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Over Investment in Fiber Optic Networks Expensive and Unnecessary

19 May 2011Technology

2011 Social Impact of Mobiles (SIM) report states affordable internet access will be accessed by mobile technology and require innovative content and pricing

  • The ubiquity of mobile and the growing number of low cost smart devices means that data services will be primarily accessed via mobile, particularly in emerging markets

  • Risk of over investment in the deployment of fixed line fibre access networks

  • Global websites, especially social networking sites, are becoming increasingly popular and will be a platform for the development of local content which in turn will help to drive down cost

  • Increased availability of spectrum will drive technology innovations and better coverage for the growing demand for mobile broadband services

The 2011 SIM Report concludes that the most effective way to provide affordable internet access to the majority of people in emerging economies is to extend the reach and capability of mobile networks. The current policy of focusing on significant investment in fibre access networks is unsustainable given the cost of deployment in rural areas. The report also suggests that greater efforts should be made to increase the amount of content and services that are valued by users as a way of driving the demand for data services and therefore increasing business opportunities.

Co-funded by Vodafone and the World Wide Web Foundation as part of a series of studies on the socio-economic impact of mobile, the report provides substantial evidence to suggest that extending data services to as many people as possible will deliver considerable economic and social benefit. Given the ubiquity of mobile and the growing number of low cost smart devices, it is likely that data services will be primarily accessed via mobile, particularly in emerging markets where there is no significant legacy fixed- line infrastructure. Despite this, regulators in many emerging markets are over-investing or planning to invest, at great expense, in the deployment of fixed line fibre access networks. For example, the 2011 SIM report studies the Indian states of Maharashtra, Karnataka and Rajasthan to compare the feasibility of extending fibre access networks against mobile networks. It concludes that the deployment of a fibre access network would only be commercially viable in 3% of the districts. On the other hand, it is commercially viable to provide wireless broadband coverage to 98% of the districts.

Diane Coyle, Chair of the Vodafone SIM Panel and editor of the report said, “The aim of the SIM report is to provide policy makers with evidence that will help them shape their policies to stimulate economic growth. We believe that our findings show that the current emphasis on delivering fibre optic cable everywhere overlooks other effective means of extending the use of broadband in an affordable way.”

In addition to network deployment, the SIM report considers the important role that relevant and appealing content plays in building demand for data usage to a critical point where network effects and economies of scale accelerate. The use of global websites, especially social networking sites such as Facebook, is becoming widespread. This is a good sign as these sites can provide the platform for the development of local content and can help to drive the prices down. Looking ahead the report recommends that governments provide mobile-enabled services free of charge in order to increase broadband take up.

Steve Bratt, Chief Executive Officer of the World Wide Web Foundation and co-sponsor of the SIM reports, said “Affordability for low income users will require innovation that does not place most of the burden of access costs on the user. This report shows that social networking has huge potential to act as a platform for e-government applications accessible via mobile handset devices. We hope regulators allow innovations in this area to flourish and not inhibit them by preconceived notions of the right model or pricing”.

Finally the report recommends that regulators should focus on consumer welfare when making spectrum available for service providers as the availability of spectrum will drive technology innovations and better coverage for the growing demand for mobile broadband services. Tapping spectrum as a source of short-term government revenue costs the economy billions more in lost economic value. This can be demonstrated by the recent sale of spectrum in India where the economic value of the recent 3G auction in India was around US$0.5 billion per year compared to the lost economic growth due to delay is over US$22 billion per year.

Matthew Kirk, Group External Affairs Director at Vodafone Group said, “This report is the twelfth in our series of policy papers which help us to better understand the economic complexities of the markets in which we operate. Our aim is to share our learnings with others so that we can work in partnership with regulators and policy makers to build a network fit for the next generation of users’ demands. The SIM report is designed to challenge the status quo and encourage us all to think more widely about the markets in which we operate”

Full copies of the Vodafone SIM Report “Making Broadband Accessible For All” is available on www.vodafone.com/sim


For further information:
Vodafone Group Media Relations
Tel: +44 (0) 1635 664444

About WWW Foundation
World Wide Web Foundation supports programs that advance the Web as a medium that empowers people to bring about positive change. Grants from Founding Members, such as the John S. and James L. Knight Foundation and Vodafone Group, fund education, outreach and research efforts that support next generation of Web technologies and enable people use the Web to share knowledge, access services, conduct commerce, participate in good governance and communicate in creative ways. Web Foundation is a registered tax exempt, public charity in Switzerland and the United States. Please follow us on Twitter at @webfoundation or visit us online at www.webfoundation.org for more information about our programs.

About Vodafone
Vodafone is one of the world's largest mobile communications companies by revenue with approximately 371 million customers in its controlled and jointly controlled markets as at 31 March 2011. Vodafone currently has equity interests in over 30 countries across five continents and more than 40 partner networks worldwide. For more information, please visit www.vodafone.com.