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Broadband Access: Analysis of Its Economic Impacts and Policy Implications Shawky El-Toukhy, Ph.D. ITA of NJ, Inc ARNET Professional Development Workshop in Collaboration with ITU Sharm El Sheikh, Egypt 4-6 March, 2005. Outline.

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Broadband Access:Analysis of Its Economic Impacts and Policy Implications Shawky El-Toukhy, Ph.D.ITA of NJ, IncARNETProfessional Development Workshopin Collaboration with ITUSharm El Sheikh, Egypt4-6 March, 2005

ITA of NJ, Inc

  • The Importance of Broadband/Advanced Telecommunications Infrastructure
  • Economic Impacts
  • Convergence and Broadband
  • Policy Implications
  • Attributes of an Effective Regulatory Body
  • Policy Implications for ARNET

ITA of NJ, Inc

stages of socioeconomic evolution
Stages of Socioeconomic Evolution
  • Agriculture
  • Manufacturing
  • Information

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information stage
Information Stage
  • Telecommunications and computers are the core of the current technological revolution.
    • Computers process and generate information.
    • Telecommunications transmits information through interactive loops and feedbacks.

ITA of NJ, Inc

information stage con t
Telecommunications & computers:

Process and interconnect information produced in all fields and spheres of activity.

Accelerate innovations as well as diffuse these innovations into other areas.

Play a major role in productivity improvements and competitiveness of most economies.

Information Stage (con’t )

ITA of NJ, Inc

dissemination of information the printing press
Dissemination of Information: The Printing Press
  • The current revolution in communications technologies is as important to our lives today , as the invention of the printing press was some five hundred and fifty six years ago.
  • Johannes Gutenberg’s printing press was arguably the most important invention of the past millennium.
  • Led to sweeping social, economic and cultural changes across the world ,facilitating the Reformation and the Age of Enlightenment.

ITA of NJ, Inc

the printing press con t
The Printing Press(con’t)
  • Dissemination of the printed word influenced art, literature, philosophy and politics.
  • Foundation of society rocked by rise of informed middle class…people could no longer be kept in the dark.
  • Re-created the world by shifting paradigms of information dissemination and communication among masses of humanity.

ITA of NJ, Inc

dissemination of information communications technologies
Dissemination of Information: Communications Technologies
  • Today we are witnessing a rapid development of communication technologies that is contributing to an equally important paradigm shift of rapid dissemination of information.
  • This shift is leading to a decentralization of traditional economic markets throughout the world.

ITA of NJ, Inc

paradigm shift consequences
Inter-connected global economy

Market where physical borders and distance are becoming increasingly insignificant

Defining perspective of globalization is “integration”

Symbol of the globalization system is “www”… unites everyone

Paradigm Shift Consequences

ITA of NJ, Inc

economic impacts
Telecommunications Technologies playing dominant role in determining course of economic growth.

Exercise a great power over commercial destinies of firms, thus having the power to redistribute wealth and income among both individuals and regions.

Location decisions are increasingly affected by considerations of climate, prestige, amenity, and communications access.

Economic Impacts

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economic impacts con t
Better communications access increases connectivity of places.

Improved connectivity lessens need to cluster economic activities in order to reap benefits of agglomeration economies.

This affects the location and distribution of these activities in space.

Economic Impacts (con’t)

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economic impacts con t1
As the country advances into an information economy, the role of these technologies increases significantly.

Presence or absence of such technologies will have a quantifiable impact on the direction and rate of socioeconomic development.

Economic Impacts (con’t)

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economic impacts con t2
These technologies allow corporations to increase efficiency and control by integrating virtually all critical business functions from the assembly line to customer billing.

Deployment of these technologies leads to the creation of new industries and increased productivity of existing ones.

Empirical evidence shows strong association between advanced communications technologies and growth in productivity/economic performance for industries that utilize these technologies (statistical models).

Economic Impacts (con’t)

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economic impacts con t3
Communications technologies has the power to reshape the basic structure of production and performance of the economy.

52% of all new investments in plant and equipment in the U.S. in 2003 were in the form of purchases of information technology, specifically computers and telecommunications devices.

Economic Impacts (con’t)

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share of producers durable equipment constant 1996 dollars
Share of Producers’ Durable Equipment(Constant 1996 Dollars)

Source: United States Department of Commerce, BEA-NIPA, August 2004

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economic impacts con t4
Economic Impacts (con’t)
  • In U.S. studies that measured the strengths of forward and backward linkages of communications sector, it has been found that the sector has a strong forward linkage; therefore it is qualified to be “key” or “leading” sector in the economy.
  • This confirms the held view that communications is a strategic sector in the emerging information economy.
  • For regional development this means that policies which promote the construction of advanced communications infrastructure would lead to enhanced economic development .

ITA of NJ, Inc

economic impacts con t5
Economic Impacts (con’t)
  • Studies show that given adequate access to Broadband, proliferation of grid computing and web services applications will yield substantial productivity gains in the U.S. and worldwide over the next decade.
  • North Carolina Study example:
    • Deployment of these high performance technologies will contribute the following gains to the state’s economy over the forecasted growth for 2002-2010 period.

Source: Cohen R. Grid Computing, Projected Impact on North Carolina’s Economy and Broadband Use through 2010, Rural Internet Access Authority; September 2003.

ITA of NJ, Inc

economic impacts con t6
Economic Impacts (con’t)
  • Industries that are early adopters showed substantial gains in labor productivity and output over the base forecast for the 2002-2010 period.

Source: IBID

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economic impacts con t7
Economic Impacts(con’t)
  • The New York State Study:
    • The effect of full deployment of broadband technology by the year 2010.
    • The effect of the absence of full deployment on the state’s competitiveness in the regional market by the year 2010.

Source: El-Toukhy SA. Analysis of the Economic Effect of the Telecommunications Network Modernization on New York State’s Economy: Telecommunications Exchange Task Force, Office of Economic Development, State of New York; August 1993.

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historical telephone penetration estimates


Access Line

Per 100


Percentage of Household with Telephones






























Historical Telephone Penetration Estimates

Source: FCC, Wireline Competition Bureau, December 2004

ITA of NJ, Inc

percent of u s households with a telephone computer and internet use
Percent of U.S. Households with a Telephone, Computer, and Internet Use

Source: A Nation Online : Entering the Broadband Age , NTIA, September 2004

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Convergence and Broadband:

A Challenge to Regulators

  • Convergence has become a major market force where entire industries converge:
    • RBOC are no longer just telephone companies.
    • Cable companies are providing high speed internet access and communications services.
    • Power companies provide communications services.
    • Traditional broadcast networks and cable networks are establishing websites, thus providing content to supplement their video services.

ITA of NJ, Inc

broadband and convergence
Technologies are also converging. The development of cable modems and DSL technology is taking us to a world in which all communications modes (video, voice, and data) are readily accessible and conveniently bundled.

At the very core of all of these changes in the communications industry is the deployment of broadband technology.

It is this technology that allows high-speed access to data, video, and telephony. This access will affect the way we live, the way our children will be educated, the way we receive entertainment, and the way we do business.

Broadband and Convergence

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broadband and convergence con t
Broadband and Convergence(con’t)
  • The convergence of voice, video, and data (available in our homes) virtually on demand is also fueling massive capital investment in related industries.
  • Communications technology is being developed at a speed that defies comparison. To put it into perspective, it took radio 38 years to reach 50 million people. It took television 13 years and PC 16 years. It took the internet only 4 years to reach 50 million people.
  • The broadband market is growing rapidly and we are entering the Broadband Age (decline of dial up connection in U.S. by 12.7% in 2003).

ITA of NJ, Inc

total broadband subscribers high speed lines over 200 kbps in at least one direction
Total Broadband Subscribers High speed lines (Over 200 kbps in at least One Direction)

Source: FCC, High speed services, Wireline competition Bureau, Dec. 2004

ITA of NJ, Inc

policy implications
Policy Implications
  • Telecommunications technologies’ infrastructure is the key to progress in many areas of critical importance: economic development, education, health care, agriculture, energy, transportation, and national security.
  • To reap the benefits of this important infrastructure and thereby create economic growth, we must have an effective regulatory body with the following attributes:
    • Independent, transparent, predictable, and appropriate professional staff.

ITA of NJ, Inc

policy implications effective regulatory body attributes
Policy Implications:Effective Regulatory Body Attributes
  • Independence
    • A regulatory body must be independent from the companies it regulates and free from direct political pressure.
    • For a regulatory body to have an effective mechanism, it must have an adequate funding.

ITA of NJ, Inc


Policy Implications:Effective Regulatory Body Attributes (con’t)

  • Transparency
    • A regulatory body must be open and transparent. All rules and decisions are clear and openly arrived at.
    • Comments from all stakeholders must be a part of the process. A clear process that people (consumers and investors) can understand and rely on.

ITA of NJ, Inc


Policy Implications:Effective Regulatory Body Attributes (con’t)

  • Predictability
    • A regulatory body must be predictable. This allows entrepreneurs and investors to manage risk.
    • Has clear authority and jurisdiction through its national law.
    • Has power over licenses, spectrum, pricing, and whatever is determined to be needed.
    • Has the power to enforce its rules.

ITA of NJ, Inc


Policy Implications:Effective Regulatory Body Attributes (con’t)

  • Capable Professional Staff
    • Up to date professional staff is a must to the success of the regulatory mission.
    • By recruiting the best and the brightest and offering incentives necessary to retain them.
    • Training has to be an important part of a regulatory body’s budget priorities.

ITA of NJ, Inc

policy implications for arnet
Policy Implications for ARNET
  • Challenge for regional development, to make globalization work, and to reap the benefits of this critical infrastructure is to have all nations upgrade their infrastructure and plug into the network.
  • To attract capital and investment, a country needs:
    • An effective regulatory regime that abides by established technical and business standards.
    • To encourage the harmonization of telecommunications policies among ARNET members.

ITA of NJ, Inc

policy implications for arnet con t
Policy Implications for ARNET (con’t)
  • Given the current state of affairs in the market, the obvious question becomes what is the role of the regulators? What should be done at this critical juncture?
  • There are at least two major responsibilities:
    • To ensure that advanced services and technologies are actually built and deployed.
    • To ensure that deployment is conducted in a manner that leaves no one behind (benefits all).

ITA of NJ, Inc

hot issues facing arnet members
Hot Issues Facing ARNET Members
  • Transitioning from monopoly to competition:
    • Human resources
    • Technical and business standards
    • Billing
    • Pricing
    • Interconnection
    • Consumer protection
    • Security and emergency preparedness

ITA of NJ, Inc

questions or comments
Questionsor Comments?

ITA of NJ, Inc