eMarketer’s Ben Macklin wonders if online economies in North America and Europe may be surpassed by Asia-Pacific's, where broadband infrastructure is exploding.
Investing in infrastructure, whether it’s roads, railways, equipment or telecommunications, is an investment in the future. The evidence for economic and productivity gains stemming from road and railway upgrades has been well documented for decades. More recently, efficiency gains from utilizing IT and ebusiness processes have also been clearly identified. In 2001, the Brookings Institute estimated that widespread adoption of basic broadband in the United States could add $500 billion to the U.S. economy and produce 1.2 million new jobs -- yet there continues to be debate in the U.S. and elsewhere as to the value of investing in broadband infrastructure.
A question that politicians and CEOs often ask in relation to broadband infrastructure is: What will consumers or businesses do with all that bandwidth? When U.S. telecom Verizon announced its intention to roll out optical fiber across its national footprint, one of its competitors wondered why consumers would need that much bandwidth. Yet the building of better roads in the U.S. in the early 20th century was one of the major factors in driving the sales of cars, in turn creating a massive industry. After all, there is no real point in buying a car if there is no road to drive it on.
The analogy between road infrastructure and broadband infrastructure is apt, for it also reflects the U.S. economy’s transition (like other economies around the world) from a manufacturing base to an information and knowledge base. The manufactured products of the past were distributed via road and rail; today’s information products are distributed via telecommunications networks. Since an increasing percentage of the world’s developed economies rely on information and knowledge products and services for economic growth, it only makes sense to ensure the infrastructure on which these goods and services flow are as efficient as possible -- and that means fat broadband pipes.
South Korea made this realization early. With three-quarters of all households connected to broadband, the country is more or less blanketed by bandwidth. Japan has also committed to a comprehensive network upgrade, with optical fiber being rolled out across the country, and residents are having no trouble in finding a use for their 50mbps connections. China, the new manufacturing hub of the world, is also investing heavily in broadband infrastructure. India and Australia are likewise beginning to create the right environment for broadband growth.
Many column inches are being devoted to China and India at the moment -- and with good reason, considering their remarkable economic growth over the last few years. But if there is one thing that is certain about the two countries, it is that at some point in their future they will no longer be the most efficient places to manufacture certain goods or the most cost-effective places to outsource IT services, and a new country will begin to exercise its competitive advantage. This is an inevitability of free trade, rising wages and improved standards of living. China and India will go through a transition that many economies in the West have already experienced.
The building of broadband infrastructure is one part of that evolution. When a billion or more Chinese and Indians are connected to high-speed internet in 25 years time, it will be an important signal that their economies have changed remarkably, and with it the entire world economy. This is not a threat, as some commentators like to suggest, but rather an amazing opportunity to share, assist and piggyback on the growth and development of these two countries. Developed economies of today need to start evolving for that new era.
But China and India are for the future. Today’s more immediate broadband lessons can be drawn from Japan, South Korea and Hong Kong.
What are broadband users in these more developed broadband countries doing with their extra bandwidth?
South Korea: Online Games and Education
Broadband is now deeply embedded in people’s everyday lives in South Korea. Online games and time-shifted entertainment are being widely utilized in South Korea, and games are one online content category that South Koreans are prepared to pay for. Now a leader in online games, South Korea has begun to export its expertise to China and other countries. Broadband is also regarded as an important educational tool and the government has been instrumental in promoting it as such. Broadband in the country is both an entertainment and educational platform.
Japan: VoIP
The Japanese government has enforced local loop unbundling and created a regulatory environment that has produced clarity and competition in the broadband marketplace. Broadband growth has been extremely rapid as a result, and connections of 8mbps, 25mbps, 45mbps and 100mbps are widely available. One of the leading broadband access providers, Yahoo! Japan Broadband, is utilizing this bandwidth by offering internet telephony services, and in only 24 months has attracted over 4 million “BB Phone” subscribers.
Hong Kong: IPTV
Over 60 percent of Hong Kong households have a broadband connection over 1mbps. Pacific Cyber Century Works (formerly Hong Kong Telecom), the leading telecom company in the country, has 660,000 broadband subscribers and introduced TV over the internet in 2004. The TVNow service provides a bundled package of basic multichannel TV, premium channels and pay-per-view to over 260,000 subscribers.
These are three real examples of new services that are made possible through high-speed internet. But this is just the beginning. In another five to 10 years’ time, the economic and social impact of widespread broadband will begin to be felt across a range of industries including entertainment, health, education and government.
This article is drawn from “Asia-Pacific Broadband,” a new eMarketer report. Mr. Macklin is a senior analyst for eMarketer.