1. “Leadership in Infrastructure Policy”www.purc.ufl.edu 1 Bandwidth Driven Growth: Policy Essentials for Next Generation Development Mark A. Jamison, Ph.D. Director

2. Outline Overview of Internet and broadband development Impacts of broadband on economic development Policy requirements for broadband development “Leadership in Infrastructure Policy”www.purc.ufl.edu 2

3. Overview of Internet and Broadband Development Distribution and development of the Internet Contrast Internet expansion with broadband “Leadership in Infrastructure Policy”www.purc.ufl.edu 3

4. Population and Internet Distribution, 2007 “Leadership in Infrastructure Policy”www.purc.ufl.edu 4 World Population ProportionsWorld Internet Proportions Source: www.internetworldstats.com, 2008

5. “Leadership in Infrastructure Policy”www.purc.ufl.edu 5 Sources: www.internetworldstats.com, 2008 www.ipligence.com/worldmap, 2008

6. “Leadership in Infrastructure Policy”www.purc.ufl.edu 6 Source: www.akamai.com, 2008

7. News site visits, 9 March 2008 Compelling news stories that caused peaks in past two years included sports (9), death/war (4), and politics (2). “Leadership in Infrastructure Policy”www.purc.ufl.edu 7 Source: www.akamai.com, 2008

8. Music site visits, 9 March 2008 “Leadership in Infrastructure Policy”www.purc.ufl.edu 8 Source: www.akamai.com, 2008

9. Retail site visits, 9 March 2008 “Leadership in Infrastructure Policy”www.purc.ufl.edu 9 Source: www.akamai.com, 2008

10. “Leadership in Infrastructure Policy”www.purc.ufl.edu 10 Source: www.akamai.com, 2008

11. “Leadership in Infrastructure Policy”www.purc.ufl.edu 11 Source: www.internetworldstats.com, 2008

12. “Leadership in Infrastructure Policy”www.purc.ufl.edu 12 Source: www.internetworldstats.com, 2008

13. Observations Only 12 countries make both lists Those making both lists are Asian (2) European (8) Islands (3) “Leadership in Infrastructure Policy”www.purc.ufl.edu 13 Top 20 InternetTop 20 Broadband Antigua & Barbuda Australia Belgium Bermuda Canada Denmark Falkland Islands Faroe Islands Finland France Greenland Hong Kong Iceland Japan Korea, South Liechtenstein Luxembourg Monaco Netherlands New Zealand Norway Portugal Singapore Sweden Switzerland Taiwan United Kingdom United States Source: www.internetworldstats.com, 2008

14. “Leadership in Infrastructure Policy”www.purc.ufl.edu 14 Source: www.internetworldstats.com, 2008

15. OECD Growth in Broadband Connections OECD penetration rates: 2.9% in 2001 to 13.6% in 2005 EU15: 1.6% to 14.2% Penetration highest in Scandinavian countries, South Korea, the Netherlands, and Switzerland “Leadership in Infrastructure Policy”www.purc.ufl.edu 15 Falch, 2008

16. Non-OECD Broadband Broadband available in 166 countries by April 2006, twice as many as 4 years earlier Broadband tariffs reduced 40% past two years In Beijing, 50% connected to Internet and 64% of those use broadband “Leadership in Infrastructure Policy”www.purc.ufl.edu 16 Falch, 2008

17. Summary of Internet and Broadband Development Developed nations dominate Internet, but developing countries in Asia are gaining Internet and broadband are not the same thing  Many countries with extensive Internet do not have much broadband, and visa versa  Substitution effect “Leadership in Infrastructure Policy”www.purc.ufl.edu 17

18. Economic Development Examine how ICT contributes to economic development Examine how broadband is different from general ICT “Leadership in Infrastructure Policy”www.purc.ufl.edu 18

19. Economic Development “The development and deployment of information technology is the foundation of the American growth resurgence.” Dale Jorgenson, Harvard University (2001) Presidential address to the American Economic Association 19

20. Röller and Waverman (2001) Telecommunications development causes economic growth  Telecommunications development caused about one-third of OECD economic growth, 1971-1990  About US$1700 per person per year  10% improvement in per capita GDP 20

21. Röller and Waverman (2001) Reasons  Adoption in one firm triggers adoption in another  Lower prices for consumers give additional discretionary income savings, investing, education, or other pursuits Benefits occur at nearly 100 percent penetration 21

22. Waverman, Meschi, and Fuss (2005) Mobile phone significantly impacts economic growth (1996-2003) Impact for developing countries twice that for developed countries 22

23. Waverman, Meschi, and Fuss (2005) Success depends on “regulatory policies that favour competition and encourage the speediest possible rollout of mobile telephony.” 23

24. Effects of Advanced ICT in the U.K., 1984-1996 Sector Lower Prices from Advanced ICT Productivity Increase from Advanced ICT Electricity, gas and water supply4.3%45% Transport10.8%50% Financial27.3%486% Telecommunications56.0%13% Total economy14.1%111% 24 (Correa, 2006)

25. Economic Development Investment (largely IT) contributions to economic growth  1989-1995, four-fifths of the economic growth  1995-2000, three-fourths of economic growth  2000-2004, three-fifths of economic growth Jorgenson and Vu (2005) 25

26. Summary on economic development Declining ICT prices drive economic development  Increased investment in ICT  Substitution of efficient ICT for outdated technologies  Development of new ICT-based skills “Leadership in Infrastructure Policy”www.purc.ufl.edu 26

27. Relating ICT lessons to broadband What do we hang onto and what do we let go of? Roles of regulatory agencies  Expert analyses  Protect competition  Provide incentives  Limiting opportunism “Leadership in Infrastructure Policy”www.purc.ufl.edu 27

28. Expert Analysis Data gathering and reporting Seminars and workshops Staff research Collaborations with universities and research institutes “Leadership in Infrastructure Policy”www.purc.ufl.edu 28

29. Competition Improves Performance Waverman, Meschi, and Fuss (2005)  Competition improves mobile penetration Gutiérrez (2003)  Competition improves investment Wallsten (2004)  Protecting incumbents hinders investment 29

30. Competition Improves Performance Competition improves broadband penetration  Aron and Burnstein (2003)  Denni and Gruber (2005) 30

31. Effects of Competition Improved efficiency Bailey (1986): Effects on AT&T  Shed 6% of its work force  Froze manager salaries  Eliminated 35,000 positions 31

32. Market Power Market power and market stability  Barriers to entry, such as limited licenses, rights of way, and radio spectrum Denni and Gruber (2005)  Resale launches broadband competition 32

33. Lee and Marcu (2007) Fixed broadband increased by  Local loop unbundling  Internet content  Modem vs. DSL competition Mobile broadband increased by  Standards competition Mobile and fixed do not compete (yet) “Leadership in Infrastructure Policy”www.purc.ufl.edu 33

34. Property Rights Protection Insulating investment from politics Cubbin and Stern (2006)  both regulatory law and higher quality regulatory governance are positively and significantly associated with higher per capita investment Lyons (2006)  Commitment increases investment 34

35. Opportunism Limits Investment Gutiérrez (2003)  “Sound regulatory governance in telecommunications has a positive impact on network expansion and efficiency.” Cubbin and Stern (2006)  Effective institutions essential to growth 35

36. Maiorano and Stern (2007) The establishment of a separate regulator, especially in developing countries, results in the long-run in about 11 percent higher mobile penetration. 36

37. Independent Agency Regulation under the law, independence, transparency, predict-ability, legitimacy, and credibility Henisz and Zelner (2001)  Checks on executive discretion enhance rate of telecommunications deployment 37

38. Henisz and Zelner (2001) “the level of institutional support for private property rights in Thailand and the Philippines (was) considerably greater than that in Malaysia and Indonesia.” “Investors in Thailand and the Philippines fared considerably better than did investors in Malaysia and Indonesia.” 38

39. Demand factors Digital divide in U.S. greater in computers than in broadband (Stanton, 2005)  Education; e-government Later adopters more influenced by social factors than are early adopters (Rogers, 2003)  Industry marketing “Leadership in Infrastructure Policy”www.purc.ufl.edu 39

40. Demand factors Bundling and pricing options slow adoption. So does desire to wait for next technology. (Adams, 2008)  Industry marketing and research Multiple firm locations and presence of young and skilled workforce makes. (Colombo et al., 2008)  Macro conditions for business “Leadership in Infrastructure Policy”www.purc.ufl.edu 40

41. Relating ICT lessons to broadband “It is precisely because change is constant that our foundations must be strong.” Peter Drucker “Leadership in Infrastructure Policy”www.purc.ufl.edu 41