Fast and ultra-fast internet access

Fast and ultra-fast internet access 

• The broadband market grew in 2011 but the growth rate continued to slow down. The fixed broadband

penetration rate in January 2012 was 27.7% of the population, just 1.3 percentage points up from
26.4% in 2011.

•  Despite the slower growth, the EU penetration rate exceeded that of Japan in 2011 for the first time.

The difference with the US is 0.5 percentage points behind only.

•  Speeds of fixed broadband lines increased significantly in 2011 w ith almost 50% of all lines providing

download speeds of 10 Mbps and above.

• l But the take up of fast and ultra-fast broadband, i.e. 30 Mbps and 100 Mbps, is still low with just

7.2% and 1.3% (respectively) of all fixed lines providing those speeds.

•  In the second half of 2011, the number of new broadband lines b ased on xDSL was almost equal to

the number of new lines based on alternative technologies sold both by new entrants and incumbents,

indicating a shift towards other technologies closely linked to Next Generation Access Networks (NGAs)

and capable of providing faster speeds.

•  In 2011 there was an explosion in mobile broadband with penetration reaching 43% of the population

in January 2012 from 26.8% in January 2011. This growth was fuelled by handheld devices; there were

35.1 mobile broadband connected handheld devices per 100 citizens in January 2011, up from 19.6 in 2011.

•  Data revenues increased by 22.6% in Q3 2011 compared to Q3 201 0 in the five largest Western

European markets37. LTE (Long-term evolution) networks are already available in eight EU Member

States and mobile broadband traffic is already more than twice as high as fixed traffic and is expected

to grow exponentially in the coming years.

1. The need for fast broadband :

The Digital Agenda for Europe set three major targets on broadband: basic broadband networks should beavailable to all EU citizens by 2013 and by 2020 half of European households should subscribe to at least

100 Mbps, while 30 Mbps should be available to all Europeans. As the 2013 target is mostly achieved,

the Digital Agenda has a clear focus on migration tofaster speeds.

Targets are expected to be achieved through the deployment of a mix of technologies: wireline and wireless. Rollout of fast broadband in the EU has just started, but the rapid diffusion of broadband (the quickest among ICTs) suggests that the achievement.

Figure 1 – Correlation between penetration of fixed broadband and competitiveness

of the 2020 targets should be feasible, despite the current economic downturn.

Widespread use of faster speeds is considered a crucial factor to realise economic growth and to have an impact on job creation (Figure 1). Evidence  Evidence show that a 10% increase in the broadband penetration rate yields a GDP impact of around 1%.57 Because of a lack of empirical evidence, the economic literature has not yet delivered firm conclusions on the impact of a migration to faster speeds. However, positive effects can be discerned. First, the construction of broadband networks creates jobs and generates investment (it is estimated that 60-80% of the total cost of broadband deployment is linked to duct work, which is rather labour intensive, see table 2). Secondly, the adoption of broadband by firms yields

efficiency gains which contribute to growth of GDP (through Multifactor Productivity growth)58. Third,

high-speed internet stimulates the development of new services applications creating new markets.

Finally, residential users receive a benefit in terms of consumer surplus, which is not directly related to GDP but which breeds from improved access to information, entertainment and public services.

Research is starting to pinpoint different employment effects by industry sector. Broadband may simultaneously cause labour creation triggered by innovation in services and a productivity effect in

labour intensive sectors. Nevertheless, we still lack a robust explanation of the precise effects by sector

and the specific drivers in each case. However, given that the sector composition varies by regional economies, the deployment of broadband should not have

a uniform impact across a national territory.

Estimates on job creation vary but point in a positive direction. For example, in relation to broadband

deployment in the EU, it was estimated that 440,000 jobs would be created in the business

services sector in 2006 and 549,000 jobs in other economic sectors due to broadband-related

innovation in knowledge-intensive activities. This employment creation would compensate for the

loss of jobs due to process optimisation and structural displacements within the economy, with a

net creation of 105,000 jobs in 2006 in Europe59. In the United States, for every one percentage

point increase in broadband penetration in a state, employment was projected to increase by 0.2 to 0.3

percent per year. For the entire US private economy, this suggests an increase of about 300,000 jobs60.

With regard to higher speed networks, investment in NGAs can deliver important countercyclical

effects, both as a result of network construction and in relation to spill-over impacts on the rest

of the economy. While the former is likely to be concentrated in the construction and electronic

communications sectors, the impact of externalities is greater in service sectors and in particular in

those characterised by high transaction costs (such as financial services).

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1. Czernich, N., Falck, O., Kretschmer, T. and Woessmann, L. (2011),
Broadband Infrastructure and Economic Growth. The Economic Journal,
121: 505–532. doi: 10.1111/j.1468-0297.2011.02420.x
58. Broadband is an enabling technology and by itself does not have
an economic impact. Its impact on efficiency gains materialises as the
adoption of broadband is accompanied by a number of organisational
changes, including training and other cultural factors (known as
“intangible capital”). Hence, its impact appears with a lag relative to the
moment of adoption.

2. Source: The Impact of Broadband on Growth and Productivity, Micus

Management Consulting Gmbh, 2008

60. Source: The Effects of Broadband Deployment on Output and

Employment: A Cross-sectional Analysis of U.S. Data, The Brookings

Institution, 2007 (figures refer to growth excluding the non-farm

economy)

Table 1– Broadband impact on job creation, Source: ITU