October 2009 Archives

Internet access is no longer a luxury, it is a necessity. In fact more of a necessity than automobile fuel some would believe. But it appears that despite the year long brouhaha over the need for ubiquitous broadband access in USA, over a third of its population still does not believe so.

In the status report on the current state of broadband in the U.S. that the bewildered FCC Broadband Task Force delivered to the Commission this week, it found that 33 percent Americans could have subscribed to the broadband, but turned it down.

Why you may ask and what may shock you as well is that the FCC does not have an answer. While it cites many possible reasons, it finally admits that the reasons "are not well understood."

Fortunately FCC is not sitting idle. For one, the commission is sending teams to 22 countries that have broadband plans to seek the best practices that could suit the United States. More importantly, it is also conducting a survey to study the psyche of non adopters as well as to influence them on the utility of broadband. 

 

However would such efforts help? Take the instance of South Korea. This is the nation that is now one of the top countries in the world in terms of broadband speed and penetration. It faced a similar problem of non-adoption when it started wiring the country with fat data pipes in 1999. One of the first measures it adopted to convince the older and the poorer sections of the society was door-to-door campaigning. The outcome has been encouraging no doubt. Yet South Korea, which suffered far less of the technical problems faced by a country like the U.S. -- its size, sparsity of population, etc. --has reached about 87 percent penetration.

Comparatively, the US with 77 percent overall penetration may not be that bad; depending on whether you prefer to look at the glass being half empty or half full.

Still experts say that perhaps taking a leaf out of Finland's latest policy may be more helpful. In what no other nation has done before, Finland last week took a policy decision to make broadband Internet access a guaranteed legal right for its citizens.

According to a decree issued by the Finish Ministry of Transport and Communications, starting with 1 July 2010, a 1 Mbit Internet connection will be defined as a requirement of the Universal Service.

The decree states that by the end of 2009, the Finnish Communications Regulatory Authority will impose this universal service obligation on select telecom operators, that will have to provide access for all residential or business users, at a reasonable price.

Significantly the providers will be free to choose the technology themselves as long as average speed of downstream traffic remain at least 75 percent of the required speed in a 24 hour period. In a four hour measuring period that average speed must be at least 59 percent of the required speed.

Clearly the Finnish government is putting very high-speed Internet access at the forefront of its development strategy. According to Suvi Lindén, Finland's Minister of Communications, the country realized well in time that high speed access to everybody will improve people's quality of life, especially in the less populated areas, will boost business, enable electronic communications, and encourage online banking; all that a country needs to forge ahead in the cyber age.

This is amazing given that already the country is rated one of the highest in almost all global broadband rankings. Not only does Finland have the eighth highest number of subscribers per 100 inhabitants, according to a recent OECD survey, it has some of the most affordable services available as well, ranking in the top five in entry-level, medium-speed and high-speed connections.

Since the Finnish announcement, reportedly UK too, which like the US has just embarked upon a national broadband strategy called Digital Britain, is mulling on a similar legislation. And perhaps it is high time for U.S. too to follow the Finnish footsteps.

Although it would still not be easy to convince those 33 percent Americans that broadband is as relevant in life as say  electricity. Yet making broadband a legal right could at least make them realize what they are missing, hope experts.

Meanwhile here are some interesting facts from the FCC status report;

1] Economics of providing broadband to the rural U.S. are challenging because of low linear density.

2] Among non-adopters, lack of relevance cited as main reason for not having broadband at home [50%]. But others are;

3] Current barriers to adoption, according to FCC are; 

Much has been said about how much America is lagging behind in broadband penetration and how imperative the broadband stimulus is for the country. But did you know that even before a cent of the $7.2 billion has been spent, broadband adoption is already picking up - by over 14%?

What's more, while experts say that since America was lagging behind, and coupled with the demand of new applications -- like social networking, YouTube, etc. -- broadband penetration in America had to catch up sooner or later. But it appears that the recession has emerged as a big driver for that growth.

"In terms of quarterly broadband numbers, America seems to have forged ahead in the last two quarters. So in the worst of recession, broadband addition was nevertheless dong very well in America," says Phillippa Biggs, the Geneva-based analyst and economist at ITU, who has a keen eye for picking out interesting trends out of mundane numbers.

"People say it could be the media coverage or the stimulus. But it could also be that because of the recession, since many people had less money to go out and spend, many subscribed to broadband so that they could be entertained staying at home."

According to The Broadband Forum that released the global broadband subscription tally last month (based on research by Point-Topic, the London-based broadband bean-counter), the number of North American broadband lines reached almost 96 million (by adding 2.34 million subscribers) in the quarter ending June this year. This represents 14.86 percent growth over the previous quarter ending June 2009.

However while that number looks impressive, the growth in IPTV -- Internet Protocol TV -- has been massive. The report said that with over five million IPTV subscribers, which represent now nearly 20 percent of IPTV penetration worldwide, Americas IPTV adoption grew by 86% over the last 12 months.

This growth is not sudden. Although broadband subscriber additions looked shaky for the world at the start of 2009, "both the US and Canada managed to stand out posting strong increases in real numbers not seen since early 2007," said Point Topic. During that period North America added almost 3.5 million subscribers to touch 93.5 million broadband subscribers.

"Difficult economic situation forced by hard economic times has caused a greater appreciation of what broadband could provide in terms of returns on investments at the household level," said David St James, the spokesperson of FTTH Council North America, the Houston-based non-profit association that works on building industry consensus on key issues surrounding fiber to the home broadband connections. 

The Council too in its latest study found continued robust growth in the number of homes passed by FTTH networks, which rose to 17.2 million from 13.8 million a year ago. Five years after their deployment began in earnest, fiber to the home networks are now available to 15 percent of homes in North America, it noted.

But according to David, while the recession is indeed one of the primary drivers of the increasing broadband penetration in US, just asit has been in the rest of the world, its adoption by Americans was not entirely voluntary.

"The recession had forced many people to reassess what they were doing to make money," says David. "Whether they lost their jobs or they realized that their jobs did not have a good enough future so they needed to earn more, or simply because they wanted to do moonlighting, many had to fall back on broadband to beat the recession."

That should be good news for the Obama administration which is about to start doling out the billions through the $7.2 billion broadband stimulus plans.

But recession or not, some think that America would have had to catch up anyway. 

"Penetration wise the US is unarguably rather behind many developed as well as developing nations. So they have some catching up to do anyway," says Tim Johnson, Chief Analyst, Point Topic.

"I think the whole movement towards using IT for productivity is changing the channels; applications are maturing to a point where more people in the US thought that they had to have it. The productivity angle, that people are trying to do other things or more things besides their jobs, or employers encouraging people to work from home, is the other angle that may have aided increasing broadband adoption, but that is not the primary reason I think," Johnson said.

Nevertheless, despite this encouraging trend, the fact is that the broadband stimulus still has a lot of work to do. According to Communications Workers Association of America, the United States faces a significant digital divide. Families in rural areas for example are much less likely to subscribe to broadband. According to its survey, while 67 percent of urban and suburban households subscribe to broadband, only 46 percent of rural households do. Similarly, whereas 88 percent of Americans who earn over $100,000 a year have broadband, only 35 percent of households that earn less than $20,000 subscribe. These broadband gaps must be closed to ensure unlimited access information available on the Internet, says the CWA.

Photo by Wyatt Preul. CC Attribution-Noncommercial-Share Alike 2.0 Generic

Read between the lines however of the voluminous yet enlightening sequel report of the impact of the financial crisis on the global ICT sector that the UN agency, International Telecom Union (ITU), released a few days back, and you will find that the crisis had one upside at least. And that is that governments in many countries have stepped up investments to fund ICT networks, somthing that certainly promises longer term benefits to the sector.

Called Confronting the Crisis, ICT Stimulus Plans for Economic Growth, this report follows a February report, which noted that despite the crisis, ICT had contributed consistently as a high-growth sector and was poised to power economic recovery across all sectors. That report also noted that to ensure long term competitiveness, the ICT industry had to continue investing in infrastructure and roll-outs of cost-effective services, such as next-generation networks.

Yet in its latest study, the ITU found that private investments in ICT infrastructure have certainly taken beating since then. While certain sections of the ICT, like mobile telephony and satellite, continued to flourish, the financial crisis and credit crunch had nevertheless cut directly across many operators' investment plans particularly in upgrade plans of the existing networks and the rolling out various Next-Generation Networks (NGNs). 

Forced by the massive investments required against the background of uncertain cash flows and revenues, the operators began calling for governments to get more involved in the financing and roll-outs. And thankfully, many governments responded by accepting that ICT had become more of a public policy problem, rather than earlier views that it should be left solely the responsibility of the private sector. 

"The financial crisis has pushed governments in some countries, at least, to come back and start financing the telecom sector," said Phillippa Biggs, the author of the report and an ITU economist. "But in any case it certainly led to more widespread recognition that governments and corporations have to work together to ensure the long term interest of the ICT industry."

According to the report, lack of readily available financing, higher financing costs and lower risk thresholds for many operators are making corporate financing increasingly difficult. In the face of these challenges, governments in some countries are now providing advantageous financing terms to fund the roll-out of fiber and NGN deployments. They are also experimenting with innovative new financing models to fund network deployments in new technologies.

For many governments, this involvement is not a stand-alone decision or a result of the debate whether the government should invest in ICT or not, adds Biggs. "These decisions were actually taken in context of what the private sector was doing already, as well as because rolling out next generation networks (primarily broadband) was of strategic importance to the competitive environment."

"In some countries, for instance, the incumbent had already been working on NGNs for several years prior to the crisis. Then came the crisis that cut across the investments plans by making it harder for corporate funding, which is when the government woke up and realized that there is an issue and additional support funding is needed and they come in and announce plans," says Biggs.

For instance in Australia the incumbent telecom company Telstra launched an AU$10 billion IP core network roll-out as far back as in 2005. But when that roll-out started faltering due to the crisis, the Australian government stepped in the end of 2008 to announce US$3 billion FTTH plan to take broadband to 90 percent of the Australians.

Similarly Irish telecom company Eircom's Eur60 million migration to NGN in 2006 started well before the crisis. Subsequent ICT sector uncertainties however forced the Irish government to move in this year to announce its Eur223 million universal broadband coverage plan. 

   

Still, notes ITU, despite the increasing participation of the government, there is not enough public sector money to solve the global crisis. This is why recovery strategies should be crafted in a manner that encourages private business and financing as well. "In fact government stimulus is almost always associated with how much money the government doles out," says Biggs. "Such emphasis on financing in stimulus packages however may overlook more simple and immediate measures that governments can take to promote private sector investments."

ITU therefore suggests that stimulus packages should also contain regulatory changes or a change of the whole policy environment so the private investments are not crowded out.

"Reforming tax structures, creating greater regulatory, clarity and resolving spectrum issues are some factors that can help promote an enabling framework and generate growth within the ICT sector and beyond," said the report.