Government Objective

1. FTTH Council, BrusselsThe Economics of BroadbandNiall Ó Donnchú25th May 2004Niall.odonnchu@dcmnr.ie

2. Government Objective “That Ireland be in the top 10% of OECD countries for broadband connectivity within 5 years.” New Connections

3. Irish Market Statistics • Domestic Internet minutes account for 40% of all retail minutes. This now exceeds voice minutes. • 45% PC ownership at home • Ireland stands 4th in the Eurobarometer of Internet penetration behind Holland, Denmark and Sweden contd

4. Irish Market Statistics • DSL Prices have halved since March 2003 • DSL consumers now stand circa 40,000. • Mobile phone penetration stands at 81% (3.17m) • Average mobile phone spend per month is €46 – European average is €30 contd

5. Irish Market Statistics • 717m SMS texts were sent in quarter one 2003 • Ireland has the highest monthly revenue per user on mobile phones. In Western Europe only Norway (€47) and Switzerland (€49) are higher • Sectoral Revenue is €3.6 bn per annum • Sectoral VAT stands at €600m per annum

6. The International Scene • Global broadband subscribers grew by 72% to 63 million during 2002 (i.ec. between 1 Jan and 31 Dec); • In comparison, there are 1.13 billion fixed-line users and 1.16 billion mobile phone users; • By region, Asia has 25.1 million broadband connections; the Americas has 24.6 million connections and Europe has 12.5 million; • South Korea still leads the world with 70% of all households connected to broadband. contd

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8. The International Scene • Hong Kong and Canada follow South Korea in the ITU's ranking. Japan was 10th, just ahead of the United States • Europe has lagged in broadband use because a lack of competition has kept prices high, and high prices have kept customers away

9. The internet financial bubble did not result from a lack of demand for telecommunication services. Note also trends for Health and Education.(Changes in the proportion of sector in disposable households incomes)

10. Health and Education are major factors in demand for broadband Canada & internet use Canada & household internet access Korea and Education Levels Households with PCs

11. Demand for Broadband Access has proven among the fastest growing of all communication services

12. World broadband subscribers are growing rapidly: over 100 million by end 2003

13. The Macro-economics of Broadband • Japan • Increased latent growth by 0.5% • Multiplier effect - 1.86 • Employment Citeria -1.85m • Improved labour productivity - 2.8% - 3.5%

14. The Macro-economics of Broadband • United States • Doubled natural rate of employment growth • IT investment accounted for 65% of growth in labour productivity in last decade • Brookings Institute estimate annual savings of $370bn • $23bn saved in reductions in congestion, travel time etc.

15. The Macro-economics of Broadband • Korea • $225.4bn in added economic value by 2012 • 820,000 jobs by 2012 • $50.8 bn in new exports by 2012

16. The Macro-economics of Broadband • Ireland • Consumer surplus 1.2% of GDP from broadband • 85,000 new jobs predicted over 10 yeas • Broadband investment of €200m could increase GDP by €4bn per annum (Fórfas) • ICT multinationals employ approx 35,000 in Ireland • ICT multinationals turnover amounts to €30bn per annum contd.

17. The Macro-economics of Broadband • ICT sector employs over 93,000 people in over 4,000 enterprise companies up from 47,000 in 1993 and foreign owned companies provide over 55,000 of these jobs • Ireland is the 3rd largest exporter of software in the world and seven of the worlds leading software companies having a base in Ireland • 1/3 of all PCs sold in Europe are manufactured in Ireland. • Ireland is the 4th most successful country in the world in attracting Foreign Direct Investment contd.

18. The Macro-economics of Broadband • Output of ICT products and services was equivalent to almost 16% of Irelands GDP in 2001. This increased by 18% pa over the period 1993-2001, twice the rate of overall GDP growth • Exports by the indigenous software sector grew by 28% in 2001 and amounted to €1.4 billion • Overseas ICT companies make a significant contribution to corporate tax receipts (€350 million in 2001)

19. Effects of Broadband • Effects on growth rate • Contribution to the rise of latent growth rate • Contribution to the rise of realised growth rate • Effects on production • Pervasive effects along with an increase in demand • Effects on employment • Employment growth from production growth • Improvement of labour productivity • Employment growth from new business creation utilising ICT

20. Effects of Broadband • Changes in individuals’ consumption behavior • Improvement in real consumption by the fall of prices • Increase of consumption along with the advent of attractive ICT related products • Changes in lifestyle • Realisation of abundant information reception/transmission • Realisation of distance learning/telemedicine

21. Effects of Broadband • Changes in business behavior • Introduction of new management technologies utilising ICT (Supply Chain Management, SCM etc.) • New business creation utilising ICT • Restructuring and reorganisation • Realisation of new work-style such as teleworking and benefits of reduced congestion, and design for roads, public transport

22. Roscommon Wexford Waterford Cork

23. MAN’s: 1st Phase

24. Management Services Entity • Independent neutral management of MANs • Competition underway • Target date for completion JUnen • to manage, maintain and market 26 MANs

25. Next Phase of MANs • 91 towns • Range of open access investments • 3 calls • Towns in each call to be decided • Competitive tenders • 1st Call: Summer 2004 • 1st Project: Autumn 2004

28. Going Forward • Group broadband scheme for remote areas • 140 towns over 1,500 population –88 un-served • Regional links through semi-states • Teleworking across public service • Rolling regulatory directives-