The public sector has played two roles in promoting the growth of information and communication technologies (ICT): (1) making markets more competitive, efficient, accountable, and transparent and (2) ensuring equitable access for all. This has enabled the private sector to lead the rollout of and investment in ICT. This same approach should be pursued with broadband development. The role of government should be to enable, facilitate, and complement market development, rather than to substitute government decisions for market forces and public sector investment for private investment.

Due to broadband’s importance, however, there have been calls to view broadband as a public good in order to ensure affordable universal access and spread the benefits across the full range of economic sectors.*  In a technical sense, public goods are nonrivalrous (that is, one person’s use does not diminish another person’s ability to use it) and nonexcludable (people cannot be stopped from using it). Examples include free over-the-air radio and television and national defense. However, some argue that broadband is not a pure public good, as broadband access is excludable, as demonstrated by the unevenness of broadband deployment, even within the same country. Some may also argue that broadband is not a public good since it is also rivalrous—one person’s use can diminish another’s use if the network is congested. See Atkinson (2010). Based at least partially on a public goods analysis, some countries have taken more direct action to promote broadband development, establishing initiatives and strategies where the government intervenes more directly to promote, oversee, and universalize their broadband markets. This was particularly the case in the wake of the economic crisis of 2008, as many governments came to see broadband networks and services as a way to preserve and enhance their economies. In 2009, for example, countries with different economic philosophies included broadband in their economic stimulus plans (for example, Australia), which indicated that they were no longer averse to making strategic investments. By 2011, however, such policies were being increasingly called into question as government debt levels rose, in some cases dramatically, forcing austerity programs and corresponding cuts in government spending on a wide range of priorities, including broadband.

2.1.1 Defining the Challenges: Barriers to Broadband Growth

As policy makers and regulators consider approaches to stimulating and promoting broadband development, it is important to recognize the full scope of the challenges that must be addressed. These challenges tend to be multilayered and involve stimulating the supply of broadband infrastructure and encouraging demand for broadband applications and services, as discussed in chapter 6. On the supply side, the problem is not as simple as just building more networks; as operators roll out their broadband business plans, issues of cost, service quality (data speeds), and technology choice will also play important roles in decisions about how best to bring access to a nation’s citizens. Even then, just building more networks or providing access to all will not guarantee success. Governments may need to support broadband development by encouraging demand for broadband in those limited instances where the private sector does not generate useful and relevant applications, services, and content. In sum, governments must think of broadband as an ecosystem, holistically, with supply and demand components, if they are to maximize their chances for broadband development success.

2.1.1.1 Supply: Reaching Unserved and Underserved Users

In considering policies and strategies to promote broadband development, one important goal is to ensure that access is available to the widest possible user base. This means that networks need to be built out to reach as many people as possible. But facilitating broadband supply presents at least two significant issues. First, some areas in virtually every country have no meaningful access to broadband services at all. This problem is most pronounced in developing countries, which have seen less investment in the construction of networks outside metropolitan areas. This situation has improved in recent years with the spread of wireless networks, but some areas still lack network coverage. Second, some areas have networks in place, but these networks are not capable of supporting broadband speeds and services. These areas will need to be upgraded, either through the construction of high-speed wireline networks or through advanced wireless networks (3G or 4G, services). In many developing countries, where wireless penetration can far exceed wireline penetration, upgraded wireless networks capable of providing true broadband speeds are expected to be the main supplier of broadband services.

2.1.1.2 Demand: Lowering the Barriers to Adoption

Improving the availability of broadband networks only addresses one impediment linked to broadband development. Even with networks in place and accessible, there are likely to be barriers due to lack of demand. This problem involves people who have access to broadband network(s), but are unable or unwilling to obtain service. Addressing lack of demand is important because low adoption rates will leave networks underutilized. This has at least two implications. First, from a network externalities standpoint, fewer users reduce the economic and social utility of the networks. Where relatively few people can communicate online, the network externalities are reduced since there is a smaller number of potential customers for businesses to serve. This further means that there may be fewer local businesses and consumers offering broadband-enabled services and applications, such as video streaming services (for example, Hulu+), voice and video communications (for example, Skype), and download services for a variety of applications such as software and e-books.

Second, low adoption and use will undermine the business case of any network—even those built with public funds. Fewer users mean that networks are correspondingly higher cost or that their costs are spread over a smaller user base, making them relatively more expensive to build and operate. Thus it is important for the overall goal of improving broadband development for governments to focus on developing policies that not only facilitate and encourage the building of broadband networks, but also ensure that as many people as possible can and do use them. Barriers to adoption vary and will likely not be the same in all countries, but some broad categories are identifiable. In studies conducted to identify barriers to Internet and broadband adoption, the primary reasons respondents cite for not subscribing to broadband services can be grouped into four main categories: (1) broadband is not relevant; (2) equipment or service is too expensive; (3) individuals lack training in or are not comfortable using broadband Internet services; and (4) broadband is not available (Pew Internet and American Life Project 2010; EUROSTAT 2009). This is not to say that demand inhibitors are exactly the same in all countries. The factors seen as impediments to adoption in some countries may be less of a factor in other countries, due to different social and cultural histories and experiences as well as different socioeconomic conditions (Hernandez, Leza, and Ballot-Lena 2010, 4). Figure 2.1, which presents survey data collected from nonadopters of Internet services in Brazil and the United States, shows how some factors are more important than others.*  Brazil, Núcleo de Informação e Coordenação (2009, 14). The total percentage of respondents is more than 100 because some respondents provided more than one reason for nonadoption. The total percentage of respondents is less than 100 because, for purposes of comparison, not all factors addressed in the study are included in this figure (U.S. FCC 2009, 30). Respondents in the United States, for example, see digital literacy as a much bigger problem than respondents in Brazil, who consider high cost to be a larger issue. Therefore, each country must analyze and address the demand-reducing factors on a case-by-case basis and tailor solutions to the individual problems.

2.1.2 Developing Country-Specific Solutions

No “one-size-fits-all” approach will guarantee greater broadband deployment and adoption in every country. Political and economic conditions vary, and each country is endowed with different technological resources. Some countries have a relatively well-developed wireline telephone network that could support broadband deployment, while others have widely deployed cable television networks that might be able to provide a measure of facilities-based competition from the start. In yet other countries, various regulatory, political, economic, or other barriers to entry may prevent potential competitors from offering broadband services or building broadband networks.

This variance makes it unwise to propose a uniform solution to promote broadband development. In some cases, the challenge will be to create incentives so that widespread networks can be used to offer broadband services. In other countries, the main challenge may be to find ways to educate potential users about the benefits of broadband and train them to use broadband applications and services. As a result, each country will have its own unique circumstances that will drive policy and investment decisions. However, the key objective for governments is to pursue policies that will create an enabling environment that will foster broadband development.

Important lessons can be learned from those countries that have pursued broadband development policies (Box 2.1).*  The experiences of the countries surveyed in Kim, Kelly, and Raja (2010), for example, may provide good approaches that could be adapted for use in many countries. First, the focus in those countries has been on improving the incentives and climate for private investment, a policy that even highly resource-constrained countries might be able to follow (and many have successfully attained with mobile telephony). Many of the policies and programs that have been developed support private sector investments and call for specific, limited, and well-justified public funding interventions only in exceptional circumstances. In particular, governments that are trying to promote the growth of underdeveloped markets should avoid policies and regulations that may reduce private sector investment.

Government funding or policy should not have the effect of “crowding out” private sector investment. For example, governments can encourage private investments in many cases without direct subsidies, such as by developing passive infrastructure—ducting, towers, and cable conduits,which can significantly cut costs and create minimal market distortions (OECD 2008; Qiang 2009). Public investments should be considered only when no or insufficient private investments are expected for a significant period. Furthermore, to maintain a level playing field for competition even with public investments, governments should seek to avoid favoring one company (or type of company, for example, telephony vs. cable) over another. For example, if and when governments intervene to increase network availability, it may be necessary to ensure that subsidized networks are open access, meaning that network operators offer capacity or access to all market participants in a nondiscriminatory way. Nonetheless, there may be cases where a dominant provider may need to be appropriately regulated to avoid market concentration or other adverse impacts on overall market competition.

Developing countries in particular will also need to identify ways to leverage limited resources to maximize impact, prioritizing programs based on demand and market evolution, rather than shying away from policy reform altogether. For most developing countries, the most effective approach to promoting broadband development is likely to involve a mix of approaches and policies that rely on private sector investment, coupled with regulatory reform that will promote efficient and competitive markets (which will also increase private sector investment). Direct government intervention should be limited to those cases where markets may not function efficiently (for example, providing service to high-cost areas) or where larger social goals are clearly identified (for example, providing digital literacy training). The basic principle remains the same: governments should only intervene based on sound economic principles, where the benefits of intervention outweigh the costs. For example, particularly at the initial stage of broadband market development, there may be a need for aggressive government policies to generate demand, expand networks, and reach underserved areas and communities.