Excellent OECD report on broadband and stimulus

[Here is another excellent OECD report on broadband and stimulus. As with several other reports they stress the importance that government investment should create a competitive, open access infrastructure. The choice of network topology is critical for enabling competition. Some excerpts – BSA]

http://www.oecd.org/dataoecd/4/43/42799709.pdf

At the same time, governments recognise that competitive broadband communication networks are increasingly fundamental to economic and social development. They are
viewed as a general purpose technology that will not only support critical services but are required for innovation, competitiveness and growth across economies.

When the public pays for broadband investment they should expect to benefit from improved service and greater choice in the market place. One means to accomplish this is to ensure that networks built or augmented using any public funding are available via “open access” rules, meaning network providers offer access or capacity to all market participants on cost-based, non-discriminatory terms.

The physical topology of broadband networks has a significant impact on the potential for competitive access in the future. In general, the topologies which offer the most access to competitors are the most expensive to install but may also provide more longer-term economic benefits and improved consumer surplus than other topologies. By way of contrast, some topologies may serve to strengthen existing dominant positions in the market and should be carefully considered before governments commit any public funds. Public investment in passive infrastructure may be another important way for governments to put people to work and build a platform for future economic growth without displacing private-sector investment.

Economic literature focuses on two types of government spending, “productive” and “nonproductive”. The term “productive” relates to government expenditure that can be included in the private production function and thus is the only kind of spending which has an effect on long-term economic output. In other words, productive spending would increase the productive capacity of individual firms via
externalities (Kneller et al., 1999). In terms of the current crisis “unproductive” investment can fulfil the first goal of putting people to work but will not affect the second goal of expanding productive capacity.

The focus on “productive” spending is important because it works as a positive externality to firms in the economy. Angelopoulos et al., (2007), refer to this spending as “the engine of long-term growth” and suggest that governments could improve their growth performance by reallocating public expenditure
towards productive activities. This has implications for policy makers considering government stimulus investment. Government spending should target “productive” investments whenever possible because of the dual effects they can provide. They essentially offer much better returns for the same initial investment.
Infrastructure investment can be “productive” because of its effect on long-run aggregate supply

Network investments are typically used as examples of “productive” government investment because of the positive externalities they provide. Aschauer (1988) finds that investment in core network infrastructure, including roads, airports, electrical and gas facilities, mass transit, water systems and sewers
have a strong and significant impact on economic productivity.

Government policy makers should consider four key goals when considering investment in the telecommunication sector: improving connectivity, increasing competition, stimulating innovation/growth and increasing social benefit (see Figure 4). All four elements are highlighted in the Recommendation of the OECD Council on Broadband Development.8 Successful government investment needs to address and
strike a balance of all four elements. Focusing investment on just one element could actually leave telecommunication markets worse off than before the investment. For example, money invested which creates or strengthens a monopoly provider may expand connectivity but will likely stifle competition,innovation and possibly social welfare.

Government investment in telecommunication networks must be used to foster competition and not to entrench existing operators at the expense of potential new entrants. One risk of governments investing in telecommunications is that they tend to have to choose winners in the market.

It would not be desirable for public funding to strengthen monopoly or duopoly service providers at the expense of new entrants. All investment should help promote competition for broadband access from the start. When governments do decide to intervene in markets by subsidising communication networks they should consider requiring the resulting network be available via “open access” rules. The term “open
access” refers to an arrangement where network providers offer capacity or access to all market participants under the same terms and conditions. Operators of open access networks must allow competitive access to the network on non-discriminatory terms. Open access networks play an important role promoting competition and can help offset market imbalances when certain firms receive government
funds but competitors or later entrants may not.

The level of competition possible on a network is closely tied to its topology. Any government investment in telecommunication networks must take the implications of different topologies into consideration when evaluating projects. There are benefits and drawbacks to each of these topologies. In general, topologies offering more
competition are relatively more expensive to install but will usually have more longer-term economic benefits:

Broadband networks are already an important foundation for innovation and growth in the OECD. Telecommunication networks helped improve the efficiency of virtually every sector in the economy. Their impact can be seen easily during this economic downturn as people turn to the Internet to look for jobs, gather information and shop for discounted goods. Teleconferencing over the Internet has helped
firms deal with decreasing travel budgets and environmental concerns. Finally, the Internet has become one of the leading sources for information, news and entertainment in OECD countries.

Open access infrastructure for community networks and economic benefits of rural broaband

[John Sehn has put together an excellent overview of open access infrastructure for community networks at his company’s web site that is dedicated to issues around FTTH Public Private Partnership Analysis.. His organization is also working on a business plan to build regional community networks build around these models. Also Washington Post recently carried an article on the economic benefits of rural broadband on Benoit Felten’s blog – BSA]
Community FTTH networks: Structural Options
http://www.sane.ca/communicationsalliance/planning/Community%20FTTH%20Networks%20(public%20version).pdf/view

See also his section on Community Networks
http://www.sane.ca/communicationsalliance

Various open fiber projects around the world
http://www.fiberevolution.com/2009/04/end-of-week-fiber-news-roundup.html


Do jobs follow broadband access
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/22/AR2009042203637.html

Google on How to Change the Internet: You Should Own Your Broadband Pipes

[A great talk by Derek Slater at Google. The concept of customer owned networks, like the Internet started with the university community and is now slowing expending into the commercial world. As I mentioned in previous post, network deployments in Switzerland, Amsterdam, Norway and Sweden enable this type of business model. Thanks to Maxine Brown for this pointer –BSA]

Google on How to Change the Internet: You Should Own Your Broadband Pipes

http://gizmodo.com/5234611/google-on-how-to-change-the-internet-you-should-own-your-broadband-pipes


FTTH provider’s customers bury their own fiber
http://free-fiber-to-the-home.blogspot.com/2009/04/ftth-providers-customers-bury-their-own.html


NAB: FTTH provider’s customers bury their own fiber


LAS VEGAS -- A Norwegian triple-play provider has a unique solution to the pesky problem of digging up consumers' yards to bury fiber-to-the-home. Lyse Tele, an overbuilder that launched its fiber-based all-IP solution in 2002, installs the fiber right to the edge of a customer's lawn, then gives the customer instructions on how to bury their own fiber cable to the house.

[..]

FTTH provider’s customers bury their own fiber

http://telephonyonline.com/residential_services/news/lyse-tele-burying-fiber-cable-0421/

NAB: FTTH provider’s customers bury their own fiber


LAS VEGAS -- A Norwegian triple-play provider has a unique solution to the pesky problem of digging up consumers' yards to bury fiber-to-the-home. Lyse Tele, an overbuilder that launched its fiber-based all-IP solution in 2002, installs the fiber right to the edge of a customer's lawn, then gives the customer instructions on how to bury their own fiber cable to the house.

[..]

Condominium Open fiber infrastructure & CO2 reduction in Switzerland

[Here is a good example of how the concept of open condominium fiber infrastructure, pioneered by the R&E network community enables deployment of lower cost broadband deployment, facilities based competition and new business models for helping reduce GHG emissions. As I pointed out in a previous post forward thinking carriers like Swiscom and KPN understand the business value of open condo fiber muni networks and the potential for radical new business models such as free fiber (http://free-fiber-to-the-home.blogspot.com/) to the home and homes with tails. See also talks by Benoit Felten on this subject. Thanks to Kátrin Schweren for this pointer – BSA]

Last Wednesday, Swisscom has announced its first cooperation that will enable joint roll out of multi-fiber FTTH.

The canton of Fribourg, Groupe E, the Swiss French electricity producer and supplier, and Swisscom are to work hand in hand on the construction of a fibre-optic (FTTH) access network. The partnership aims to reduce costs for both companies and to offer every interested service provider the opportunity to use the infrastructure, therefore avoiding duplicate investments. It consists of setting up a single multi-fibre access network within an existing underground infrastructure and will allow a healthy level of competition in the area of networks and telecommunications services. Groupe E and its energy provider partners will develop energy-related services with the aim of achieving energy efficiency. The canton of Fribourg is clearly following its „High Tech in the Green" strategy by supporting this project which will make the canton more attractive in both urban and rural areas. This is the first collaboration between an electricity company, an operator and a canton in Switzerland.

Please find attached the press release
as well the link to it.

http://www.swisscom.com/GHQ/content/Media/Medienmitteilungen/2009/20090325_MM_Glasfasernetz.htm Deutsche Präsi:
http://www.swisscom.com/NR/rdonlyres/C3656A92-3A51-4283-9AE3-DB46CF46CDC6/0/20090325_Praesentation_Swisscom_de.pdf

Benoit Felten talk
http://feedproxy.google.com/~r/typepad/fiberevolution/~3/2blbBndRDz0/open-access-makes-economic-sense.html

The Importance of Next Generation Networks for job creation

[Here is a good report on all the future applications and job creation that will be enabled by next generation networks. However, this glorious and wonderful future will not come into reality unless we solve the problem of the business case for next generation broadband deployment and a more competitive marketplace. As long ago as August 1993, Scientific America pointed out that it is NOT new applications that drive demand for broadband but competition driving down prices. The Scientific America article demonstrated that it was the price of telecommunications technology in terms of average per capita income that drives demand and its competition that achieves this price reduction. The PC is a good example of a technology has thousands of wonderful applications, and will continue to do so, but the PC only became widespread once its price became affordable as a result of competition from manufacturers around the world. The opposite situation happened with the telephone, where it took 75 years to reach 50% penetration of homes, because historically it has been very expensive technology as a percentage of average annual income due to its monopoly position in the marketplace.

Some countries like Greece, Switzerland, The Netherlands are starting to understand the importance of providing competition by deploying passive fiber infrastructures throughout their countries with multiple home run fiber strands to every home to enable access by multiple competitors and new business models such as homes with tails, Green broadband etc. Even some carriers such as KPN and Swisscom are starting to understand the importance of this architecture and business model and are beginning to endorse it, as it is the only way that we can cost effectively roll out next generation broadband.

There were several good presentations on this new business model from Greece, Netherlands and Switzerland at the recent Fiber to the Home Council meeting in Europe. Unfortunately the FFTx council has decreed that you need a password to access these documents. – BSA]


The European Fiber to Home Council Meeting - Cophenhagen
http://www.conference.ftthcouncil.eu/

KPN joins Amsterdam CityNet in extending its open FttHnetwork
http://www.trouw.nl/digitalekrant/TR/20090204___/1_012/article4.html



New Report Takes Broadband Beyond Stimulus Debate Next-Generation Networks, More Speed, Key to Growth
Cites Potential for 2 Million Jobs
http://www.itif.org/index.php?id=231


A new report says next-generation networks capable of providing much faster Internet access are needed to provide the next level of services and applications to consumers.

Released today by the Information Technology & Innovation Foundation, “The Need for Speed: The Importance of Next-Generation Broadband Networks” identifies the economic and societal benefits of high-speed broadband, as well as policies needed to encourage further expansion.

“Supporting the widespread deployment of next-generation broadband Internet will enable the emergence of a whole host of online applications and services, many of which we can barely imagine today, that will increase quality of life and boost economic growth,” the report finds.
“The true potential of the next generation broadband network lies in the transformative new functionalities it enables and the innovative Web-based applications it supports.”

The study finds that broadband deployment has the potential to create or save two million jobs for American workers over the time period in which that deployment occurred, further emphasizing the importance of national broadband deployment.

“This report shows us that deploying next generation broadband networks will have profoundly positive benefits for consumers, businesses, academic institutions and society in general,” said ITIF President Robert Atkinson. “Deploying next generation broadband to 80 percent of U.S. households that currently lack it can bring the needed economic stimulus by ensuring approximately two million American jobs.”

The report emphasizes that there is a role for proactive public policies to encourage investment in next-generation broadband networks, such as more favorable tax treatment for such investments.

Competition most important tool to increase broadband deployment

[Here are a couple of good pointers on why competition may be the most important tool to increase broadband deployment. As far back as August 1993 in an article in Scientific American, it was noted that competition was the main driver for the rate of adoption of many technologies from basic telephony to the PC computer. In that article they compared the rate of adoption of the telephone versus cable, VCR, PC etc. The telephone took over 75 years to reach 50% penetration, while cable TV took 35 years and the PC and VCR less than 15 years. There was a clear correlation between the average cost as expressed in per capita income of these technologies and their rate of adoption. And of course what drove down cost was competition. Where there was lots of competition – PC and VCR, prices dropped and adoption rates skyrocketed. Where there was no competition, as in the case of telephone monopoly, prices and adoption declined very slowly. Excerpts from Scott Bradner’s column and posting by Dirk van der Woude on Gordon Cooks excellent Arch-Econ list – BSA]

http://www.networkworld.com/columnists/2009/012709-bradner.html?fsrc=rss-columns

Obama's broadband stimulus: throwing money at wrong target?
[…]
The Pew Internet & American Life Project just published the results of two surveys on Internet connectivity it ran over the last year. This report shows that not all that many people are blocked from getting broadband Internet access because it is not available in their area. There is no question that there are big parts of the country where broadband access cannot be obtained unless you are willing to use a satellite service. It is hard to tell in how much of the country this is true because of the poor statistics the FCC has been collecting. (See "All's well with U.S. broadband deployment (says FCC).")

The Pew report says that some people (more than 15%) have no interest in getting online. Another 6% think the price is too high, and 5% have usability problems. The president's plan is unlikely to change these numbers much.

The current draft of the broadband part of the stimulus package focuses on providing grants to companies that are willing to deploy wireless or wired broadband in underserved areas. The bill mandates open access to any services that result from such grants.

But, if the Pew report is correct, the stimulus money and open access policies might only result in a few percent of additional broadband users in the United States. Figuring out how to get more competition into the picture so that prices could come down might yield a greater return.
[…].
[From posting by Dirk van der Woude]

ECTA, the European Competitive Telecommunications Association, yesterday released the latest installement of its regulatory score card. Good reading and below an interesting quote (pag 12). (Hat tip to 'you know who you are').

"It may be tentatively concluded from these and other results found by analysing data reported in the Scorecard together with July 2008 broadband data reported by the European Commission and OECD that infrastructure and effective access-based competition may complement each other in stimulating high broadband take-up rates, and take-up of higher speed services – both of which are necessary to justify and reduce risks in investments in access upgrades such as FTTH.

The positive relationship between incumbent retail DSL lines and LLU also suggests that the benefits of access regulation through increasing overall take-up of broadband may also enable the incumbent to increase its own take-up rates. Although data is not yet available to assess the effects quantitatively, one might also postulate, following similar logic to unbundling of copper loops, that the take-up of fibre access and higher speed services available over it could be stimulated through unbundling and that such expansion and competition could also facilitate increased demand for the incumbents own fibre services."

Whole report: http://www.ectaportal.com/en/basic651.html