Internet access for all has been the rallying cry for governments and the UN. But even in Europe the division between the haves and have nots has yet to be fully addressed. Andrew Davies looks at the issues
The Digital Divide is a major issue at a national, European and world-wide level. In simple terms, it is the divide between those who have access to computers and the Internet and those who do not. The divide can be economic, demographic or geographic. It is the geographic dimension that is an issue for telecommunication service providers and the routes to its resolution could be a significant opportunity.
In modern economies, access to computers, the Internet and, increasingly, broadband communications is seen as essential for future prosperity. Consequently, lack of access could be a significant brake on economic growth. On a national basis, in countries such as the UK where penetration of computers and the Internet is high, the provision of access to broadband connection is important enough to be embodied in government policy. This view is held by most Western European countries, the European Union and the United Nations. With the enlargement of the EU, the need to provide equitable access to what is referred to as the Information Society is seen as essential.
New member states
The state of play in Europe varies, particularly in some of the new member states. The penetration of fixed line access is low, which means that significant proportions of the population do not have access to voice telephony, let alone the Internet. In some of these countries, as much as 25 per cent of the population have never even heard of the Internet. With a poor fixed line infrastructure, penetration of broadband is also low. This means that there is much work to do if the geographic digital divide is to be closed.
It is interesting to compare the situation of the new member states with the established members where the expectation is that the geographic digital divide should already be solved. In the UK, BT recently announced that all households would be in reach of a broadband connection by 2005. Their most recent estimate is that the latest technology will enable them to connect all but 100,000 individual users.
By contrast, a recent workshop in France defined the minimum broadband connection as 2 Mbps by 2007 and estimated that as much as 20 per cent of the French population would be out of reach of terrestrial connection at that rate. Spain and Italy have similar concerns and their national governments are developing programmes to address the issue.
National government and European Union concern about the digital divide in Europe potentially creates an opportunity for providers of telecommunication services and equipment. However, it is useful to answer a few pertinent questions to determine the extent of the geographic digital divide:
1. How real is the demand for Internet and broadband connection?
2. How great is the demand and how much is unmet by current means?
3. How can government institutions help and should it be left to market forces?
A quick look at the situation in the UK answers the first question. From Ofcom figures, personal computer ownership is tending towards 70 per cent of the population by 2007 and Internet connection is tending towards the same figure. If 70 per cent of the population is connected to the Internet by 2007, it is likely that all of them would be potential users of broadband. In the business community, particularly in the Small to Medium Enterprise (SME) sector, penetration of Internet connection is even higher and broadband take-up is already at 34 per cent and rising. As SMEs are the lifeblood of any economy, these figures indicate that Internet access, and increasingly broadband connection, are important to a thriving economy. This is especially true in rural areas where SMEs are often the main employer.
For the new member states, additional factors come into play. A good example is the impact of the Common Agricultural Policy (CAP). This places significant demands on record keeping and form filling for farmers in the new member states. This means that the farmers will need computers and, ideally, Internet connection for e-mail and information services. Additionally, village based communities are more numerous in the new member states and the importance of the rural SME is even greater.
This indicates that there is undoubted demand and economic need for Internet access and, increasingly, broadband connection. This leads to the second, more complex issue: how much of this is unmet by current connection means? BT has indicated all but 100,000 users will be broadband enabled if they want it, by 2005. With 70 per cent PC ownership this implies 70,000 users will want it but will be out of reach. If this figure is increased pro rata across Europe, then the unmet demand becomes 600,000. However, the French figures indicate as much as 20 per cent of their population will not have access to broadband by 2007, an unmet demand based on PC take up of around 8.5 million which, scaled up to the enlarged Europe, gives an unmet demand of over 60 million.
This indicates that there could be a large number of households and small businesses that want Internet access and broadband connection but are unable to get it. In some of the new member states there is the additional issue of the ability to pay for such services and this plays into the answer to the last of the three questions, on the role of government.
A number of EU and national initiatives are in progress but there are limits to what government can achieve. The two leading issues are the need to maintain competition and the need for 'technology neutrality'.
A national government is unable to simply give money to a service provider to connect remote users. This is seen as a subsidy and contravenes European and world trade regulations. Similarly, as technologies such as satellite already claim to cover most of Europe, albeit at higher cost, providing incentives to satellite service providers to bridge the digital divide is not 'technologically neutral'. However, funding can be made available that falls within the rules but enables rural users to have broadband access. In the UK, Regional Development Agencies provide grants to businesses that may be disadvantaged by the lack of broadband. Because the grant is made on an individual basis, the end user can choose how the connection is delivered, maintaining technology neutrality and competition. If, for example, satellite access is the only means of delivery to the user, he or she may still have a choice of competing service provider, thus staying within the rules.
For new member states, the EU funding available for disadvantaged areas, known as structural funding, can be used if Internet and broadband connectivity can be shown to be necessary for economic development. In Poland, grants will be made available to 100,000 farmers to enable them to comply with the requirements of the CAP. If this money is used to buy computers and Internet connections, it is still within the rules.
In the Nordic countries, tax breaks for users to encourage demand and for suppliers to encourage build out have enabled the fixed line infrastructure to effectively reach out further.
So, the three questions can be answered. We have confirmed that here is a growing demand for Internet and broadband connection across Europe and that a significant proportion of that demand cannot be met economically by fixed line connection in the current market. There are ways institutional funding can be used to underwrite some of the cost of connection. So how should the service provider community respond?
The first point to make is that these 'digitally divided' users in Western Europe are outside the economic reach of fixed line service providers. In many of the new member states, the fixed line infrastructure is very limited outside urban areas. Leaving it to market forces could result in a growing gap between those with Internet and broadband access and those without. However, if institutional intervention takes place to stimulate the market, someone still has to deliver to places that are not currently economically feasible. This situation is exacerbated in some of the new member states for two reasons:
• Average incomes are between a half and a quarter of those in Western Europe, so user subscription levels need to be lower.
• The successful roll out of GSM in some of the countries has meant many users are bypassing the fixed network altogether, discouraging build out of the fixed line network by the incumbents.
This implies that there is an opportunity for wireless connection for broadband, embracing both fixed wireless and satellite. There may also be an opportunity for newer technologies such as powerline delivery through the electricity infrastructure.
Satellite service providers such as Eutelsat and SES Astra are already looking at satellite/WiFi combinations to provide community broadband. The lower cost WiFi for local access combined with the more expensive satellite for trunking looks promising provided issues of scaling are successfully addressed. If so, the model could work anywhere in the satellite footprint. Low cost satellite access models are also being addressed, as the unmet market may be of sufficient scale to provide the volumes needed to drive down user terminal costs. Powerline – the delivery of communications via electric power cabling – is beginning to look more attractive because of the scale of the potential demand. It may even be argued that 3G networks could cover some of the unmet demand, based on the success of 2G networks in new member states.
What is emerging is that the issue of the digital divide could be addressed by the technologies that promised much in the late 1990's but never quite delivered. The government imperative may be the key to unlocking the potential of these technologies, provided service providers are able to integrate them in their service offer. There are many value chain issues to be resolved, particularly in new member states where credit cards and bank accounts are not the norm and where consumer scale distribution chains are relatively primitive. Innovation in service delivery is required in addition to innovation in technology.
One issue is clear. Western European governments believe that the Internet is an essential tool for the citizen and that broadband connection will form part of the path to future growth and prosperity. If this is true, those outside the reach of these technologies will be seriously disadvantaged, with resultant shifts in the patterns of business away from rural areas and less well connected countries. This is contrary to the aims of the enlarged European Union. However, it is not enough for government institutions to provide state support to service providers to solve the problem. The service providers themselves need to be able to offer innovative solutions that combine with institutional support to address the digital divide. This could be a great opportunity for some niche technologies to come to the fore over the next five years.
Andrew Davies is Business Development Director at strategic technology consultants ESYS, and can be contacted via: firstname.lastname@example.org