The digital divide often refers to two distinct issues: first,
the gap in availability of broadband infrastructure (usually between densely
populated urban areas and sparsely populated rural areas); and second, the gap
in broadband take-up between certain demographic groups, with socio-economic
factors often being key drivers.
Many governments and organisations in Europe are developing
broadband policies to address the digital infrastructure divide, by stimulating
investment in high-speed broadband infrastructure in rural areas; for example,
through the provision of public–private partnerships and structural funds.
The focus of this article, however, is on the options available for
tackling barriers to the adoption of high-speed broadband services among lower
socio-economic groups, to meet the European Commission’s Digital Agenda for
Europe (DAE), which proposes ambitious targets for high-speed broadband
take-up.
Only 2% of homes within the EU have taken up ultrafast
broadband subscriptions while fixed broadband take-up is only 62%, meaning that
38% of households are still digitally excluded.
The DAE targets are defined as: 100% basic broadband
availability to European Union (EU) citizens by 2013; 100% 30Mbps (fast)
broadband availability to EU citizens by 2020; 50% 100Mbps (ultrafast)
subscriber take-up in homes by 2020. According to the EU Scoreboard,1 basic
broadband coverage is available to over 95% of EU citizens and fast broadband
coverage is available to 54%. Yet only 2% of homes within the EU have taken up
ultrafast broadband subscriptions – and this is the most relevant statistic to
this article.
Analysys Mason’s own research demonstrates that the extent
of the digital divide is still quite significant in terms of the take-up of
fixed basic, fast and ultrafast broadband services across Europe. Figure 1
shows that fixed broadband take-up is 62% for Europe, meaning that 38% of
European premises do not have any fixed broadband connection.2 lack
of understanding of the relevance and benefits of broadband lack
of skills or familiarity with information technologies, or confidence
to use them affordability of connection and access fees, and devices
with which to access broadband.
UK statistics show
that almost half of the UK’s adult population who do not use the Internet live
in social housing and are in lower socio-economic groups. Although this
statistic will vary across Europe, affordable housing tenants present an easily
identifiable target group towards which interventions can be targeted. For
providers of affordable housing, it has become increasingly important to make a
channel shift in how they communicate with tenants and receive payments
electronically, in order to increase efficiency and protect rental income.
Affordable housing providers may therefore consider subsidising broadband
infrastructure or service provision to encourage take-up among tenants.
Strategies to connect the unconnected
UK statistics show that almost half of the UK’s adult population who do not use the Internet live in social housing and are in lower socio-economic groups. Although this statistic will vary across Europe, affordable housing tenants present an easily identifiable target group towards which interventions can be targeted. For providers of affordable housing, it has become increasingly important to make a channel shift in how they communicate with tenants and receive payments electronically, in order to increase efficiency and protect rental income. Affordable housing providers may therefore consider subsidising broadband infrastructure or service provision to encourage take-up among tenants.
Intervention options
|
Description
|
Risks
|
Benefits
|
Market-led –
no intervention
|
Operators are left to target low socio-economic groups
Likely to work in densely populated areas where operators
can generate a return on investment by targeting multi-dwelling units
|
Market may not lead, as low socio-economic groups are seen
as a lower revenue opportunity and a credit risk to operators
No co-ordinated strategy to bridge the digital divide,
hence unable to influence DAE targets
|
No investment required from government or social-housing
providers
|
Demand aggregation
|
A moderate intervention to aggregate demand, making it
more commercially appealing to operators
Possibly using CSR or other funds to subsidise connection
and rental fees
|
Requires investment resources to aggregate demand and lead
a procurement activity
May not result in significantly reduced price broadband
services as operators may use funds to offset risk and to increase
profitability
|
The application of CSR or other funds will reduce operator
exposure to financial risk and likely to attract service competition
Broadband connection and rental costs can be reduced if
funds applied correctly
|
Direct intervention
|
Commercially led joint venture to build infrastructure to
affordable housing premises
|
Requires significant upfront capital investment in
infrastructure
May be subject to state-aid challenges if public subsidy
involved
|
High degree of control over technology choice and
geographical target
Ability to influence meeting of DAE 2020 take-up targets
|
Figure 1: Broadband take-up among European households
in 4Q 2012 [Source: Analysys Mason, 2013]
The primary barriers to broadband adoption can typically be
classified as follows:
The first two barriers can be addressed through government
programmes to implement education and demand stimulation initiatives such as
the development of e-government, e-health, e-learning and e-business, aimed at
encouraging the development and use of new broadband applications.
There is a clear correlation between the affordability of
broadband services and the levels of broadband penetration, therefore
presenting greater challenges in achieving the DAE's broadband take-up targets
for 100Mbps services.
Addressing affordability requires other types of
intervention. Our analysis shows a clear correlation between the affordability3 of
broadband services and the levels of broadband penetration in a selection of
European countries (Figure 2). Affordability will present an even greater
barrier to adoption in achieving the DAE’s 100Mbps broadband take-up targets,
as high-speed broadband usually consists of higher connection and monthly fees
than basic broadband services.
Figure 2: Relationship between affordability and fixed
broadband penetration [Source: Analysys Mason, 2013]
It is particularly important to address the digital divide
in order to meet the European Commission’s DAE, which proposes ambitious
targets for high-speed broadband services.
Analysys Mason conducted the most comprehensive literature
survey of the economic benefits of broadband for the European Commission4 and
there is a growing consensus that a 10% increase in broadband penetration
results in an increase in GDP growth of between 0.9% and 1.5%; therefore,
broadband is important for Europe’s economic growth and development. Our study
also highlighted the role of broadband in communities in improving education
and skills, increasing employment opportunities, saving money by shopping
online, reducing crime, and in improving general well-being.
Low-income groups in affordable housing are a target group
towards which interventions can be targeted. Affordable-housing providers may
therefore consider subsidising broadband infrastructure or service provision to
encourage take-up among tenants.
Without a robust digital inclusion strategy to address the
digital divide, lower socio-economic groups will face increased marginalisation
and social exclusion. However, with an ever-increasing reliance upon high-speed
broadband communications in our daily lives, addressing the digital divide
could be the opportunity to develop future-proofed fibre solutions targeted to
lower-income groups.
The cost of high-speed broadband services is relative to the
large investment in infrastructure that must be recouped by operators. By
reducing the cost of providing infrastructure to lower-income groups, it may be
possible to tailor lower-cost broadband products that bridge the affordability
gap. Subsidies from public-sector bodies, affordable-housing providers, or
operators’ corporate social responsibility (CSR) budgets may help to bridge
this gap further.
It may be possible for operator- and public-sector-led
subsidies targeted at affordable-housing communities to reduce the cost of
broadband provision to lower-income groups, through demand aggregation or
through direct investment in infrastructure.
There are a wide range of options available to improve the
affordability of high-speed broadband services, with a particular focus on
affordable-housing communities. We have summarised these into three broad
categories as shown in Figure 3, with further explanations provided below.
Figure 3: Intervention options [Source: Analysys Mason,
2013]
A market-led intervention is more likely to work in densely
populated urban areas where there is existing competition amongst ISPs, where
they can see the opportunity to target multiple users in a single premises for
themselves and where ISPs have access to affordable backhaul products. However,
governments will not have any influence over broadband roll-out and in their
ability to meet the DAE targets.
The second example (demand aggregation) requires an
organisation (local government authority or affordable-housing provider) to take
responsibility for co-ordinating the procurement of affordable broadband
services. By pooling demand in this way, ISPs have access to a captive market,
increasing the attractiveness of the programme. The availability of capital or
revenue funds could be used to subsidise connection and rental fees if applied
correctly. It may be possible to influence the DAE targets by setting the
requirement for 100Mbps broadband services. However, this will increase the
need for subsidy to ensure the broadband services are affordable and care will
need to be taken to ensure procurement does not breach any state-aid rules.
The third option will require a carefully constructed
venture able to generate a reliable and sustainable income by providing
affordable high-speed fibre broadband services to low socio-economic groups to
offset the investment in fibre infrastructure. The venture should comprise at
least one technology partner to design, build and operate the network, although
local stakeholders such as local-government organisations or affordable-housing
providers may wish to be a part of the joint venture to influence the priority
areas for investment, potentially in return for profit share. However, the
involvement of public-sector organisations may introduce state-aid
implications; therefore, the sources of funding will have to be assessed
carefully.
The above options are intended to be a high-level list of
possible intervention strategies to bridge the digital divide and are not
exhaustive. The choice of measures taken to bridge the digital divide will be
driven by a range of factors such as the socio-economic make-up of the
population in each country, the availability of broadband infrastructure, level
of broadband service competition, availability of public or private funding,
and the willingness of local operators, local government and affordable-housing
providers to engage in bridging the digital divide in order to meet the DAE
targets.
- See more at:
http://www.analysysmason.com/About-Us/News/Insight/Bridging-digital-divide-Jul2013/#sthash.W1MU0kig.dpuf
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