GSMA Intelligence recently released the latest update of our global fixed broadband and pay-tv market forecasts, covering 2020 to 2025 and giving insights into the current state of the market.
The good news? Fixed broadband penetration in many developed markets has already reached 85 per cent to 90 per cent of households (see chart, below, click to enlarge).
The bad news? Many developed nations still have a significant share of households lacking access to fixed broadband altogether or receiving internet speeds that are significantly slower than national targets.
This raises the question of how to systematically provide universal fixed broadband that is affordable, fast, reliable and, foremost, available to the remotest part of the country.
In theory, with no competitive environment in those areas, governments have limited options. Yet, against the backdrop of a global pandemic, all governments understand that reliable broadband connections have become more important than ever, enabling work from home, remote schooling, virtual medical appointments, and key public services, not to mention helping people keep in touch with friends and family, shop online, and keep themselves entertained.
To be sure, governments are paying attention to this. But that doesn’t mean they’re all following the same strategies to address the challenge of underserved and unserved households and communities. Consider some recent examples:
- United Kingdom. An Ofcom report in June 2020 revealed more than 600,000 homes and businesses in the country are still unable to receive a decent fixed line broadband service. The solution? The government announced an unprecedented £5 billion ($6.9 billion) subsidy to support the deployment of gigabit broadband in the hardest-to-reach areas of the country, including prioritising delivery to those premises without access to superfast broadband. In a recent spending review, the government set out how first tranche of £1.2 billion will be made available to industry over between this year and 2025 to expand broadband coverage.
- US. In May 2020, the FCC reported 18.3 million people lacked access to broadband, nearly 6 million unserved households and business. The regulator unfurled its Rural Digital Opportunity Fund (RDOF), a $20 billion, ten-year opportunity for service providers and their vendor partners to build and connect faster broadband speeds in rural and unserved areas. As of December 2020, $9.2 billion had been awarded to provide high-speed broadband internet service to 5.22 million unserved homes and businesses, boosting access in rural areas. The FCC noted that $6.8 billion in funding which was not awarded will be rolled over into a future subsidy programme that can use up to $11.2 billion to target partially served areas and remaining unserved areas.
- Germany. In November 2020, The European Commission approved a €6 billion ($7.2 billion) German scheme (extendable up to €12 billion) to support the deployment of very-high capacity broadband networks offering Gigabit speeds. The infrastructure is intended to supply those customers who do not yet have access to speeds of at least 100Mb/s. In the second expansion stage from 2023, support will also be available for the deployment of Gigabit infrastructure for households that already have access to speeds of 100Mb/s, but not to a network which already provides very high speeds up to 1 Gigabit.
While indicative, this is not an exhaustive set of examples. Canada, France and Spain and others have also recently earmarked funds to expand high-speed broadband and deliver services in challenging areas. It’s exciting to see governments taking steps to spur investment in middle- and last-mile infrastructure and close gaps in adoption. But does setting aside funds guarantee the success of these programmes?
Of course not. There are certain key factors playing a crucial role in the success of these programmes
Collaborating with local stakeholders to create policy framework
Regulators need to have consultations with state governments, providers and even communities to build consensus on the specific goals for broadband access, setting timelines for achieving them and creating broadband programmes. These programmes should clarify questions like which entities can provide broadband and access the infrastructure, what will be threshold of the investment required and what will be the rights of way needed to deploy broadband infrastructure. One such programme, USO broadband launched in March 2020 by Ofcom in the UK, gives a legal right to request a decent, affordable broadband connection from BT. It also specified that maximum outlay of providing connection under programme can’t exceed £3,400, unless the end-user pays the excess costs over this amount. It provides clarity to stakeholders about whom to approach and what to expect if they want to address the lack of fixed broadband connectivity in their jurisdictions. However, this framework would not fit everywhere and thus, every country must prepare their own roadmap and framework which address their unique challenges.
Weighing the trade offs: speed, coverage and cost
There is no single broadband technology best suited to address hard-to-reach areas. Each country must assess technology based on several criteria including economics, national broadband speed targets and geographic characteristics. For instance, GSMA Intelligence data suggests 54 per cent of the German households are still running their fixed broadband accesses over xDSL, which means half of the access in the country is receiving average speed of less than 100Mb/s. This means FTTH, which is though labour and capital intensive, could be the preferred technology for the market given fibre is future proof and serves both residential and enterprise customers. In contrast, the USA, due to its huge landmass, has decided to invest in satellite and fixed wireless, by allocating $1.3 billion to LTD Broadband and $885 million to Starlink broadband to serve rural homes and business. Both technologies have limited throughput, but promise a lot on their ubiquitous coverage. Hence, every country has to offer conditional choices and enunciate them clearly to all the stakeholders.
Address the funding issue
GSMA Intelligence analysis suggests that connecting the last 10 per cent of households in a country could be five- to ten-times more expensive per household compared to initial rollouts. For example, bringing fibre to an urban premise in the US averages $400 but is more than $2,000 in rural areas. In Germany, cost per rural premises passed averages $3,000, while in Canada it is $1,500. Serving communities with no internet will require deep pockets and government aid. An estimation by the Federal Communications Commission in 2017 suggested that bringing 25Mb/s FTTP and/or cable to 100 per cent of locations would cost $80 billion, thus, the $20 billion RDOF program is only about 25 per cent of what is required. To complement the funding, policymakers must be flexible and innovative in their approach, thinking in terms of where government should be the infrastructure owner, a partner with ISP or where should it create capacity only on demand.
Grants are an important tool in delivering last mile connectivity where the market does not offer it. However, to address all the barriers, every stakeholder including policymakers, industry players, local governments and civil society require a clear strategic vision, hand-in-hand approach and coherent implementation.