Global Internet Connectivity: A critical success factor in the information economy Dr Tim Kelly, International Telecommunication Union, Telenor Carrier.

Global Internet Connectivity:A critical success factor in the

information economy

Dr Tim Kelly,International

Telecommunication Union,Telenor Carrier Venue,

2001

The views expressed in this paper are those of the author and may not necessarily reflect the opinions of the ITU or its membership. Tim Kelly can be contacted at [email protected].

AgendaAgendaConnectivity and reach

Internet and the digital divide Some international comparisons Some common myths “The Internet latecomer” problem

Connectivity and richness Broadband deployment Barriers to broadband deployment

Connectivity and economic opportunity

Source: ITU, adapted from Internet Software Consortium <www.isc.org>.

0.1 0.2 0.4 0.7 1.3 2.7 5.814.4

21.829.7

43.2

72.4

104.0

44%

67%

46%36%

70%

95%

79%

107%

81%93%

100%

135%

Jan-89

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Number of Internet host computers, Number of Internet host computers,

in millions, and annual growth in %in millions, and annual growth in %

0%10%

20%30%

40%50%60%

70%80%

90%100%

Internetusers

Mobile users

Telephone lines

Popul-ation

High income

Upper-mid income

Lower-mid income

Low income

300 million

490 million

912 million 6 billion

82 %69 %

58 %

15 %

Digital divide = Infrastructure divideDigital divide = Infrastructure divideUser distribution, by income group, Jan 2000User distribution, by income group, Jan 2000

Source: ITU World Telecommunication Indicators Database.

Barriers to connectivityBarriers to connectivity

Regulatory barriers 46 countries permit only one ISP A significant minority of countries restrict access to

international IP bandwidth to a single IAP A majority of countries place limitations on use of

international IP bandwidth for voice over IPEconomic barriers

High costs for int’l leased lines in some markets, esp. those without infrastructure competition

For countries with only low levels of IP demand, unit bandwidth costs are higher than for countries with higher levels of demand (economies of scale)

Many countries are not served by international cables (e.g., landlocked countries, small islands)

More connectivity = more ISPs = More connectivity = more ISPs = more connectivitymore connectivity

ISPs and Leased Line Internet connections in countries with more than 1 million inhabitants

R2 = 0.7851

0.01

0.10

1.00

10.00

100.00

0.01 0.10 1.00 10.00 100.00 1000.00

Leased lined connections to the Internet per 1 million inhabitants

ISP

s pe

r 1

mili

on in

habi

tant

s .

Source: OECD, adapted from Netcraft.

Market liberalisation and Market liberalisation and investment brings down pricesinvestment brings down prices

Band-X: Bandwidth Price Index (2Mbit/s). Oct ’98 =100

0

20

40

60

80

100

120

Oct-98 Dec-98 Dec-99 Dec-00

London Sydney

London Hong Kong

Composite World .

Los Angeles Tokyo

New York London

Los Angeles Hong Kong

London Amsterdam

London Frankfurt

London Milan

London Madrid

London Brussels

Composite European

New York Frankfurt

London Paris

Source: Band-X.

Connectivity: Myths and missesConnectivity: Myths and misses

The total bandwidth available in the United States is increasing three-fold every year. Therefore there will soon be universal connectivity.

Some 264 economies have Internet access. Therefore the whole world is connected.

Bandwidth across the Atlantic will soon amount to more than 1 Mbit/s for every person in North America and Europe. Therefore usage will soon be too cheap to meter

Connectivity: Myths and missesConnectivity: Myths and misses

The total bandwidth available in the United States is increasing three-fold every year. Therefore there will soon be universal connectivity.

Some 264 economies have Internet access. Therefore the whole world is connected.

Bandwidth across the Atlantic will soon amount to more than 1 Mbit/s for every person in North America and Europe. Therefore usage will soon be too cheap to meter

WRONG!WRONG!Connectivity is about distribution, not about total quantity

WRONG!WRONG!The vast majority of fibre optic cable is left dark and is made available only when price is right

WRONG!WRONG!The majority of countries have less connectivity than a single ADSL link

Inter-regional Internet backboneInter-regional Internet backbone

357 Mbit/s

19’716 Mbit/s

Asia-Pacific

LatinAmerica &Caribbean

2’638 Mbit/s

127 Mbit/s

Arab States, Africa

468 Mbit/s 171

Mbit/s

Europe

56’241 Mbit/sUSA &Canada

Source: TeleGeography Inc., Global Backbone Database. Data valid for Sept. 2000.

Inequalities in Inter-continental Inequalities in Inter-continental Internet bandwidthInternet bandwidth

Singapore Estimated 950’000 Internet users (Dec 1999) Around 800 Mbit/s international capacity (June 2000) Around 20 kbit/s per user (assuming 1 hour per day)

Egypt Estimated 200’000 users (Dec 1999) Around 26 Mbit/s international capacity (May 2000) Around 3 kbit/s per user (assuming 1 hour per day)

Uganda Estimated 25’000 users (Dec 1999) Around 2 Mbit/s international capacity (Feb 2000) Around 1.9 kbit/s per user (assuming 1 hour per day)

Telecom connectivity and Internet Telecom connectivity and Internet connectivity: connectivity: What’s the difference?What’s the difference?

Telecom world Platform is jointly-

provided circuits (cost-sharing)

Operators typically guarantee end-to-end connectivity

Financial arrangements based on negotiated settlement rates

Cash flows from core to periphery of network

Internet world Platform is leased circuits

(full-circuit paid by connecting operator)

Internet exchange points typically guarantee only efficient routing of traffic

Peering between Tier 1 IXPs; traffic exchange payments from Tier 2 IXPs

Cash flows from periphery to core of network

By 2005, the Internet may be: Available throughout the world A fully commercial undertaking Used primarily for multimedia streaming

The “Internet latecomer” problemThe “Internet latecomer” problem

In the beginning, the Internet was: North American Not-for-profit Used primarily for email & file transfer

Asia-Pacific

LatinAmerica &Caribbean

Arab States, Africa

Europe

USA &Canada

By the mid-1990s, the Internet had: Spread to the OECD countries Begun “privatisation” of the backbone Become primarily a channel for the Web

Two LDC “success stories”Two LDC “success stories”

Nepal 16-fold increase in IP connectivity in 8 months

following liberalisation of VSAT market in 1999 Lowest IP access prices in South Asia BUT, opening up VSAT market has lead to a drastic

fall in incoming telephone traffic and settlements

Uganda Rapid increase in network growth following

introduction of second national operator, MTN Uganda

First country in Africa where mobilephone outnumbered fixed-line telephones

BUT, entire national capacity is less than 2 Mbit/sSource: Internet Diffusion Case Studies at: http://www.itu.int/ti/casestudies

Broadband in Europe, installed Broadband in Europe, installed lines, per 100 inhabs, Dec. 2000lines, per 100 inhabs, Dec. 2000

Source: OECD, ITU.0 0.5 1 1.5 2

Austria

Netherlands

Belgium

Sweden

Denmark

Iceland

Finland

Switzerland

Norway

France

Portugal

Germany

Italy

Spain

UK

DSL

Cable modems

Fibre

Broadband outside Europe, installed Broadband outside Europe, installed lines, per 100 inhabs, Dec. 2000lines, per 100 inhabs, Dec. 2000

Source: OECD, ITU.

0 2 4 6 8 10

Korea (Rep.)

Canada

USA

Japan

Australia

New ZealandDSL

Cable modems

Barriers to broadband Barriers to broadband deploymentdeployment

Technical barriers Technical constraints on DSL technologies and cable

modems on older cable TV networks.

Regulatory barriers Where infrastructure competition is not permitted,

roll-out had been slower and prices higher. Where there is cross-ownership between cable TV

operators and incumbent telcos, roll-out is slower.

Economic barriers High costs for network roll-out = high prices Financial crisis is slowing down deployment Perceived lack of “killer applications”

Connectivity and economic Connectivity and economic opportunityopportunity

Connectivity in the 21st Century will play an equivalent role to trade routes in earlier eras

Trade in information goods will outweigh trade in goods

Connectivity differences between economies are much greater than would be predicted by differences in wealth or market structure:

There is an International IP connectivity divide between developed and developing nations

Disparities in broadband access between developed countries

International digital divide initiatives have focused on using ICTs to extend access to healthcare, education, governance etc

BUT, without connectivity, demand side initiatives are largely irrelevant

ITU Internet Diffusion ITU Internet Diffusion Case StudiesCase Studies

2000 6 studies covering Bolivia,

Egypt, Hungary, Nepal, Singapore, Uganda

2001 Regional focus on ASEAN

Purpose:“To understand the factors that may promote or retard the development of the Internet in different countries”

www.itu.int/ti/casestudies