CHAIR'S REPORT
1. At the
invitation of the Secretary-General of the International Telecommunication
Union (ITU), a workshop was held in Geneva from 2-4 May 2001, to discuss the economic and regulatory implications of
broadband and its likely impact on
ITU Member States and Sector Members. The Workshop was organized by the
Strategy and Policy Unit (SPU), under the Secretary-General’s “New Initiatives”
programme. Some 27 experts participated in the meeting, representing a range of
regulatory and policy-making agencies, Public Telecommunication Operators,
academic institutes and others. Those present at the meeting participated in an
individual capacity. Prof. Deborah Hurley, Director of the Harvard Information Infrastructure Project, Harvard
University, chaired the meeting.
2. A background
issues document, including a
suggested list of questions for discussion, had been prepared in advance of the
Workshop by the secretariat of the ITU. In addition, a number of country case
studies had been commissioned, covering Australia, Italy, Malaysia and South Africa. These were presented,
along with the experiences of other countries and regions, notably Canada, India, the Republic of Korea and the European
Union. This was the first ITU meeting on this emerging topic and it was
agreed that the information provided and the discussion generated were extremely
useful, especially to those currently involved in drafting national policies.
3. The meeting
commenced with a brief discussion of the definition of broadband. There was consensus that the focus should be
squarely on the services to be provided via broadband. Although governments have been under some
pressure to define broadband in terms of speed or with reference to a
particular technology or technologies, there was agreement that broadband
policy might, more usefully, be arrived at by identifying the applications,
such as entertainment, health
care, education, government services, or commercial applications, to be
provided. After the relevant services are identified, the technological and
economic options available to provide those services could then be
investigated. Ultimately, ‘broadband is what broadband does’, and what it does
is (finally) facilitate convergence.
4. As
anticipated, at present the dominant technologies employed to provide
broadband services are ADSL (asymmetric
digital subscriber line) and cable modems. Although cable modems are widely
used in Canada and the United States, this is not replicated in other parts of
the world, largely for the reason that cable TV penetration in most countries
is very low. Generally, therefore, broadband is available throughout the world
via ADSL today. Clear recognition that ADSL is the current dominant technology
for broadband will help with planning, commercialization, and policy-making. At
the same time, it is widely acknowledged that ADSL and cable, while currently
available, both present technological challenges, and function as transitional
technologies on the road to other broadband technological options, such as
fibre optics, wireless, and satellite. Interesting
information was presented in the workshop on declines in the price of fibre relative to copper, which may make
possible its wider deployment. The
workshop participants agreed that, given the benefit of these rapidly evolving dynamic and flexible technologies,
it might be most useful to think of this wealth of technological options as
forming a mosaic from which countries and companies can choose to provide the
desired services in the most effective manner.
5. There was a
wide-ranging discussion of the economic
and market issues connected with broadband. There was a strong emphasis on market-based solutions, especially
in Australia and the EU. Experts from
developing countries spoke eloquently, however, on the insufficiency of sole
reliance on market-based solutions for their nations. Competitive market structures may not yet be sufficiently robust
to carry the task alone. Government
will continue to have significant roles to play in providing broadband
services, articulating national visions, and stimulating consumer demand. For all regions, developed and developing,
there is still uncertainty about elaborating appropriate business models for
delivering broadband services.
6. One key regulatory issue raised was
that of demand side stimulation. The rate of uptake is sometimes much
less than the level predicted on the basis of availability. In Denmark, for
example, the government is developing a policy, for release in June 2001, with
the objective of stimulating uptake through government use of broadband
applications in delivering its own services (e.g., e-government, health care,
etc.). This is intended to demonstrate the uses and possibilities of broadband.
The variety of programmes to stimulate demand upon which governments have
embarked is wide-ranging and imaginative. Examples of cost-effective
demand stimulation strategies include:
·
A federal government competition in Canada to designate
12 “smart communities”, which had prompted widespread interest for a relatively
modest financial outlay;
·
A star-grading scheme for certification of “smart
buildings” in Korea;
·
In Malaysia, buses
fitted-out for instruction in the use of the Internet bring experience to
remote and under-privileged areas. A fleet of boats to ply the coast and major
rivers is soon to be launched.
7. Where demand has taken off, it appears
that the main applications are:
·
Education e.g.,
in Korea, where expenditure on broadband access for the Internet is considered
an important family investment.
·
Entertainment
applications, such as games and interactive TV, are often an early driver of
residential demand.
·
Voice over DSL (VoDSL) – again, this is becoming particularly
popular in Korea.
·
MP3 music file
swapping and other peer-to-peer applications.
These applications
suggest that the age profile of broadband users is likely to be younger on
average than for other communications applications.
8. In many countries, flat-rate
subscriber charges have proved to be one of the main drivers of demand. In
Korea, for instance, broadband is cost effective relative to dial-up for subscribers
making three or more hours of use per day. Elsewhere, high prices for access
are suppressing demand. There is a concern on the part of incumbent
telecommunication operators that flat-rate broadband may limit the scope for
increasing revenue from subscribers. In many developing countries, where the
impact of falling revenue from international calls is undermining the business
plans of national operators, raising domestic call revenue is an urgent
requirement.
9. All governments must grapple with making
the best use of limited funds available for communications services,
particularly in developing countries. In many countries, such as China,
for instance, the Government is currently concentrating on providing basic
telephony access. In South Africa, the definition of universal access is being
changed to reflect progress in extending service availability, but still means the
availability of a telephone within a 15-minute walking distance from home. The
market in many developing countries is hampered by the lack of consumer
spending due to poverty. While, this does not imply that there is a necessary
sequence of first narrowband and then broadband, it was pointed out that
although broadband presents an efficient option at the national level it might
not be affordable at the individual level. Therefore, China is promoting the
development of both broadband and narrowband access. In India, for instance, cybercafés
are proving immensely popular, accounting for perhaps 30 per cent of Internet
use. The aggregation of demand is creating a need for a broadband backbone
network.
10. The issue of content was
repeatedly raised in discussion, the main issues being:
·
The desire among
many countries to maintain their cultural and linguistic heritage,
·
Constraints on access
to content, for instance where existing media companies own exclusive rights to
compelling content such as sport and movies.
·
A more general lack
of content geared towards local markets raises concerns about appropriate
business models.
11. A number of
different national strategies for rollout of broadband were discussed.
Three main types were recognised:
·
“Light touch regulation”, where the principal role of
government is to create the right environment for market development.
·
“Extended access” strategies, where governments have
identified specific geographical areas, or parts of the community, which may
not be among the first to be served by the free market and are pushing a
strategy of outreach or subsidised access. For instance, the Canadian Yukon territory
probably has the highest level of broadband subsidy per capita of anywhere in
the world.
·
“Comprehensive national plans” where governments are
elaborating a master plan for broadband rollout. This involves bringing
together many different actors, such as ministries, infrastructure providers,
service providers and user groups.
A number of examples of the latter strategy were examined
during the workshop, including the Republic of Korea and Malaysia. In other
countries, such as Denmark and Canada, national strategies are currently under
development. Because of rapidly changing technologies and market conditions,
national strategies and regulation would need to be flexible and frequently
reviewed.
12. At the
sub-national level, city governments have sometimes taken a lead in
promoting broadband rollout to their communities. Examples cited included
Stokab in Stockholm, and the Multimedia Super Corridor in Malaysia. City and
local governments often have considerable assets that are potentially very valuable,
such as pipe and ductwork, sewer systems and high sites, as well as an
understanding of the local community. In India, a number of states had made
available rights of way alongside roads in order to promote infrastructure
deployment.
13. A major focus
of discussion was on regulatory implications. It is useful to
distinguish between regulatory issues associated with controlling access to the
market and those associated with controlling market behaviour. The latter
include interconnection, cross-subsidisation and unbundling of the local loop.
On this latter point, diverse views were presented. Some felt that it was
essential in order to gain maximum values from existing (copper) networks.
Others felt that it might have a deterrent effect on investment. Korea, for
instance, which has the highest ADSL penetration rate in the world, has not yet
unbundled the local loop.
14. The trend
towards convergence raises additional questions of how markets are
defined, lines of business restrictions and joint-ownership issues. Some
countries, notably Malaysia, have moved towards converged regulatory structures
as a way of handling these policy issues. Some countries remain unsure of what
regulatory and institutional structure to develop. Development of broadband markets
may also raise concern about the creation of new bottlenecks, for instance for
set-top boxes. Some participants identified a resurgence of policy interest in
the separation between content and carriage as a way of overcoming the effects
of a tendency towards natural monopoly in broadband. Examples such as Stokab
show that it is possible to separate the provision of wholesale infrastructure
(‘dark fibre’) from the provision of services over those networks. This
approach is sometimes referred to as creating a “Loop Co”. At the same time it
was recognised that it may become increasingly difficult to make a distinction
between content and carriage.
15. The
principle of technology-neutral regulation underlies much current policy
development. However, it remains unclear just what technological neutrality
implies. . It may be defined as regulation that neither imposes nor
discriminates in favour of the use of a particular type of technology, though
not all were comfortable with this definition. Some participants argued that
while the European Commission is unbundling the local loop of telecommunication
operators, it is not requiring open access to cable networks.
Technology-neutral regulation could be seen as a step on the path towards full
deregulation, in which sector-specific regulation is substituted by competition
law. Some felt that the IT industry has flourished in a largely unregulated
environment and this benefit should be extended to all convergent markets
rather than continuing with artificial distinctions. Others however saw a
continuing and crucial role of government; particularly in countries where the
market economy is still relatively fragile and where equity concerns need to be
addressed.
16. In communications
policy-making, the assumption has long been held that communications
services tend to be provided first in urban centers or developed countries and
then, gradually over time, migrate to rural, remote, and less developed
areas. Workshop participants were
encouraged to reverse this notion of migration from privileged centers to the
edges and to imagine, instead, a world with no edges, a mobius strip of
advanced communications capability.
Arguably, there are rural, remote, and less-developed regions that have
a greater need for broadband capacity than developed urban hubs to obtain, for
example, medical and educational services.
The points were made that the population of Rankin Inlet in northern
Canada need telemedicine and tele-education, while residents in Toronto have
easy access to hospitals and educational institutions. Similarly, it is difficult to provide
sufficient medical services in the interior of Australia, due to a shortage of
doctors in that area. Broadband
services to these areas may provide larger incremental benefits, reduce the
digital divide, distribute social benefits more equitably, and encourage civic
participation.
17. It was agreed that the development of
broadband presents new regulatory challenges for ITU Member States. A possible role
of the ITU was discussed. The main area for ongoing ITU work relevant to
broadband is likely to be on standards development, especially in areas like
multimedia services, quality of service, coordinating telephone numbering and
email addressing (ENUM) and billing. ITU stewardship of scarce resources, such
as spectrum or numbering plans is also highly relevant in this respect. In the
Development Sector, advice to regulators on development of appropriate
structures and the identification of future regulatory issues is likely to
prove valuable. A number of participants raised concerns over Internet domain
name governance, suggesting that the ITU could help developing countries to
play a more active role in ICANN. The ITU can also play a valuable role in
information sharing, especially among regulatory agencies. If we take
the main impact of broadband to be convergence, then there may be a need to
undertake in-depth analysis of the various forms and market implications of
convergence in order to further light the regulatory implications of broadband.
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