Well-leveraged policies accelerate broadband development

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By Xie Weiqiang

A 10% increase in broadband penetration generates 1% GDP growth. Broadband construction has become one of the driving forces of economic recovery and growth for countries around the world. National-level ICT policies provide macro-regulation and control of broadband development. Well-leveraged policies can iron out market wrinkles and ensure optimal resource allocation and distribution.

Statistics show a correlation between broadband penetration and socio-economic growth. Every 10% of penetration generates 1% GDP growth. Broadband construction has become one of the driving forces of economic recovery and growth for countries around the world. Progressive policies ensure national-level macro-regulation and control. Well-leveraged industry policies can iron out market wrinkles and achieve optimal resource allocation and distribution.

Broadband development bottleneck and government support

In the 21st century, "broadband" has become a buzzword. Countries around the world have invested heavily into next-generation broadband deployment. The ICT industry is now the engine of economic innovation and growth and credited with improving productivity. In 2013, China officially announced the "Broadband China" strategy. Other countries and telecoms also proposed their own broadband development strategies and construction plans, leading to booming broadband deployment across the world. At the same time, Internet services are developing rapidly and enriching their offerings. Services such as fixed and mobile convergence (FMC) and multiscreen are also growing. There is now a global broadband development trend aimed at ultra-broadband coverage.

The driving forces of network evolution and the building of new networks are customers' constant demand for high-quality service experience and continuous ICT development. New access media based on optical fiber, integrated optical & copper access, and the exploitation of traditional copper wires provide the foundation for ultra-broadband services. However, network bandwidth cannot be the sole measure of Internet service development and service experience. Telecoms need to address three challenges in the construction and sustainable development of ultra-broadband – investment, terminals, and content.

To promote the development of the telecom industry and ultra-broadband and to guide third parties to help telecoms solve these three problems, governments should provide strategic guidance and support through industry policies to ensure that broadband construction is included in national strategic development strategies, just like expressways and railways.

Investment: Shift from encouraging competition to encouraging investments that support rapid fixed broadband (FBB) development.

Cost: Coordinate infrastructure construction to reduce network costs.

Operation: Promote industry chain integration & bandwidth monetization.

Development: Execute the national broadband network (NBN) strategy.

Shifting from encouraging competition to encouraging investments

Although the number of Internet users is rising, a significant number of people still cannot access the Internet – even in emerging and developed countries. At the same time, those who are already connected demand higher speed and better service experience. A robust broadband network is the prerequisite for spreading new Internet services. Developing countries are increasing broadband penetration while developed countries are moving on to ultra-broadband; both require enormous investments.

The best way to judge whether the current industry policies are successful or not is to look at the broadband development level. If FBB is developing well and its penetration is increasing, the related industry policies and regulations are beneficial to broadband development. Then the government should continue the implementation of the policies. If FBB development is slow, the government should consider adjusting or changing policies and regulations to attract investment and broadband users.

We can classify the broadband development process of a country or an operator into three phases based on the broadband penetration rate: exploration (<10%), developing (10% to 25%), and developed (>25%). In the exploration phase, services offered are extremely insufficient, users have to wait for service provisioning, and technologies are few. Governments should encourage operators to quickly deploy more networks to expedite service time-to-market.

In the developing phase, broadband coverage is sufficient, but the service prices are high and service choices are few. Governments can issue new licenses to increase the competition somewhat so that operators will accelerate broadband deployment and increase network speed. Benign competition is conducive to broadband promotion. Considering telecoms' large investments and in order to promote widespread coverage, governments should not charge too much for new licenses, and can even give subsidies to telecoms, who will then have to shoulder some social responsibilities such as providing ubiquitous coverage.

In the developed phase, broadband coverage is widespread. Governments should pay attention to the requirements of high-end and low-end users and encourage telecoms to carry out continuous innovation and sustainable development. Low-end users are distributed in remote mountainous regions and less developed regions. Like all other businesses, telecoms seek profit and lack the incentive to deploy networks for low-end users. Governments should give more policy and fund support to telecoms to reduce their investment risks. The focus of high-end users has shifted from broadband connection to service experience. Telecoms must offer more innovative services of superb quality, which will promote the healthy development of broadband networks.

Competition aimed at stimulating telecoms to pay more attention to broadband users is good for market development in the exploration and development phases and should be encouraged to ensure quick broadband coverage and the provisioning of cost-effective services. However, during the developed phase, governments should shift from encouraging competition to encouraging investments. They should focus on helping telecoms to achieve technological innovation and reduce investment risks. This will create more investments in the market, helping telecoms realize leapfrog development and grow to become broadband leaders in a region.

Coordinated city infrastructure construction reduces deployment costs

Strategic measures to reduce broadband deployment costs

FTTx-based ultra-broadband development requires huge investment because a lot of stations and pipes need to be constructed or reconstructed. In both developing and developed countries, optical distribution network (ODN) construction costs make up a large part of network deployment expenses. For example, ODN projects account for over 70% of FTTH costs in Germany. ODN deployment costs account for 60% of total network FTTx construction costs in China, where the prices of land and labor are rising.

Coordination of city infrastructures can reduce network deployment costs by 20% to 40%. For example, Nigerian operator Phase3 Telecom minimized total network costs through coordinated construction. They deployed optical lines on high-voltage cables and leased optical lines from Nigerian Power Company, transforming themselves into the largest fiber-optic telecom in the country. Other telecoms, enterprises, and even the government are now leasing optical fiber from Phase3 Telecom to reduce costs.

In most countries, different government departments regulate the construction of various types of infrastructure. Power grids, oil pipelines, highways and railways, and municipal power lines are in the care of different departments and companies with no coordination at all. The aim of coordinated construction is to reduce project scale and difficulty. If the construction of telecommunication infrastructure can be coordinated with that of transportation, power, water and sewer, and buildings, the network deployment costs are greatly reduced. According to the Federal Communications Commission (FCC), it takes USD144,000 to build independent optical fiber networks every mile. The cost will be reduced to only USD101,000, if network construction is coordinated with other infrastructure deployment like highway construction thanks to a reduction in material costs, and especially engineering costs.

Measures of coordinated city infrastructure construction

There are three scenarios that involve coordinated infrastructure construction. First, different companies and telecoms conduct simultaneous pipeline and optical fiber deployment and municipal infrastructure construction. Second, governments share existing municipal infrastructures with broadband telecoms to facilitate broadband deployment. Third, for fiber-to-the-building (FTTB) and fiber-to-the-home (FTTH) scenarios, copper wire can be reused and cross-connection boxes can be shared.

Infrastructure coordination is especially important to developing countries since they need to build a lot of it. If optical cables are deployed while work is done on roads, the power grid, or buildings, then costs are reduced. Coordinated construction eases the deployment of facilities such as pipes and towers. This strategy is also significant in developed countries. Governments around the world are recommended to promote coordinated infrastructure planning during annual city construction review. For example, in the U.S., the "dig once" act stipulates that digging for infrastructure construction can only be performed once in a certain period of time. Different companies are required to coordinate their construction projects to meet potential customer requirements when it comes to cable and pipe deployment. In Boston, the "shadow conduit" policy demands that the first company to dig should ask other companies of their potential needs so that shadow conduits can be reserved for future users.

Fully sharing new infrastructure construction and opening existing infrastructures could accelerate broadband development. Governments can formulate policies and laws to promote the opening of city infrastructure such as municipal pipelines, highways, subways, and telephone poles to telecoms for free or at low prices. For example, Altibox, the largest optical fiber telecom in Norway, pioneered the franchised outlet model, attracting 42 local companies for cooperation to reduce the investments and risks of network construction. Altibox provided unified device models while local companies provided pipelines, optical fiber resources, and marketing resources to develop customers. In just 10 years, Altibox accumulated 80% of all optical fiber users in Norway. The Swedish government also issued licenses to electricity, gas, and telecommunication companies, allowing them to lease optical fibers to others. The measure accelerated the usage of existing infrastructure to expedite optical network deployment. In Spain, ultra-broadband construction can be based on existing pipelines. For example, Telefónica's pipelines can be leased to other telecoms for further network deployment. The re-use of existing infrastructure has greatly accelerated network construction in countries around the world.

The most challenging part of broadband deployment is FTTH. Governments should formulate a number of regulations and standards and strictly implement them in infrastructure planning. Strict adherence to regulations and standards in building construction can greatly simplify the task.

For buildings with copper wires, the re-use of these resources and sharing them among telecoms can greatly accelerate broadband deployment and enhance broadband coverage. For example, both the U.K. and Hong Kong have explored good ways to realize coordinated infrastructure construction.

Regulations must be even more comprehensive for the construction of new buildings. In April, 2014, the Ministry of Housing and Urban-Rural Development of China released the Regulations for FTTH Infrastructure Construction for Residential Areas and Buildings and FTTH Infrastructure Project Implementation and Acceptance Standards. The two documents provided detailed pipeline and cable connection specifications for the project preparation and implementation process, greatly facilitating optical fiber deployment.

Building a healthy industry chain to achieve sustainable development

Informatization is the greatest technological revolution in the last 30 years. Over the next 20 years, we will enter an age of connectivity. Fixed and mobile convergence (FMC) and ubiquitous connections will be fundamental to our work and life. The development of the Internet and mobile applications will further promote the emergence of the experience-based economy. Focus has shifted from connection to service experience. It is now imperative that ultra-broadband network operators integrate their fixed and mobile broadband networks and increase network content.

In order to quickly attract users and activate network resources, telecoms, network content providers must engage users to cooperatively build a win-win ecosystem that focuses on improving user experience. This ecosystem is beneficial to continuous business model innovation and can activate user interest. It promotes ultra-broadband development through optimal service experience.

By issuing more licenses, especially comprehensive licenses to top telecoms, governments could encourage and promote network development and the creation of more innovative services. Broadband development alliances should be fostered as they have had great success in streamlining and aligning the operation of content providers, telecoms, vendors, and regulatory institutions leading to innovation and an optimized customer experience.

Execution of NBN strategies

National Broadband Network (NBN) is a broadband development model that relies on government encouragement and support through regulations and laws. NBN controls network construction and maintenance costs and lowers the price of services. NBN can help recover an economy in recession. It is a source of innovation and digitization, and also the key to building a knowledge-based economy and society.

The public-private partnership (PPP) model where the government cooperates with telecoms is the key to the successful execution of NBN strategy. Top telecoms have rich experience in network O&M and own widespread pipeline resources. The government can select the best telecoms to quickly realize their NBN goal.

While executing NBN strategy, governments should take into consideration the requirements of remote regions and provide policy support accordingly. For example, the U.K. government launched its NBN strategy in 2010 and executed it with two projects. BT was responsible for the NGA project that completed the coverage of two-thirds of the population in cities and other densely populated areas.

The Broadband Delivery U.K. (BDUK) project completed the coverage for the remaining third of the population in remote corners of the country. This project was jointly funded by the British government (25%), local governments (25%), and the bidding telecoms (50%). The total costs for the two projects amounts to GBP2.5 billion and GBP2 billion, respectively. The projects aim to boost U.K.'s ultra-broadband penetration to over 90%. BT is responsible for project implementation.

In addition to NBN, governments should also support broadband development by making preferential policies and offering terminal subsidies and IT training to ensure broadband application and network content creation.

The Malaysian government funded the establishment of 246 community broadband service centers with MYR60 million (USD18 million) and the deployment of digital counters in 105 aboriginal areas across the country with MYR40 million (USD12 million), spreading e-government service in remote regions. South Korea launched the Korea Information Initiative (KII) in three phases and passed laws dictating that all educational, governmental, and medical institutions should connect to the broadband network. During the KII phase of South Korea's broadband development, the government invested in the deployment of backbone networks. In the KII-P phase, private investments poured in and home and enterprises users were connected. The KII-T phase was one of joint public and private investments.

The South Korean government made great efforts to develop potential broadband users. From 2000 to 2002, the government carried out tens of thousands of trainings for 14 million people from all walks of life. The training programs played a very important role in promoting broadband development.

In summary, national social and economical growth requires broadband support and broadband initiatives need government support. Government can guide network investments and promote sustainable broadband development.

During the process, governments can achieve shift from encouraging competition to encouraging investments, thereby boosting telecoms' investment enthusiasm; facilitate coordinated city infrastructure construction to reduce costs and risks; facilitate industry chain cooperation to stimulate broadband consumption; and execute NBN strategies that provide nationwide coverage.

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