually using)
Initiatives by local communities to invest in
broadband
Market price for broadband services
These parameters are further detailed below. Section 3 discusses different types of policy
parameters.
2
2.1 Supply of content
The content layer relates to the provisioning of online information services and applications which
are to be transmitted over broadband networks to the receiver. Broadband enables distribution of a
host of new services that either was non existing or only available off-line. Convergence is an
important aspect of this. Broadband infrastructure offers a transmission platform that due to its high
capacity can be used for delivery of services originating from a wide range of industries. Current
examples are online music platforms, Video on Demand (VoD), Voice over IP (VoIP) and webbased software applications.
Important future applications are expected to be Video-conferencing, broadcast multi-casting and
increasingly interactive content. An important driver is here the ability to develop new converging
services combining features from services used to be distributed through separate delivery channels.
There is however a number of economic and political challenges related to this. For instance, VoIP
is threatening to cannibalize revenues of established (incumbent and new entrants,) telecom
operators and the availability of (audio)-visual content is considerably affected by intellectual
property protection in form of law and technology.
Development of new business models and pricing schemes are important drivers for both generation
and demand for content. One of the drivers behind the success of the Internet has been a charging
mechanism, where the end-user pays distance independent price and where most content is free. On
the other hand this model has had clear limitations with regard to content generation, as it seems
difficult for users to accept payment for certain types of content.
Supply of content is difficult to quantify and compare. In theory the supply of content is the same
from everywhere, as one will be able to access the same content once the infrastructure is in place.
But different languages and preferences towards locally produced content imply that users may
experience national differences. Relevant measures for supply of content, which can be used for
international comparisons, include number of digital broadcasting channels available, number of
Internet hosts etc. But these numbers will never tell the full story and can only be used as indicators.
2.2 Supply of infrastructure
The infrastructure aspects relates to the broadband network itself. The development of supply
depends on existing network facilities as well as the level of investments. Network operators are
mostly commercially oriented companies that assess their investment opportunities according to the
return of investments. The viability of investments in broadband depends on the level of total costs
compared to expected revenues.
The point of departure for creating an infrastructure, which can offer broadband for all, is very
different within countries. First of all, there are differences in demography and geography. For
instance will densely populated areas usually be cheaper to supply with broadband than rural areas.
Secondly, the quality and capacity of existing telecom networks vary from country to country. Even
though most countries within the OECD area provide more or less national coverage for basic
communication services, the point of departure for upgrade towards higher bandwidth is very
different. The differences in the extent of cable-tv networks are even more visible. While countries
like the Netherlands offer almost universal access to cable TV networks, Cable TV plays only a
very limited role in some other countries (e.g. Germany).
In addition to telecom and cable-TV networks other types of infrastructures provided by
municipalities or power companies may be used as a basis for provision of broadband services.
Local community associations may also be a driving force in provision of broadband e.g. through
existing cable networks or by use of WLAN.
The most successful access technologies for broadband have so far been ADSL and cable modems.
Cable modems offer generally higher bandwidth and are cheaper than ADSL services. But cable
networks are not as widespread as telecom networks. Therefore cable modems are only offered to a
certain segment of users mainly in urban areas. Wireless connections such as 3G and FWA have so
far a limited penetration. 3G services have today some success in Japan and South Korea and are
3
expected to take off in other countries as well. However the bandwidth offered is limited and can
hardly be a full substitute for a wired broadband connection. FWA is more expensive and is mainly
used by business users, but may be an attractive solution in rural areas not served by ADSL or
cable. Finally WLAN technologies may be used for providing broadband access in public spaces or
in neighbourhoods.
The extent to which these technologies can be applied by use of existing network structures affect
the total cost of investments needed for supply of broadband services.
In addition to demography of customers and reuse of existing network infrastructures, costs also
depends on financial factors such as the level of interests to be paid, which again depends on the
financial strength of the operators, and the possibilities for use of soft-funding mechanisms such as
government subsidies.
The total cost of the investment is however only one out of a number factors driving the
development in broadband facilities. It also depends on the revenues that these facilities can be
expected to generate.
Expected revenues depends on the number customers and the prices that can be charged for delivery
of broadband services. The factors driving the total demand will be discussed in more detail in the
section on demand for content and infrastructure. But in addition to this, the market structure – first
of all the level of competition – play an independent role in driving the supply.
The level of competition on the telecom market is important for the supply of broadband. The level
of competition, in turn, creates pressure on the companies to invest despite lower return on
investment figures. After all, up to a certain limit, it is better to have a lower return than none at the
expense of competitors.
Competition includes competition among different suppliers of the same service and competition
between different types of infrastructures. Competition among suppliers of ADSL services is highly
dependant on the regulation for unbundling of local loop services (ULL), as it is often only the
incumbent operator that has its own infrastructure for local access. Empirical research seems to
indicate, that a strict regulatory practise on interconnection with the aim of promoting real
competitions, favours penetration of new services. Among the EU countries, a positive correlation
between the level of competition and investments in telecom facilities can be documented (Henten,
Falch & Tadayoni, 2004).
The emergence of a converged digital communication market has a profound impact on the
competitive market mechanisms. Today, telecom operators are beginning to offer VoD and cable
network VoIP in addition to Broadband access services. This technological and market convergence
creates new infrastructure competition and provides more choice for customers1.
For instance, Internet Protocol TV (IPTV) launched its new services in France (MaLigne tv) and Spain (Imagenio).
Thus, Internet TV can become a competitior to traditional broadcasting mediums. However, in the near future pricing
and availability of content will hinder a fast uptake.
Competition among infrastructures depends on the availability of alternative infrastructure and the
ownership of these infrastructures. If the same incumbent controls both the telecom and cable
network, this will limit competition between these two types of infrastructures.
Another source of competition in the market for delivering broadband access services comes from
local communities, where customers demanding broadband access set up there own local networks.
1
http://www.theregister.co.uk/2004/07/23/digital_homes/
4
Some of the largest of these networks are established in co-operation with the municipalities. This
has been the case in e.g. Germany and in Denmark.
Unlike network investments made by telecom or cable operators, these initiatives are customer
driven. Pooling of demand from a group of customers can be a very effective tool to decrease prices
by benefiting from economies of scale. Rather than approaching the network operator individually,
communities considerably strengthen the bargaining power of the customers. This is however, not
the only implication. Such initiatives also stimulate demand and thereby the supply of broadband
services.
Investment can also be stimulated through a reduction in investment risks. In the case of broadband
infrastructure and services, the Internet allows for a higher degree of interactivity. This interactivity
enables the investigation and measurement of demand for broadband infrastructure and services
before major investments are made. In the UK, has BT set up a website where people living in rural
areas can express their interest in broadband services. The goal was to measure the demand for
broadband infrastructure in order to reduce the investment risk. Similarly, in the case of broadband
content (music and games) the Internet is being used to lower the investment risk by measuring
demand before the investment in music and games are made (e.g. Vodes.Net). Hence, the Internet
allows the investment risk for both content and infrastructure to be lowered considerably.
Apart from the potential return on investment, the degree of legal investment protection is another
decisive factor in relation to the network operator's incentives to investment in broadband network
facilities. As noted above competition seems to stimulate network expansion, but a very tight
telecom regulation may have the opposite effect at least on the incumbent operator. If network
operators are required by law/regulation to interconnect and give third parties' access to their
networks, this will affect their investment decisions. The higher the degree of investment protection
the higher are the incentives for network operator to investment in broadband. This have however to
be weighted against the negative impact this may have on competition. As long as one operator (the
incumbent) dominates by market share around 90% or more (as it is in many countries) in the
market for network facilities in the access network, it seems that a policy in favour of more
competition is necessary to stimulate investments.
It should be pointed out, however, that increased, industry-wide driven commodization of network
elements and modularization of infrastructure allow easy third party interoperability. In other
words, the more industry standards emerge, the more can third parties investment complement the
investment by the network operator. This is of particular relevance in relation to the high level of
debts of many network operators.
Supply may also be stimulated by Government or EU initiatives. In an age where there is almost
blind faith in market forces, any kind of state intervention has to have compelling reasons.
Nevertheless, some initiatives stimulating supply of broadband services have been taken – in
particular for support of supply in disadvantaged areas. The EU telecom regulation on universal
services does only include basic telecom services. However, some countries e.g. Sweden have
implemented programmes for funding of provision of broadband services in rural areas. In addition
to that the EU Commission has provided funding for creation of a high speed research and
education network through TERENA.
Indicators for supply of broadband infrastructure
In a comparison of indicators for supply of broadband in various countries, it is necessary to be
aware of differences in the definition of what broadband really is. The OECD defines broadband as
a 256 kbps downstream and at least 64 kbps upstream connection2, the FCC requires high-speed
lines faster than 200 kbps in at least in one direction3. Some EU publications use 144 kbit/s in one
2
OECD: BROADBAND DRIVING GROWTH: POLICY RESPONSES, p.2 (Oct 2003).
http://www.oecd.org/document/26/0,2340,en_2649_33703_16220890_1_1_1_1,00.html
3
FCC (2002): Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable
And Timely Fashion, and Possible Steps To Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of
1996, THIRD REPORT, page 4. http://www.fcc.gov/broadband/706.html
5
direction as the limit4. These differences are necessary to consider when statistics from various
sources are compared.
As technologies are rapidly changing, it is difficult to focus on exact kbit/s numbers in defining
penetration of broadband. Maybe a broadband connection for the time being should be defined as an
always-on connection capable of streaming music in good quality without interruptions. It may
however be necessary to change this definition, if the majority of future broadband services will
demand a higher capacity than can be delivered through such a line.
Broadband availability refers to the number of end users which are within the reach of broadband
capable access points to the core broadband network. In the case of DSL "availability" number
refers to the number of upgraded local exchanges. One can refer to this figure as "theoretical
broadband availability" or "supply side availability". This figure is easy to gather (the number of
upgraded switches), but it gives an incomplete picture as this figure does not tell anything about the
capacity within the network. Lack of capacity may imply that only a limited number of users are
able to connect – or that user in reality only will have a bandwidth, which cannot be termed as
broadband, available. This "practical availability" is also very important especially in relation end
user's and their broadband experiences.
In addition to that upgrade of the local exchange may not be sufficient for reaching all customers.
xDSL is distant dependent: the further users live away from the local exchange, the slower is the
connection. Therefore broadband may not be available for the more distant customer before
additional investments in the access network are implemented.
2.3 Demand for content and infrastructure services
As the demand for broadband infrastructure is driven by the demand for content, the drivers for
services and infrastructure are highly interrelated although the indicators for the level of demand are
different.
The demand for content depends on the economy, socio-cultural factors and the penetration of
broadband services (which again depends on both supply and demand). The demand for broadband
connections depends on the same economic and socio-cultural factors and on the availability of
relevant content.
Economic factors
The most important economic factor is income. Income is certainly an important factor for
penetration of broadband services. All countries ranking high in terms of broadband penetration are
high income countries. However, income is not the only decisive variable. South Korea has a much
higher penetration than countries with a similar or even a higher GDP per capita, and Germany has
a fairly low penetration although their GDP are among the highest. Another economic factor of
importance is distribution of income, as the number of households that can afford to use broadband
depend on the distribution of income as well the level of income.
It must however not be forgotten that broadband is demanded by businesses as well as households.
Although households dominate the demand in the most advanced countries the use of broadband in
businesses is important in the less advanced economies. In addition business applications may also
stimulate demand from the households. Therefore, the structure of economy is important for the
overall demand. Thus an economy dominated by informational activities must be expected to
generate more demand for broadband services than an economy based on agricultural production.
4
EU COMMUNICATIONS COMMITTEE, Broadband Access in the EU, p 4.
http://forum.europa.eu.int/Public/irc/infso/cocom1/library?l=/public_documents_2003/cocom0340annexpdf/_EN_1.0_&a=i
6
Socio-cultural factors
The most obvious socio-cultural factor is what can be termed the e-readiness of the society. Ereadiness is related to historical factors as well as competences disseminated through the
educational system. A number of international reports have tried to measure e-readiness5. This is
however mainly done by use of statistical indicators, which cannot really be termed as sociocultural and which are included in the list of parameters. One relevant indicator is however the
penetration of PCs.
Another socio-cultural factor is time spent at home, which often are mentioned as explanatory
factors with regard to mobile broadband services. More time is spent on commuting and away from
home in Asia compared to Europe. Combined with a low penetration of PCs, this creates a sociocultural environment, where mobile solutions often are more convenient than fixed line solutions.
3. POLICY INTERVENTION AND REGULATION
This paper aims to assess the role of policy intervention and regulation in explaining national
differences in penetration of broadband services. Most governments are well aware of the
importance of the development of broadband communication for economic growth, employment
rate and social welfare in general. They recognize that any information society fundamentally
requires a sophisticated and reliable broadband infrastructure as the transmission link enabling
citizens to access an ever growing repertoire of e-services and e-goods. Most countries have
therefore defined policies for promotion of the information society. These include among others
industrial policy, education, e-government and telecom regulation. However, these policies vary
from country to country. Some countries have focused on manufacturing of ICT equipment, while
others have put more emphasis on the application of ICT technologies.
They also differ in their prioritisation and intensity of governmental support. Some countries are
providing financial support for project stimulating use or production of ICT, while others focus on
creation of a competitive environment e.g. through liberalization of the telecom sector, and the
remedies are therefore ranging from direct subsidies, access (price) regulation and tax incentives to
other less far reaching facilitation measures such as increasing transparency in the market place.
While it is – at present – generally accepted that market forces alone are not providing optimal
results in the communications sector, too much governmental intervention is also
counterproductive. The effectiveness of these policies depends on the context, and the paper will
analyse how policy measures have contributed to penetration of broadband in the case countries.
Government intervention can aim to stimulate one or more of the fore categories depicted in figure
one, and the remedies can either be facilitation, regulation or intervention.
3.1 Facilitation
Facilitation measures are the mildest form of market interference. Those measures/services could be
offered by the National Regulatory Agency (NRA) with aim to increase market transparency inter
alia by providing information on prices, on availability of products and on consumer rights. Another
form of facilitation measures relate to the settlement of dispute between companies. Crucially, the
competence to make a binding settlement depends on the willingness of the companies to be subject
to the final NRA decision. This is different from traditional regulation where companies are subject
to the decisions of the NRA regardless of their consent.
As for the core characterizing features, facilitation measures lack the form of orders or decisions
and do not have direct legal consequences for third parties, without their consent. In most countries,
the way a NRA can express itself and make binding rules (including the possibilities to appeal those
decisions) is prescribed by law.
5
E.g. Soumitra Dutta and Amit Jain: The Networked readiness of Nations. INSEAD, 2002.
7
NRA or other governmental bodies may also play an important role in development of common non
mandated standards. Although, much of the standardisation work is done at the international level,
there are still important areas, for instance in digital signatures and EDIFACT messages, where
development of national standards is necessary.
Development of competences and of readiness to take up new technologies for instance through
education can also be seen as a type of facilitation, as this does not directly interfere with the market
as such although it may stimulate demand.
The lack of formality and the lack of possibility to bind third parties distinguish facilitation from
regulation. For instance, when a NRA decides to provide an information service which allows users
to search for Broadband access services by typing in their postal code, the NRA does not adopt a
decision or order.
To summarise, facilitation measures lack the formal features of regulations (decisions and orders)
and do not have legal consequences for third parties. In most cases, NRAs or other governmental
bodies merely act as market observers without any regulatory powers.
Facilitation measures serve a very important function: They provide market information at no costs
to the individual. Indeed, it is very cost-effective if a NRA uses the information provided to it by
communication companies to increase market transparency - one of the core assumptions of perfect
competition.
In relation to Broadband access points, NRAs can offer price comparisons, product descriptions,
geographical availability and the like. In many cases operators are required by law to provide this
information anyway. As long as sensitive information is not included, increases market
transparency can be tremendously effective in improving the competitive situation and thereby
stimulate investments in broadband facilities.
3.2 Regulation
Regulation is a more direct form of market interference. Formally regulation is characterized by its
legal form and materiality by its legal consequences.
Generally, though nomenclatura differ from country to country, a distinction can be made in
"decisions" binding only party in current proceedings, or "rules" which generally bind third parties
provided the subject fulfils the conditions set out in the rule.
Regulations by NRAs are extremely important in the discussion on incentives to investment in
broadband facilities. For instance, LLU, open/closed access and interconnection conditions are
setting the legal playing field in the telecom sector.
An important aspect of regulation is the way it is implemented by the NRA. Rules and decisions
must be transparent, fair and free from political interventions in order to attract new market players.
Therefore the competence and the independence of the regulator is an important parameter..
3.3 Direct Intervention
Direct market intervention is the strongest degree of governmental market interference. Essentially,
market intervention is about actively providing the services as opposed to merely providing market
information or regulating the market. Direct intervention will often be made through public funding
of either infrastructure or content production.
As mentioned in section 2.2 some governments have provided funding for provision of broadband
services in certain disadvantaged areas or for specific purposes (e.g. research networks). Egovernment initiatives can be seen as a sort of direct intervention in content production as the public
produces its own content, which can stimulate demand for both content and infrastructure.
8
This strongest type of market interference conflicts in many respects with a liberal approach, where
development mainly is left to the free market. It is argued that private companies are in a better
position to provide the services. In addition, economies of scale are "lost" if the state is providing its
own infrastructure. Market intervention negatively affects the incentives to invest in Broadband
access points. However, the use of public sector activities to stimulate either demand or supply does
not conflict with this approach.
4. DENMARK
The Danish market has, like the markets in the other Nordic countries, a high penetration of most
kinds of telecom services. This has been explained by the fact that the major share of the population
is able to afford these services. In addition, Danish consumers and enterprises are among the fastest
to take up new technology. Denmark has one of the highest penetration rates of fixed phone lines
although the penetration rate has been falling from 72 in 2001 to about 67 lines per 100 inhabitants
in 20036. This is partly due to a substitution by mobile phones as the penetration rate of mobile
phones has increased from 74 to 89 within the same period. The Nordic countries were among the
first to introduce mobile telephones and used to have the highest penetration. However, their lead
has decreased in the past couple of years, and a number of countries both inside and outside Europe
have reached the same high level of penetration.
Several comparisons position Denmark as an advanced market for ICT products in particular in the
mobile areas. According to a benchmarking analysis measuring 26 parameters within infrastructure,
applications and market structure, Denmark is the most advanced ICT market next to Hong Kong
and ahead of other Scandinavian and European countries7. In a similar benchmark on ‘e-readiness’
made by INSEAD, Denmark ranks as number eight after both Sweden and the UK8.
Also with regard to broadband and Internet services, Denmark has been among the leading
countries in Europe and it still maintains one the highest penetration rates in Internet access as well
as penetration of ADSL and cable modem. The aggregate penetration of broadband services were in
2003 14.1 connections per 100 inhabitants. Two third of the connections were based on ADSL
technology, about 25% on cable modem and about 5% on fiber to the home (http://www.ITST.dk).
It should however be noted that more than half of the connections supply a bandwidth below 144
kbps downstream, which is below some definitions of broadband, and certainly far below what is
offered in e.g. South Korea.
Broadband services are available for 97% of the population. Unlike the EU regulation framework,
the Danish service obligation includes ISDN and 2MB lines. It has been discussed to include
broadband services in the universal service obligation imposed on the incumbent operator, but when
it turned out that broadband already was available to the vast majority of the population it was
considered to be an unnecessary regulatory intervention.
Denmark has since the mid 90s followed a deliberate policy stimulating competition on the telecom
market, and the Danish market is considered to be one of the most competitive within the EU with
fierce competition in particular on the market for mobile services. Denmark was also among the
first countries to demand unbundling of the local loop. In contrast to most other EU countries
unbundling is also demanded for optical networks.
Broadband via DSL is offered by a number of operators. However the incumbent operator TDC has
a market share of 79% . On top of this the other operators depend to a large extend on the TDC
access network to reach their customers either by raw copper or bit stream access agreements.
When DSL services first were introduced in Denmark, the three operators TDC, Cybercity and
6
ITST: Telecom Statistics various years http://www.itst.dk
7
ITU, ’Internet for a Mobile Generation’, Geneva, 2002.
8
Soumitra Dutta and Amit Jain: ‘The Networked readiness of Nations’, INSEAD, 2002.
9
Tiscali had equal market shares. But since 2000, TDC has been able to gain the majority of the new
(mainly residential) customers. The competitors have accused TDC for unfair competition, as TDC
has demanded large fees on top of the interconnection charge to get access to their network. But this
has not yet led to any intervention from the IT- and Telecom Agency or the Competition Board.
Also competition in cable networks is limited, with two major operators e.g. TDC and Telia. It is
clearly TELIA that have taken the lead in introduction of cable services in Denmark. TDC was very
reluctant to go into this market as they preferred to offer ISDN and DSL services to their customers
instead.
Table 3, Broadband prices in Denmark October 2003
Access type
Speed (Kbps)
Monthly charge / flat fee
(USD)
Installation charge
(USD)
TDC
ADSL
256/128
52.49
36.75
TDC
ADSL
512/128
65.24
36.75
TDC
ADSL
1024/256
80.24
36.75
TDC
ADSL
2048/512
117.74
36.75
TDC Cable TV
Cable modem
512/128
50.84
104.24
TDC Cable TV
Cable modem
1024/256
82.34
104.24
TDC Cable TV
Cable modem
2048/512
112.34
104.24
TDC Cable TV
Cable modem
4096/256
125.84
104.24
Company
Incumbent
Independent ISP access using incumbent local loops
Tiscali
ADSL
256/256
44.25
0
Tiscali
ADSL
512/128
64.49
0
Tiscali
ADSL
512/512
86.24
0
Tiscali
ADSL
1024/512
101.99
0
Tiscali
ADSL
2048/512
112.49
0
Cybercity
ADSL
384/384
59.39
0
Cybercity
ADSL
512/512
71.39
0
Cybercity
ADSL
1024/256
71.39
0
Cybercity
ADSL
4096/768
227.97
0
Cybercity
ADSL
8192/768
455.95
0
Telia Stofa
Cable modem
256/128
44.85
29.74
Telia Stofa
Cable modem
512/128
63.74
29.74
Telia Stofa
Cable modem
1024/128
45.00 (5.000 Mbps)
29.74
Sonofon
FWA
512/512
65.43
94.61
Sonofon
FWA
1024/512
79.34
94.61
Sonofon
FWA
2048/512
119.84
94.61
Alternative infrastructure
Source: OECD: Benchmarking Broadband Prices in the OECD DSTI/ICCP/TISP(2003)8/FINAL
Prices for broadband have remained rather high in Denmark if compared with the bandwidth
offered. This has stimulated the creation of a number of alternative providers such as
neighbourhood organisations that have set up their own networks either based on existing cable
infrastructures or WLAN. Also power companies are active in this area. They are rolling out optical
fibres to a large number of households, and will thereby be able to offer an alternative to the access
10
network of TDC.
Seen from the demand side, the Danish point of departure for being among the leading countries in
terms of broadband penetration is rather good. The Danish market is usually very fast to take up
new technologies and a high and evenly distributed income implies that a high penetration can be
obtained for most consumer services. In addition to this, Denmark already has a high penetration of
PCs and Internet connections. The Danish Government has been very active to develop eGovernment services, which also has contributed to the demand.
Although the Danish telecom market is considered to be among the most liberal and competitive,
competition on the market for broadband services still maintains to be developed. This is properly
one of the reasons for the rather slow take-up for high bandwidth DSL services. TDC has through
efficient marketing been able to provide a high penetration of DSL services, but lacks the incentive
to increase the bandwidth offered. As long as the competitive pressure is limited, offering of higher
bandwidth will add to the costs, but will not create more customers.
5. GERMANY
5.1 Communications Market
According to the OECD, broadband penetration rate stood at 5.6% (around 4.6 million lines) in
December 2003. 96% of all broadband lines are xDSL. Alternative infrastructures is virtually not
available: Per 1000 inhabitants there is one subscribers for cable broadband and one for other
infrastrcuture (satellite, FTTH, PLC).9 The German NRA (RegTp) reports 45 0000 subscribers for
satellite and 8000 for powerline.10
As for broadband competitors, only 4 of DT's competitors are active on a national basis but their
services are not available throughout the whole country. RegTP reports that in 2003 the market
share of the incumbents' competitors accounted for 11% (up from 8% in 2002). In some very
limited geographical markets the market share of competitors is up to 40%.11
As for Broadband pricing, according to recent OECD figures and compared to South Korea and
Canada, German Broadband connections are quite expensive in terms of costs/MB. In addition, the
highest transmission speed is 2.3 MB. Most of the BB products have download limits. PrimaCom
offers free Broadband Internet but charges 0.1 Euro per MB.12
Table 4, Broadband prices in Germany October 2003
Access type
Payment plan
Speed
(Kbps)
Monthly
charge (USD)
Downlo
ad Limit
Installation
charge (USD)
DT
ADSL
T-Online 1000MB
768/128
34
1 GB
0
DT
ADSL
T-Online 5000 MB
1536/192
62
5 GB
0
DT
Satellite
T-DSL via satellite
768
77
Unlimit
ed
112
Company
Incumbent
Independent ISP access using incumbent local loops
Arcor
ADSL
DSL Flatrate 768
768/128
39
Unlimit
ed
57
Arcor
ADSL
DSL 768 volume
2000
768/128
23
2 GB
57
9 http://www.oecd.org/document/31/0,2340,en_2649_34225_32248351_1_1_1_1,00.html (last visited 4. August 2004).
10 Annual report 2003 of the German NRA, pages 21-22 available at http://www.regtp.de/imperia/md/content/aktuelles/jb2003n.pdf.
The report defines BB as more than 128 kbit/s.
11 Id.
12 OECD (2004) at 29.
11
QSC
ADSL
Q-DSL home 2300
2300/256
44
1 GB
67
QSC
SDSL
q-DSL max
2300/2300
112
1 GB
0
Alternative infrastructure
PrimaCom
CATV
Free
1024/256
0 (0.1 / MB)
0
0
PrimaCom
CATV
Start
256/128
28 (+ 0.02/
MB)
1.5 GB
0
PrimaCom
CATV
Pro
1024/256
44
Unlimit
ed
0
5.2 Policy and Regulation
D21 initiative is Germany’s largest Public Private Partnership.13 It is an economic initiative with
almost 300 members from all spheres of business, politics and society. The objective is to foster the
change to an information society in Germany. There is close co-operation between business, politics
and societal organisations in almost 50 projects. Five ministries are involved and there are four
subject areas with a task force. EGovernment/IT-Security, eHealth, growth/competitiveness and
Education/Qualification/Equality of Chances. In those four areas there are currently 50 projects
being worked on. Concrete examples are IT-training for teachers, Internet access for schools,
ITambassadors and girls' day. Today, public policies are not primarily targeting the supply with
infrastructure, but more at stimulating demand and the "human factor" in particular. Many of the
D21 initiatives specifically aim at end users and raising their awareness of new technologies and
show its advantages.
Thus far, more than 120 000 teachers were trained in IT, there were 100 000 girls at the Girls Day
in 2003 and there are more than 1700 honorary, unsalaried IT ambassadors which schools can
contact for introducing IT to pupils.
5.3 Market Initiatives
One crucial factor affecting the Broadband penetration rate and pricing in particular is the degree of
infrastructure competition. Germany is a country with a heavy reliance on one technology (of the
incumbent telecom operator). Alternative Broadband infrastructure is virtually non-existent. For
instance, Germany's cable networks are old and need substantial investment to deliver Broadband .14
It has been reported that KDG wants to invest 500 Million Euro in its cable networks. However, this
sum is considered to be only a fraction of the investment needed.15 Indeed, given the ownership
structure of KDG – three financial institutions (ApaX Partners, Providence Equity Partners and
Goldman Sachs Partners) – one might question the owners' incentives to make long-term
investments such as upgrading cable networks on a national basis.
Another important factor affecting relating to competition and Broadband penetration rates is
convergence of services. In this respect, Kabel BW - a soon to be subsidiary of KDG - has started
offering VoIP. DT, on the other hand is offering a Video-on-Demand service called Vision.16 One
can expect that this competition will considerably affect prices of services and indirectly Broadband
penetration rates.
Broadband penetration rates in Germany are in the middle range in Europe. One of the prime
reasons is the dominant position of Deutsche Telekom and the lack of alternative broadband
13"D21" stands for Germany in the 21th Century – the "online-century". D21 was founded by 20 companies on July 27, 1999 in
Stuttgart, Germany. http://www.initiatived21.de/english/index.php. (last visited 4. August 2004).
14Kabel Deutschland (KDG) recently purchased three regional cable networks and owns now most of the cable networks in
Germany. The German competition authorities are currently investigating the acquisition on grounds of creating/strenghening a
dominant position.
15 http://www.rundschauonline.de/kr/page.jsp?ksArtikel.id=1086537571613&listID=1037966297777&openMenu=1037966296399&calledPageId=10379662
96399. (last visited 4. August 2004).
16 If one wants to watch a movie on Vision, he needs to have a T-DSL account and the Microsoft Media Player (including its Digital
Rights Managment Systems) installed.
12
infrastructure. In Germany, cable networks – which are in most countries the only serious
infrastructure competitor – require substantial investment before broadband services can be offered.
The current ownership structure makes it questionable whether long-term investment is made in the
near future.
As for the content level, with VoIP offerings by cable companies and VoD offerings by DT, one
can expect that prices are continue to fall. In turn, lower prices for services and applications coupled
with increased interoperability between different networks could very well positively influence end
user's incentives to sign up for broadband services.
6. SOUTH KOREA
Korea has made major strides in information and communication technologies over the past
decades. From being a country with almost no ICT access 30-40 years ago, Korea has become one
of the leading countries regarding ICT access.
6.1 Telecommunication market
Although Japan was the first country in the world to launch a 3G mobile network, it is actually the
South Korean mobile services provider, SK Telecom, which is making headway with the
introduction of their CDMA2000 1xEV-DO network. South Korea has the fastest growing mobile
penetration rates in the Asia-Pacific region and has the largest penetration of mobile Internet users
in the world.17
The total number of mobile subscribers (with or without Internet access) in South Korea is 34
million. There are two main mobile operators in South Korea. SK Telecom is the largest and Korea
Telecom’s KT Freetel is the second largest operator. At the end of January 2004, SK Telecom had
about 53.8% of the market or about 18.3 million users. KTF had a market share of about 31.8%,
corresponding to approximately 10.8 million users. LG Telecom had 14.4% of the South Korean
market.18
The mobile technology used most abundantly in South Korea is that of CDMA2000 1x. Due to the
amount of available content and services on the CDMA2000 1x platform and the network being
able to support the higher speeds of transmission, users are willing to take up the new technology
and the services that come with it. The latest technology is that of CDMA2000 1x EV-DO, which is
the most adaptable wireless connection standardizing technology for transmitting large packet-sizes
of data at high speeds. With the CDMA2000 1x EV-DO platform, transmission speed of up to
2.4Mbps is technically possible. This is 16 times faster than the previous CDMA2000 1x platform,
which allows for speeds up to 144kbps. According to Mr. Myung-Sung Lee from SK Telecom, their
CDMA2000 1xEV-DO network is covering the most of South Korea and is on an average basis
providing the end-users with 800 kbps.19
The growth of Internet usages in South Korea has seen incredible growth rates, but most of all
South Korea is known for its remarkable uptake in broadband Internet access. Regarding Internet
usages, the number of subscribers has increased from approximately 140,000 in 1994 to around 30
million by the end of 2003, corresponding to a 65% penetration rate, where the broadband
penetration rates account for almost 25%.20 Looking purely at the broadband penetration, 62% is
DSL, 36% Cable modem and 2% other platforms.21
South Korea being the country with the leading broadband penetration, as expected, also has some
17
ITU: ‘Internet for a Mobile Generation’, ITU, 2002. IT should be noted that the South Korean operators are considering the
possibility in a couple of years’ time to switch to W-CDMA.
18
http://www.google.dk/search?q=cache:4iL-8E24X9IJ:asia.news.yahoo.com
/040204/4/1bz4s.html+Korea%27s+SK+Telecom+Fined+for+Unfair+Business+Practices&hl=da&ie=UTF-8
19
Presented at the Broadband World Forum in Seoul, May 2004
20
http://www.budde.com.au/Reports/Contents/South-Korea-Broadband-Networks-and-Services-2633.html
21
http://www.oecd.org/dataoecd/58/17/32143101.pdf
13
of the lowest broadband prices, regarding cost per Mbps of connection speed. Furthermore the
available broadband speeds are also in a category of its own, ranging from baseline speeds of 1 –
2Mbps to premium connection speeds from 8-20Mbps – at very affordable costs. Table XXX
below, shows the major provides and the speed and price range.
Table 5, Broadband prices in South Korea October 2003.22
Company
Access
type
Payment plan
Speed
(Mbps)
Monthly charge / flat
fee (USD)
Installation
charge (USD)
Incumbent
Korea Telecom
DSL
Megapass light
1.5
25
28
Korea Telecom
DSL
Megapass
premium
8
34
28
Korea Telecom
DSL
Megapass special
13
42
28
Independent ISP access using incumbent local loops
Hanaro Telecom
DSL
V lite
1
25
28
Hanaro Telecom
DSL
V pro
8
33
28
Hanaro Telecom
DSL
V Dream
20
41
28
Thrunet
DSL
Multiplus light
2
26
34
Thrunet
DSL
Multiplus saver
10
32
34
Hanaro Telecom
CATV
CATV Lite
1
25
28
Hanaro Telecom
CATV
CATV Pro
10
30
28
Thrunet
CATV
Multiplus cable
10
35
34
Alternative infrastructure
In addition to this, it should also be mentioned that a major part of all mobile subscribers use their
mobile phone to access the Internet, e.g. wireless Internet. Research, online gaming and email are
by fare the three most used activities when active on the Internet, concerning VoIP only .5%
indicated that thy use the Internet for Internet telephony.23 Also Hotspot or WLAN services is very
big in South Korea, NeSpot (A KT Company) are offering WLAN service in all major cities at very
reasonable tariffs e.g. approximately €30 per month). In May 2004, Nespot was deploying more
than 11.000 access point and expected to be deploying around 25.000 access point by the end of
2004.24
6.2 Policy and regulation
Regarding policy and regulatory issues one of the major influencing factors for the high rate of
mobile usage in South Korea is the government’s strong involvement in the country’s development
of next generation technologies, which includes both wired and wireless communication.25 To have
South Korea ready for the new communications era, the South Korean government in 2000
implemented several policies, including strengthening the competition among telecommunication
providers. This was done by the selection of IMT-2000 service providers and also the introduction
of standard price models which providers have to follow so that there will be fair competition in the
industry. Mobile service providers have to offer attractive rates and packages to their users and this
has, in turn, generated a large number of cellular users in the country. From September 1999, the
number of mobile subscribers exceeded the number of fixed line subscribers and this can be
attributed to the aggressive marketing strategies of the mobile service providers, which have been
targeted at persuading people to use mobile telephony. Overall, the push from the South Korean
government has spurred the telecommunications operators to revolutionize their mobile industry.
22
http://www.oecd.org/dataoecd/58/17/32143101.pdf
2004 Statistical Report on Korea’s Internet, www.nac.or.kr
24
Presented at the Broadband World Forum in Seoul, May 2004 by Mr. Myung-Sung Lee from SK Telecom
25
http://www.mic.go.kr/eng/jsp/res/res_300_10.jsp: White Paper 2002 on Information.
23
14
3G licenses were awarded to Korean Telecom and SK Telecom. The government rejected LG
Telecom, which had requested a WCDMA license, and Hanaro Telecom, which had requested a
CDMA2000 license. What the government had chosen to do has in many ways shaped the Korean
telecom industry to what it is today.
The Government has also played an active role in stimulation of broadband. The Korean
Government prepared early a comprehensive plan for the future Korean information structure,
which aimed to deploy high-speed and high capacity networks, mainly through market competition
and private sector investments, but also with governmental incentives. The Korean government’s
original plan was to provide broadband networks to all households in the form of FTTH by 2015. In
2001 the plan was ratified, now aiming at providing broadband Internet services to 13.5 million
subscribers in 2005 including government investments amounting to $1.5 billion. In the densely
populated areas LAN Ethernet, VDSL, ADSL and CATV will be used to provide transmission
speeds of 10-100Mbps (20Mbps on average).
In addition the Korean government in 2002 took action to further promote and facilitate Internet
telephony by establishing a VoIP Regulation Improvement Task Force, which main purpose was to
resolve problems related to Internet telephony and help the service to be firmly established. As one
of the results, the Korean Government decided to create a new legal clause that designated VoIP as
the common carrier service, as early as September 2004 - allowing VoIP service providers to
register as either a common carrier or a special category telecommunication operator provided that
the condition for call quality and user protection is in line with general conditions.26
The main reasons, among others, for the South Korea success within ICT and particularly mobile
and broadband communication are believed to be rooted in the level of competition, which
regarding the broadband market has resulted in very low prices and high access speeds. Concerning
the 3G mobile market, South Korea is leading the way and also here market competition is an
important aspects but also the fact that South Korea has a lot of infrastructure and handset
manufactures are believed to have influenced the developments. Compared to European, South
Korean 3G mobile operators are offering a variety of handsets – compared to the 5-7 models one
can buy in Europe. Finally the South Korea government has also played an active and supportive
role in promoting ICT within the South Korean society.
7. CANADA
Canada is in the leading tier in terms of broadband access lines. In 2003, for the first time, there
were more high-speed Internet households (28%) than there were households with dial-up
subscriptions (24%).27
7.1 Communications Market
According to the OECD, broadband penetration rate stood at 14.8% in December 2003. Even more
importantly, DSL and cable account each for half of the access lines.28 Though the number is high in
comparison to other countries, one should keep in mind that only 28% of Canadian communities
have broadband access.29 Though Canada is the second biggest country, 13 million people (of a total
population of 31 million) live in an area of 33 000 sq km (total size of Canada is 9 mill).30
26
NAC IT e-Newsletter Vol.4 No.3 (May 31, 2004)
27The annual reports of the Canadian NRA are very comprehensive and provide a lot of useful information. The 2003 report is
available at http://www.crtc.gc.ca/eng/publications/reports/PolicyMonitoring/2003/gic2003.pdf (last visited: 4. August 2004)
28OECD (2004) Benchmarking Broadband Prices in the OECD,
http://www.oecd.org/document/31/0,2340,en_2649_34225_32248351_1_1_1_1,00.html (last visited: 4. August 2004).
29 http://broadband.gc.ca/pub/faqs/faqscomplete.html#whatsnsi (last visited: 4. August 2004).
30 http://www12.statcan.ca/english/census01/products/standard/popdwell/Table-CMA-N.cfm?T=2&SR=126&S=3&O=A (last
visited: 4. August 2004).
15
Hence, while the 14.8% penetration rate is certainly high, this should not be used to argue that
Canada illustrates how demographics can be overcome. In fact, quite the opposite is true given the
fact that only 28% of the communities are connected.
7.2 Competitors and pricing
In Canada, Internet revenues (dial-up and broadband) reached $3.3 billion in 2002. Of the 3.3
billion, $2.5 billion accounted for the residential BB access and the remaining $ 800 million for
businesses. In 2002, there were 6.5 million residential (or 51% of all households) Internet access
subscriptions.
As for incumbents and competitors market shares, the cable companies' and ILECs' share of both
the residential and business segments of the Internet access market continued to grow steadily,
especially in the provision of residential high-speed services, while other competitors' share of the
market had eroded.
In the residential Internet access market (including dial-up) the telecom incumbent increased its
market share from 36.1% to 41.2% in the four year period and the cable incumbent from 14% in
1998 to 35.5% in 2002. Those gains came at the expense of competitors which market share has
steeply declined from 49.9% to 23.3%.31
Table 6, Retail Internet access
Retail Internet Access
1998
2002
ILEC
141.7
1045.4
Market Share
36.1%
41.2%
Cable
54.9
899.4
Market Share
14%
35.5%
ILEC
196.1
591.9
Market Share
49.9%
23.3%
Total
392.7
2536.8
In terms of revenues, table 7 shows that the incumbents' market share of high-speed Broadband
increased from 12% in 1998 to 37% in 2002.32 The sharp decline is largely explained by the fact that
competitors have very little share of the growing residential high-speed access market. In 1999, the
four largest companies held only 35% of the retail Internet access market. In 2002, this number
increased to 51%.
31Annual CRTC report, at p. 53.
32http://www.crtc.gc.ca/eng/publications/reports/PolicyMonitoring/2003/gic2003.pdf (last visited: 4. August
2004)
16
Table 7, Degree of concentration
1998
Four largest Companies
2002
Revenues
Share
Revenues
Share
Dial-Up
122.3
38%
222.7
30%
Other
16.5
22%
1067.2
59%
Retail
138.8
35%
1289.9
51%
As for broadband pricing, a 1 MB ADSL of the incumbent Bell Canada cost 27 US$ while a
Rogers, a cable operator charges 34 US$ (in addition to installation set up costs of 61$). Apart from
low prices, Canada stands out in that 11MB broadband FWA are available at low prices (23 US$).
However, those services are not widely available.33 Figure 3 gives a brief overview over broadband
offers in Canada.
Table 8, Broadband prices in Canada October 2003
Company
Access
type
Payment plan
Speed
(Kbps)
Monthly charge
(USD)
Download
Limit
Installation
charge (USD)
Incumbent
Bell Canada
ADSL
DSL Basic
128/64
23
2 GB
19
Bell Canada
ADSL
High Speed
1024/320
27
Unlimited
0
Bell Canada
ADSL
High Speed Ultra
3072/640
46
Unlimited
19
Telus
ADSL
High Speed Internet
1500/512
27
6 GB
0
Telus
ADSL
Enhanced high Speed
2500/640
34
10 GB
0
1200
31
Unlimited
0
128/64
23
Unlimited
61
1500/192
34
Unlimited
61
11 MB
23
1 GB
0
2500/2500
22
1-6 GB
190
Independent ISP access using incumbent local loops
DSL.ca
ADSL
1.2 MB Home User
Alternative infrastructure
Rogers
CATV
Hi-Speed Internet Lite
Rogers
CATV
Hi-Speed Internet
Gulf Islands
FWA
GI Lite
PriS
FWA
Option B
7.3 Policy and Regulation
Canada adopts a very pro-active role in increasing Broadband penetration. At the federal level, one
of the key initial steps was the establishment of the National Broadband Task Force (NBTF) in
early 2001.
Two important federal initiatives that are currently being implemented are the Broadband for Rural
and Northern Development Pilot Program and the National Satellite Initiative. Both aim at
connecting un-served areas by utilizing Internet over Satellites to reach communities far up north.34
Another promising initiative is the Broadband Marketplace where Communities can find help to
develop and/or implement their broadband business plans and can post requests for proposals for
33 OECD (2004): Benchmarking Broadband Prices in the OECD, p. 20.
http://www.oecd.org/dataoecd/58/17/32143101.pdf
34 http://broadband.gc.ca/pub/program/index.html (last visited 4. August 2004).
17
broadband services.35
Other broadband projects are the establishment of the Canarie research network36 and Alberta supernet.37 The latter primarily aims to connect public institutions to broadband. The CRCT report is very
detailed on the latest initiatives.
Currently, Canada is a global leader in terms of Broadband penetration. However, given the fact
that the vast majority of communities are not connected yet, the countries size will make their
digital inclusion more difficult. Satellite technology and bundling of demand is currently
coordinated and fostered in order to lower costs for Broadband connection in rural areas.
As for the market development, from 1998 - 2002 the incumbent telecom and cable carriers have
considerably gained market share at the expense of its competitors. Cable companies and new
entrants have suffered.
8. CONCLUSION
This paper aims to analyse the drivers and inhibitors towards penetration of broadband services at
the national level. This question is important as the broadband infrastructure is the very foundation
of any information society. Broadband is not only about access to music and movies, but to
information in general. Broadband infrastructure and services are more than just economic factors
and have a far wider impact on the society. Hand in hand with this political dimension of
broadband, the degree of market intervention by governments is of utmost importance. This paper
attempts to identify the most important factors affecting broadband penetration and thereby to
create a framework for identification of policy measures that can stimulate growth in this area.
We have made a distinction between factors affecting content and infrastructure, and a distinction
between factors affecting demand and supply. Some factors cannot be influenced by governments
(macro-economic environment, demographics) while others can only be influenced in the long run
(e.g. educating people to use broadband services) and some can easily be influenced (e.g. setting of
interconnection and access regulations by the NRA). Apart from the question which factors can be
influenced, the main issue is how to positively influence those factors and whether this should be
done centrally/locally or market-driven.
The countries analysed in this paper are all among the countries leading the development of
broadband services, although Germany lacks somewhat behind the others. All the countries are high
income countries and income seems to be an important factor in explaining national differences.
However, the level of income is not decisive. Germany has a higher per capita income than South
Korea, but a substantially lower penetration of broadband.
The role of geography is difficult to assess. Canada is the only one of the countries analysed in this
paper with a widespread population. But a large share of the population is concentrated in a few
high density areas, and broadband is not available in most of the remote areas. However, if is to
remain among the leading countries with regard to broadband penetration, it will be necessary to
cover these areas also.
Competition seems to be an important parameter. Competition can be at two different levels:
between different types of infrastructures and between different operators using the same or the
same type of infrastructure. At present, competition between infrastructures takes place mainly
between cable modem and DSL services. Here it seems to be important whether the incumbent
telecom operator controls the cable infrastructure. The development in both Germany and Denmark
indicate that cross ownership of infrastructures has a negative impact on the development.
Competition between companies using the same or the same type of infrastructures is more
35 http://www.sourcecan.com/E/sb2410.cfm? (last visited 4. August 2004).
36Http://www.canarie.ca (last visited 4. August 2004).
37Http://www.albertasupernet.ca (last visited 4. August 2004).
18
developed in Korea and Canada than in Denmark. However, this does not seem to have had a severe
impact on the penetration, but the bandwidth used in Denmark is lower than in the other two
countries.
Initially, market and government action lied on the supply side with laying out infrastructure and
believing people will use it. Government intervention with the aim of stimulating the supply of
broadband services has played an important role in the success of South Korea. It is however clear
that with increasing availability of broadband services to households and yet still low uptake
numbers, achieving the goal of broadband for all demands more than putting the infrastructure in
place, and now there is a shift towards more focus on the demand side. Denmark refuses to provide
any support to infrastructure development, and many of the suggestions in Germanies' D21
Initiative focus on the end user and how to increase his incentives to use broadband services. In this
respect education and schools are at the forefront and focus must lie on how to bring broadband to
the younger generation.
If any firm conclusions can be drawn from this paper, it must be that public policy does matter.
Although technical and economic parameters such as income level play a role for the development
of broadband services, successful implementation of broadband also depend on the kind of policy
measures to be taken. These measures may include stimulation of both demand and supply of both
content and infrastructure.
19