universal broadband

Broadband Expansion Is Popular in Stimulus Plans

By ERIC PFANNER
Published: February 25, 2009
PARIS — The broadband race is on.

As policy makers haggle over how to revive ailing economies, one strategy has found widespread support in places as varied as Washington, Berlin, Sydney and Seoul: investing in high-speed Internet access.

In recent weeks, Britain, Canada, Finland, Germany, Portugal, Spain and the United States have included measures to expand broadband access and to bolster connection speeds in their stimulus packages.

Other countries, including Australia, France, Hungary, Ireland, Japan and South Korea, have announced separate broadband plans, according to a compilation by the Organization for Economic Cooperation and Development, based in Paris.

While some plans have been in the works for a while, analysts say it is no coincidence that so many are being rushed out now.

“The crisis is making countries push forward with their digital agendas much more aggressively,” said Charlie Davies, a senior analyst at Ovum, a telecommunications consultancy. “There’s this competition internationally to want to be there at the top and say, ‘We’re the most digitally advanced country, a great place to do business and all that.’ ”

Most plans seek to expand connections to rural areas. Another common goal is to speed up existing links through incentives to build faster fixed-line and wireless telecommunications networks.

The plans highlight a range of economic benefits, from the small scale and specific to the sweeping.

Ireland, for example, said in January that its “national broadband scheme” would directly create 170 jobs. Germany said last week, as the cabinet approved its broadband strategy, that efficient connections and the construction of next-generation networks were “a prerequisite for a return to growth and increased prosperity.”

While analysts agree that investing in communications technologies makes economies more competitive, they are skeptical about whether the promised gains will materialize quickly enough to make the spending packages — ranging from 11 million euros, or $14 million, in Hungary to $7 billion in the United States — effective recession-busters. Allocating money so that cables can be laid could take many months; completion of the networks might take years.

“So there would only really be a sizable stimulus if we are in a very long recession,” said Ian Fogg, an analyst at Forrester Research.

The international scramble to improve broadband connections has accelerated since the election of Barack Obama, who made information technology a campaign issue.

With household broadband use of about 60 percent, the United States — along with most other countries — is playing catch-up with South Korea. Eighty-five percent of the South Korean population has a fixed-line broadband connection, according to Ovum, and many other people have high-speed Web access through their cellphones.

Universal coverage is a common goal of many of the broadband plans — by the end of this year in France, by the end of next year in Germany and by 2012 in Britain, for example.

Some analysts say the economic case for such expansions may be limited. In the United States and many Western European countries, broadband already has the potential for reaching more than 90 percent of the population. Reaching the last remote areas could require significant investments, with no guarantee that the people who live there will even want to pay for connections.

Governments might be able to increase broadband penetration more substantially by simply changing some regulations. In South Korea and many European countries, for example, owners of telecommunications networks are required to provide rival broadband providers access to their networks. That requirement does not exist in the United States, a move that has limited competition.

Analysts say that economies might also benefit more from speeding up broadband links in areas that are already served, rather than making connections available everywhere. To do this would require investment in a new generation of fixed and mobile networks capable of downloading an entire movie in a matter of minutes, for example.

Governments have generally been reluctant to provide financial incentives for the construction of these networks, in part because of regulatory objections. But policy makers are looking at other measures aimed at persuading telecommunications companies to build them.

France, for example, has promised to give mobile providers a portion of the radio spectrum freed by switching off analog television signals for a new generation of faster wireless connections.

But some telecommunications companies have balked at investing the billions of dollars required for the faster connections until regulators tell them how they will be allowed to run the networks.

Others are reluctant to commit to extending fiber optic links, which provide ultrafast fixed connections, for fear of how they might be used.

“Today, fiber serves no purpose,” Philippe Capron, chief financial officer of Vivendi, told a French business paper, La Tribune. “There is no new revenue stream and no supplemental service to offset the considerable investment. All that it does is to encourage the illegal downloading of films.”