Europe lagging broadband benefits


This article is part of our special report Broadband: driving recovery?.

Broadband technology is boosting GDP globally – especially in the developing world – but Europe remains the only continent where telecommunications business is running at a loss, according to speakers at the Mobile World Congress.

Speaking at a forum on the future of broadband in Barcelona on 26 February, Indonesian Telecoms Minister Tifatul Sembiring said that – despite concerns in Indonesia about the impact of the financial crisis in the US and Europe – growth in broadband was central to optimism that the country's buoyant economy can be maintained. Indonesia’s economy grew by 6.5% of GDP during 2011.

Broadband can open up the potential of Africa

“When broadband coverage reached 6.5% of the population in Indonesia, this resulted in a twofold increase in sales of 13.5%. Broadband is first and foremost an economic priority,” said Sembiring.

In markets such as Nigeria, where broadband is currently available to only 1% of the population, each 10% increase in usage would create a corresponding 1.2% increase in GDP growth, Edward Deng, vice president of Huawei, told delegates.

“In broadband, the [Indian] government will create ‘anchor’ demand and then there will be serendipitous commercial developments,” said Vijay Kelkar, an economist who chairs the board of the Forum Federations in India and formerly headed the country's Finance Commission.

European broadband costs too low

Europe is the only world region where telecommunications companies are making losses, Luigi Gabardella, a board member of the European Telecommunications Network Operators' federation (ETNO) – told delegates.

He said that although telecommunications companies averaged growth of 10% worldwide last year according to industry estimates, they suffered a corresponding 10% loss in Europe.

Gabardella blamed low prices for European broadband, but he added that problems faced by data overload would soon start to affect even broadband-penetrated markets.

Broadband provision should be liberalised

Finding solutions to this problem offered European companies a chance to discover innovative new solutions for growth, he said.

China views broadband no less strategically than tangible infrastructure projects such as roads and shipping, the country’s former chief negotiator in its accession talks to the World Trade Organisation told the forum.

Long Yongtu, who is now a member of the influential Chinese think tank Boao Forum for Asia, said the Chinese government was committing $300 billion to broadband over the next five years because of the benefits to the poor through improvement to health, education and “social harmony”.

He added that trade policy on broadband provision should be liberalised within the ambit of the World Trade Organisation.

The extension of broadband across Australia will contribute to the country overtaking the UK’s GDP by 2027, when the island’s population will still be half that of the UK, Tim Williams, an Australia-based policy advisor for consultancy Arup, told the forum.

Williams said: “The Australians have recognised the value of the digital revolution: not simply to their economy but to healthcare, the education system and public service transformation at large.” Though he added that the country’s Asian location would also be a contributing factor. “Broadband is about creating demand, local and global coming together... the developing world is taking broadband by the scruff of its neck,” concluded Williams.

“The [Indonesian] government realises that there are still areas that need work [on broadband] but has created a regulatory environment for economic growth. We are on the right track for broadband in all sectors and we are looking for an impact not only on the economy but also in lifestyle changes,” said Tifatul Sembiring, the Indonesian minister of telecommunications.

Changes to the Chinese government set to follow the Communist Party's national congress in autumn this year will have little impact on the country's commitment to broadband provision, Lifang Chen, the head of global public affairs and communication at Huawei told EURACTIV after the forum. “There may however be some slight differences in the manner of achieving mass broadband coverage, with more scope for private sector involvement,” Chen added.

Although 70% of the developing world has access to the internet, not all is through broadband networks, which enable faster and high-volume access.

However, broadband has spread rapidly in wealthier countries, and it is in the developed world that both internet access and broadband remain elusive. Only 9% in Africa have internet access, of whom fewer than 2% use broadband.

The lower economic base of the developing world enables huge commercial strides to be achieved once broadband is installed, a ratio which the West finds difficult to emulate.

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