Broadband Becoming the New Utility Like Water and Electricity

Broadband is becoming so vital for businesses and offers such competitive advantages that it is being compared to utilities such as water and electricity, contents The U.N. Conference on Trade and Development's Information Economy Report 2006, released Thursday. This is disturbing news for developing countries, where broadband access is scarce and the basics needed to provide it at reasonable cost are often lacking.

The report says there are large differences between developed countries, where broadband is growing rapidly, and developing countries, where dial-up Internet connections are still prevalent when there are any connections at all.

In rich countries, broadband subscribers increased by almost 15% in the last half of 2005, reaching 158 million. Business broadband connectivity grew most significantly -- in the European Union, for example, from 53% of enterprises in 2004 to 63% in 2005.

Broadband enables companies to engage in more sophisticated e-business processes and to deliver a greater range of products and services through the Internet, thus maximizing the benefits of information and communication technology (ICT).

The use of broadband directly increases competitiveness and productivity, the report says -- and that, in turn, has an impact on macroeconomic growth. It is estimated that broadband can contribute hundreds of billions of dollars a year to the Gross Domestic Products (GDPs) of developed countries over the next few years.

The growth of broadband is largely due to competition and declining prices, but it also depends on available infrastructure -- and the report notes that many developing countries, because of the lack of economies of scale, have low incentive to expand broadband infrastructure outside urban areas.

Wireless technology and satellites can help circumvent the cost of infrastructure for sparsely populated, remote or rural areas. Governments have an important role to play in improving access to broadband through infrastructure and policy, the report adds. Policies can either encourage or be a disincentive to competition, and thus have an impact on availability and prices.

Availability of broadband in developing countries is difficult to estimate; only 71 of 151 nations submitted data on the subject. But 48 of those 71 said broadband penetration rates were under 1%. Of that group, more than half of broadband subscribers were in mainland China, and even China´s broadband penetration rate was only 2.9%. The highest penetration rates among developing countries providing data were in Asia, led by the Republic of Korea at 25.5%.

Although there is virtually no data on the value of online sales in the developing world, it is apparent that e-commerce accounts for a very small percentage of the overall sales of domestic firms there, and other e-business activities such as extranet usage, e-government, e-learning and remote work, are almost non-existent. Still, some developing countries show a high rate of use of e-banking, such as Brazil (75% of enterprises, excluding micro-enterprises used the Internet for banking in 2005) and Morocco (34.9%).

E-commerce continues to grow rapidly in developed countries. In 2004, the highest proportion was in business-to-business trade (93% of all e-commerce in the U.S., for example). Growth rates have averaged 6-10% in recent years (manufacturing and wholesale, respectively).

Mobile phones continue to be a technology that "fits" poor countries, and such phones are the only form of ICT in which developing countries have surpassed developed countries in the number of users (1.2 billion versus 800 million). Nonetheless penetration rates remain lower in developing economies. In some industrialized nations, the penetration rate is over 100%, while in several dozen developing countries it is under 10%. Schemes to make mobile telephony more affordable account for much of the growth in developing countries, the report notes. For example, in 2004 almost 88% of mobile subscribers in Africa used prepaid services that were tailored to low-income markets.

Among other trends identified in the Information Economy Report, ICT sector value-added and employment grew in developed countries in 2003, and the report contends that this increasing demand and supply