Transcript Telecommunications Investment as an Economic Stimulus Taylor Reynolds, OECD 22 June 2009 The views expressed in this presentation are those of the author and do not.

Telecommunications
Investment as an
Economic Stimulus
Taylor Reynolds, OECD
22 June 2009
The views expressed in this presentation are those of the author and
do not necessarily reflect the opinions of the OECD or its Membership.
Key questions
• Can communication network infrastructure
investment be used as an effective economic
stimulus?
• If governments decide to invest, how can they
structure projects for maximum benefit?
Why telecom as a stimulus?
• Projects:
– can be initiated relatively quickly (slack)
– are labour-intensive
– can minimize economic leakages
– are a key foundation for commerce
– may provide stronger marginal impacts on
supply and productivity than investing in
established networks such as electricity, gas,
water and transportation.
Demand
Supply
Public broadband investment
• Goal one: Stimulate the economy on demand side
through construction projects for infrastructure
rollout
• Goal two: Increase the productive capacity of the
economy via spillovers from broadband networks
• Goal three: Bridge the digital divide and improve
competition
Public broadband investments as
part of stimulus packages
Country
Spending (local)
Spending (USD)
Australia
AUS 40 billion
Canada
CAD 225 million
212,500,555
Finland
EUR 66 million
94,700,000
Germany
EUR 150 million
215,200,000
Japan
JPY 3 trillion
Luxembourg
EUR 195 million
279,800,000
Portugal
EUR 50 million
71,700,000
United States
USD 7.2 billion
7,200,000,000
32,700,000,000
28,130,000,000
Policy Responses to the Economic Crisis: Investing in Innovation for Long-Term Growth, June 2009, OECD, Paris.
How public funds are being
used for broadband
Building out different network components
• High capacity networks connecting larger
cities
– Transport: highways
– Telecommunication: backhaul
• Mid-capacity networks connecting
neighborhoods/business areas
http://www.infovisual.info/05/photo/highway.htm
l
– Transport: mid-size roads
– Telecommunication: middle-kilometre/
metropolitan area networks
• Lower capacity networks to individual homes
and businesses
– Transport: Local roads
– Telecommunication: “last kilometre” access
networks
Network components
Backhaul
Middle
kilometre
Last
kilometre
Fibre as a foundation
• Investment in high-capacity fibre optic lines is the
foundation for all types of broadband Internet access
– Wired: DSL, cable, power-line communication
– Wireless: Mobile, WiMAX, satellite
• Investments in targeted fibre infrastructure can be
structured to benefit all network providers (wired
and wireless)
Capacity of new networks
One fibre optic strand the width of a human hair
currently has the capacity to support 3 billion
simultaneous phone conversations. That is
equivalent to every person in the world on the
phone with someone else at the same time.
Fibre to the city/town
Network
operator
City
or
town
copper
Neighborhood
wireless
copper
Home
or
premises
wireless
Fibre to the neighborhood (faster)
Network
operator
City
or
town
Neighborhood
Copper
(faster)
Home
or
premises
Wireless
(faster)
Fibre to the premises (fastest)
Network
operator
City
or
town
Neighborhood
Home
or
premises
Likely stimulus targets by
telecommunication market type
• Least-developed
– Expanding international capacity and building local traffic exchanges
– Upgrading mobile networks for higher-speed data connections
– Basic fibre connections between cities and to mobile sites
• Developing
– Building higher capacity backhaul connections between geographic areas
– Expanding fixed-line, cable and mobile coverage
– Upgrading mobile networks for higher-speed data connections
• Developed
– Extending initial access to the last underserved areas
– Pushing fibre deeper into neighborhoods to improve speeds of all
technologies
• Highly-developed
– Upgrading last-kilometre connections all the way to the premises with fibre
and shifting rural wireless users to faster fixed/wireless networks
Policy and investment
• Investment without a efficient regulatory framework
is likely to have minimal impact.
• Little need to build backhaul networks without
unbundling. Operators won’t need it.
• Investments in networks must be paired with procompetitive policy moves
• Should not strengthen existing monopolies
Balancing policy and investment
• Policy
– Unbundling of the local
copper loop to enable market
competition
– Ensuring sufficient spectrum
is available to support highspeed wireless applications
– All investments in
telecommunications
networks using public funds
should be accessible to
competitors via open access
rules on transparent, costbased terms
• Technology
– Push fibre closer to end users
to support higher-speed
wired and wireless use
– Invest time in developing the
most efficient network
routes for fibre investments
– Make use of copper, coax,
fibre and wireless
technologies for the last
kilometre as appropriate
– Balance backhaul and lastkilometre investment
Example:
Mexico
• Backhaul
– In May 2009, the Mexican
government announced it will
open up the electric
company’s fibre-optic
network to competitive
telecommunicatoin service
providers
– Operators should have
improved fibre access deep
into Mexican cities, towns
and villages
• Last kilometre
– However, Mexico does not
have local-loop unbundling
over the copper telephone
network which is necessary
for competitors to offer
attractive broadband services
– Without access to the local
loop, backhaul investments
will have a much smaller
impact in Mexico, particularly
on competition and service
development
Telecom investment
with limited funds
• Some economies are constrained in spending potential
• Choose projects offering highest return per unit spent
• Magnify the impact of investment by introducing necessary
telecommunication reform at the same time
• When fiscal constraints limit investment possibilities, policy
makers should target specific bottlenecks
– Backhaul networks (open access) throughout a region can lay the
foundation for competition service delivery in the future (Korea)
– Network investments can extend to schools and government buildings
but should be built will excess capacity which is available on
competitive terms to all providers (Canada)
Project considerations
Speed to come online
Shovel ready
Rights of way / spectrum availability
Employment effects (local)
Demand side
Spending composition
High marginal propensity to consume
Avoids leakages
Number of affected users
Marginal benefit per user
Connectivity
Capacity of the lines
Topology effects on bandwidth
Longevity of the network
Ease to upgrade network
Competitive access to network
Supply Side
Competition
Broadband choices
Potential for market distortion
Economic impact per unit spent
Innovation/growth
Upgradability for new services
Balanced rollout backhaul/last kilometre
Universal service
Social benefit
Cultural benefits
Inclusion
Long-term viability
Private sector viability
Viability of project after stimulus
Thank you