BuddeBlog

In response to the economic crisis which began to hit global economies from about September 2008, and to the rising unemployment which resulted from it, governments around the world have developed a number of schemes to stimulate consumer spending in a bid to buy their way out of recession, and to retain jobs.

Among the electorate – the ultimate source of funding – those schemes which are most popular are also those which are held to provide long-term benefits for society as a whole. As such, investments to develop a nation’s information society are absolute winners.

The US has adopted a number of ‘crisis’ measures in recent months, including many billions of dollars to develop broadband, online healthcare and digital terrestrial TV (DTTV). Australia recently announced a bold multi-billion dollar investment to roll-out the most ambitious FttH network in the world to date, providing 100Mb/s services to 90% of the population, with the remainder being served by wireless and satellite solutions. In Europe, information society investment has taken a number of forms. Given that most money set aside for these numerous projects will be spent during 2009 and the first half of 2010 – the period when the crisis is expected to hit employers the hardest – it is worthwhile reviewing a few of the prominent schemes in progress.

France
• The ‘Digital France 2012′ (‘France numérique 2012′) plan will guarantee universal broadband access to all citizens at a maximum price of €35 per month by the beginning of 2010;
• Mass introduction of FttH networks by mid-2009, capitalizing on open-network regulations adopted earlier in the year;
• Investing €277 million to guarantee the transition to DTT before December 2011.
• Allocating 4G mobile service frequencies by the end of 2009 and assigning licenses in 2012 to further develop mobile broadband.

Portugal
• New Generation Networks (NGN) Investment Plan (January 2009): part-financed by €800 million in government loans supplementing €1 billion commitments from operators to 2010.

Netherlands
• ICT Agenda 2008-2011 plan adopted in December 2008 by the Ministry of Economic Affairs to ensure that The Netherlands remains a leader in ICT in 2015. Focuses on five priority areas in ICT (Training, Electronic Administration, Interoperability and Open Standards0. An additional €54 million is assigned for innovation in social sectors (ICT and sustainability, education, healthcare, citizens).

UK
• Digital transition plan outlined in January 2009 to secure the UK’s place at the forefront of the global digital economy.
• Investment in NGNs, universal access to 2Mb/s broadband, commitment to facilitate network access. Action plan outlines a program of work with commitments to upgrade and modernise the fixed-line and wireless broadband networks, as also the broadcast infrastructure.

Spain
Second stage of the Avanza Plan adopted in January 2009, ‘Avanza2′. The first stage of the programme (covering 2006-2009) was launched in response to the EC’s broader i2010 programme to develop Europe’s information society. Avanza aimed to give impetus to R&D investment in Spain, and to bring the volume of economic activity relating to the use of ICTs to 7% of GDP by 2010 through joint efforts from the private sector, and various levels of government. Avanza allocated €6.5 billion in funding for 2005-9.

The Plan Avanza consists of:
• Digital Citizen: increase ICT usage among households and increase citizens’ participation in public life through telecoms.
• Digital Economy: encourage and support R&D, partly through training and zero interest loans. Total funding reached €2.3 billion.
• eGovernment: targeting the delivery of e-services.
• New Digital Context: maximise the use of the national broadband infrastructure.

Avanza2 (2009-2012) focuses on:
• Development of the ICT sector: supporting SMEs to develop ICT products and processes with a budget for 2009 of €663 million.
• ICT training: to include citizens and companies in the Information Society. Funded with €548 million for 2009.
• Public eServices: improve public services, develop the national eID card (DNIe), create new health and education platforms. Funded with €186 million.
• Infrastructure: develop the Information Society at local level to improve ePublic services. Funded with €89 million.

These are only some of the numerous measures which will safeguard European economies as major players on the world stage for the next few decades. The competitive environment internationally will prompt some countries to adopt the policies of their neighbours, as appropriate, and so further stimulate a more sophisticated and inclusive information age.

Henry Lancaster
Senior Analyst Europe

For more information, see separate reports:
Europe – Infrastructure – FttH & NGNs;
Europe – Regulatory Environment;
Europe – Broadband – Regulating fibre access;
Spain – Key Statistics, Telecom Market & Regulatory Overviews;
United Kingdom – Key Statistics, Telecom Market & Regulatory Overviews;
Netherlands – Key Statistics, Telecom Market & Regulatory Overviews;
Portugal – Key Statistics, Telecom Market & Regulatory Overviews.

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With their superior national coverage and large subscriber bases, Africa’s mobile network operators have built up a level of market power to the extent that they have been called ‘the new incumbents.’ Newly introduced converged licensing regimes have increased the competitive pressure in a number of key markets but also allow the mobile operators to branch out into new service segments.

Due to Africa’s poor fixed-line infrastructure, the mobile networks are beginning to play an increasing role in Internet service provision. Mobile banking is an emerging key trend that is revolutionising Africa’s financial sector, where only a small percentage of the population has access to traditional bank accounts.

More than 10% of Kenya’s GDP now pass through the M-Pesa mobile banking service, which has more users than there are bank account holders in the country.

Safaricom started testing a banking service in 2005, enabling users who do not have bank accounts to build up credit on their mobile phones and then pay bills via SMS. The company applied for a banking licence in 2006 and launched a mobile payment service called M-Pesa in March 2007, allowing customers to transfer money, deposit or withdraw funds using their mobile phones. The service would use Safaricom’s airtime distribution outlets and other authorised agents. It does not require the user to have a bank account, nor is there a minimum amount. Users can deposit cash into the M-Pesa account and withdraw it through a network of authorised dealers such as shops and petrol stations, or at one of 110 PesaPoint ATMs in 46 towns throughout Kenya, without the use of an ATM card. SMS-based money transfers can be made irrespective of whether the recipient is another M-Pesa customer or not, and even to non-Safaricom customers.

M-Pesa attracted 1.6 million users within 12 months and broke the 3 million barrier in 2008, roughly the number of all account holders at all Kenyan banks combined. By this time it was carrying US$280 million per month, the equivalent of more than 10% of Kenya’s GDP. Safaricom earns between US$0.35 and US$0.50 per transaction.

M-Pesa’s stunning success in Kenya has prompted Safaricom’s parent company, Vodafone, to expand the service internationally, starting with Tanzania in April 2008.

The extensive national coverage of the mobile networks has the potential to revolutionise the financial services sector in Kenya where less than 10% of the population have a bank account and services outside the major cities are limited. However, the established banks are complaining that the mobile operators are enjoying privileges similar to those extended to them but not being subjected to the same regulatory regime.

IRR’s Mobile Banking & Financial Services Africa event running in Johannesburg from July 20 will examine how mobile operators, banks, microfinance institutions, payment specialists and solutions vendors are developing and launching enticing products and services for a variety of market environments and customer segments.

For event information see –

http://www.iir-events.com/IIR-conf/Telecoms/EventView.aspx?EventID=2134

For BuddeComm research see – 2008 African – Mobile Communications and Mobile Data Markets

The proposal from the government to invest $43 billion in a national Fibre to the Home broadband network is a clear indication that they believe broadband infrastructure is a collective good. With its trans-sector multiplier effect it delivers massive social and economic benefits. The second major component of the proposals relates to reform of the regulatory regime for the telecommunications industry. These reforms aim to improve competition, strengthen consumer safeguards and reduce bureaucratic overheads imposed by the state industry regulator. Crucially the reform may include measures to address Telstra’s vertical and horizontal integration, such as functional separation or limitations to the cross-ownership of fixed-line and cable networks and media assets.

A trans-sector approach is required to guide us through the development of the NBN. It is critical to look across a variety of industry sectors to create synergy. There are significant opportunities to utilise new telecoms networks for e-health, e-education and smart grids.

With respect to broadband infrastructure, Australia desperately needs to foster open networks to support competition. The unbundling of the local loop and the installation of DSL equipment by third parties within Telstra’s exchanges has resulted in a significant increase in competition. The development of a wholesale-only national fibre optic network based on open access principles is likely to secure these gains. However in order to satisfy demand for bandwidth core network backbones need to increase in capacity, perhaps as much as a hundred fold from their current capability. In fact some industry commentators contend that with increased state investment in the backbone potentially there would be little need to invest in the fibre optic network from the telephone exchange to the premises. This component would look after itself in a normal commercial fashion, mostly without the need for any subsidies.

Network operators currently utilise the copper access network to provide DSL based broadband services and the HFC cable network to provide similar products. While the government plans for a wholesale based national broadband network may change fundamental aspects of the telecoms industry in Australia, the copper and HFC based network will continue to co-exist alongside the fibre based networks for the foreseeable future.

Though there are roughly 200 ISPs in Australia and the retail broadband market in Australia is dominated by a small number of firms. Telstra provides nearly 45% of services and has roughly four times as many retail subscribers as the second largest player Optus with around 11% of the market. iiNet and TPG and Primus are other major players and each has around a 5% share. The remaining 30% of the market is shared between around 180 small and medium sized providers. Consolidation in the retail ISP market has occurred with a number of mergers in the last two years. The most notable of these deals was between iiNet and Westnet and between TPG, Soul and Chariot Internet.

Of critical importance to ISP’s is whether to further invest in DSLAM infrastructure as the fibre optic based national broadband network is built. Further investment will enable ISP’s to directly connect subscribers to their network rather than relying on purchasing wholesale services. However in the longer term the national broadband network may render this investment obsolete as subscribers are migrated to the fibre network.

There are two HFC network operators in Australia, Telstra and Optus, both serving customers in the large major metropolitan centres. By early 2009, we estimate that there were 830,000 cable broadband subscribers, a penetration rate of around 15% of the total broadband market in Australia. Telstra has indicated it will seek to expand the number of services it provides over its HFC network to compete with fibre-based services provided on a wholesale basis by a NBN operator. Telstra plans to launch very high-speed Internet services in Melbourne by the end of 2009. However, if the price of fibre-based services provided by the NBN operator is attractive to Telstra relative to the cost of servicing subscribers through an upgraded HFC network, then we may see Telstra abandon a strategy to upgrade the HFC in other major centres.

With respect to municipality broadband, councils and communities are beginning to understand the social and economic benefits that broadband can bring to their communities. It is therefore of critical importance that cities are taking charge of the development of their knowledge-based environments. A proactive local government is a vital element in the development of broadband, to the point where it can begin to deliver community benefits in terms of education, healthcare, community services and job creation.

The statistical sections of this report provide broadband statistics relating to the number of subscribers and market shares of major providers as well as additional data relating to DSL, cable and other broadband technologies. Of particular note is that the wireless broadband market is currently booming and this trend is expected to continue into 2010.

In 2008 fixed broadband access among Internet household in Australia stood at around 67%, trailing the leading broadband nations, such as Denmark, Netherlands and Switzerland, which are approaching 100%. New Zealand lags further behind though both countries are like to close the gap due to reform of their respective telecommunications industries. At the beginning of 2009 only 26% of broadband connections provided peak download speeds of 8Mb/s or more, up slightly from 20% at the end of 2007. Australia lags its peers with respect to slower broadband connections too. In early 2009 around 51% of broadband connections deliver speeds of 1.5Mb/s or more, up from 35% at the end of 2007.

The business market has been quick to embrace broadband – by 2009 the vast majority of the business sector had made the transition. Further growth is expected moving into 2010 despite difficult economic conditions in Australia. As business users gradually move to faster broadband access via ADSL2+ and, when it’s built, services from the fibre based national broadband network, businesses are increasingly embracing new broadband applications.

In 2008 business broadband usage increased by 143% from just over six million gigabytes downloaded in December 2007 to over fifteen million gigabytes downloaded in December 2008. Over the same period household usage grew by only 24% to 66 million gigabytes.

However business users have been earlier adopters of several broadband media services and in 2009, despite difficult economic conditions, household users may increasingly take up similar services, most notably, IPTV. However pricing of broadband media services is critical for household users. As such the emergence of an economically attractive revenue model based on advertising or other forms is critical.

BuddeComm’s 2009 Australia Broadband Market – Overview and Statistics annual publication profiles key sectors in Australia’s wireline broadband market. It provides an overview as well as analysis of the National Broadband Network proposals to build a nationwide fibre optic to the home network as proposed by the Australian Government in April 2009. This report also provides an analysis of both the copper and HFC based broadband infrastructure in Australia and includes an overview of the major network operators, wholesalers and retail service providers. The report also examines municipality networks as well as home networking. The statistical sections of this report provide historic data as well as forecasts relating to broadband usage, Internet service providers and the business and residential markets for broadband.

For more information see: Australia – Broadband Market – Overview and Statistics

Estonia’s telecom market has benefitted from many years of strong economic growth and investment, facilitated through competition and implementation of an EU-mandated regulatory framework which will stand the market in good stead in light of Estonia’s current economic situation.

Internet usage is high, with the proportion of the population who are Internet users exceeding 64%. The market has moved almost completely from dial-up access to broadband, with DSL subscriptions the most popular, and boasts the highest broadband penetration level of all Eastern European countries, approaching 25%. Widespread Internet usage has underpinned the country’s emerging Internet economy, with various e-commerce and e-government services available and widely used.

A well developed cable TV sector has provided a strong base for infrastructure-based competition with the network of the largest cable TV operator accessible by over 50% of households. Competition in the digital pay TV market is healthy as take up of broadband TV (IPTV) and satellite pay TV is growing annually. Analogue switch off has been brought forward from the original date of 2012 to July 2010, with a phased transition to complete switch off currently underway.

A highly developed mobile market is evident, with seven competing GSM or WCDMA networks pushing SIM card penetration levels beyond 100%. To grow revenue service providers are focusing on increasing usage and hence revenue per subscriber, mainly in the form of minutes of use and marketing of mobile broadband services. The latter holds much promise given the current low mobile broadband penetration levels and hence strong annual growth rates of mobile broadband take up.

Key highlights of the new BuddeComm report:

• Healthy infrastructure based competition in the broadband market is evident as DSL makes up a shrinking proportion of a growing total broadband subscriber base. FttH/FttB has been the biggest gainer, which grew by 40% during 2008 to make up approximately 21% of total fixed broadband subscriptions, a trend expected to continue in the future as the incumbent and competing operators deploy fibre access networks.
• Broadband TV (IPTV) is used by over 10% of total of TV viewers, with a 40% annual increase in subscriptions during 2008 alone. Subscriber figures for major cable TV operators have remained constant since IPTV was introduced in 2006, suggesting IPTV has been predominantly taken up by first time pay TV subscribers. Growth in satellite pay TV take up was relatively subdued in 2008 after annual growth rates in excess of 100% during the previous two years. Take up growth during 2009 is expected to be affected by Estonia’s current economic woes.
• Usage of online services is high – over half the population undertakes banking online, checks emails or looks for information and services. Take up of interactive or multimedia online services such as chatting, web TV and VoIP is increasing annually.
• All Estonian citizens and residents over the age of 15 are issued with an Electronic ID (eID) card which facilitates secure authentication and legally binding digital signatures for public and private online services. The eID is a key enabler of authentication-based online services and hence will facilitate future development and take up of e-commerce and e-government services. A mobile SIM card-based version of eID is also available, opening up opportunities in developing mobile-based or facilitated online services.
• Over 50% of businesses already utilise e-government services such as filling in and returning forms. Online voting has been used since 2005 and the world’s first parliamentary “e-vote” took place in 2007.
• A major e-health initiative, the Digital Health Information System project, commenced in 2008 with development to continue until 2013. Initial benefits include making and cancelling appointments with a health care service provider online via one web portal. Participation by all health care service providers is mandatory.
• Four 3G mobile networks are in operation following the launch of services by a new entrant during 2008. 3G and HSDPA has facilitated introduction of mobile broadband services, with subscriptions increasing annually by over 100% since 2005. The future growth path of mobile broadband is expected to emulate that of the mobile voice market over the coming years as the cost of access and capable handsets decrease and end user awareness and ease of use increases.

BuddeComm’s Annual Publication, ‘Telecoms, Mobile and Broadband in Estonia‘, provides a comprehensive overview of the trends and developments in the telecommunications, e-health and converging media markets in Estonia.

For more information see: Estonia – Telecoms, Mobile, Broadband and Forecasts.