Transcript Presentation to Cabinet Subcommittee on Housing

FTTH Council,
Brussels
The Economics of
Broadband
Niall Ó Donnchú
25th May 2004
[email protected]
Government Objective
“That Ireland be in the top 10% of OECD
countries for broadband connectivity
within 5 years.”
New Connections
Irish Market Statistics
Domestic Internet minutes account for 40%
of all retail minutes. This now exceeds
voice minutes.
45% PC ownership at home
Ireland stands 4th in the Eurobarometer of
Internet penetration behind Holland, Denmark
and Sweden
contd
Irish Market Statistics
DSL Prices have halved since March
2003
DSL consumers now stand circa 40,000.
Mobile phone penetration stands at 81%
(3.17m)
Average mobile phone spend per month
is €46 – European average is €30
contd
Irish Market Statistics
717m SMS texts were sent in quarter
one 2003
Ireland has the highest monthly revenue
per user on mobile phones. In Western
Europe only Norway (€47) and
Switzerland (€49) are higher
Sectoral Revenue is €3.6 bn per annum
Sectoral VAT stands at €600m per
annum
The International Scene
Global broadband subscribers grew by 72%
to 63 million during 2002 (i.ec. between 1 Jan
and 31 Dec);
In comparison, there are 1.13 billion fixed-line
users and 1.16 billion mobile phone users;
By region, Asia has 25.1 million broadband
connections; the Americas has 24.6 million
connections and Europe has 12.5 million;
South Korea still leads the world with 70% of
all households connected to broadband.
contd
???
The International Scene
Hong Kong and Canada follow South
Korea in the ITU's ranking. Japan was
10th, just ahead of the United States
Europe has lagged in broadband use
because a lack of competition has kept
prices high, and high prices have kept
customers away
The internet financial bubble did not result
from a lack of demand for
telecommunication services.
Note also trends for Health and Education.
(Changes in the proportion of sector in disposable households
incomes)
180
Index: 1990=100
Communications*
Health
160
Education
Water, electricity and gas
140
Recreation and Culture
Restaurants and hotels
120
Transport
100
Alcohol, tobacco and
narcotics
Households equipment
80
Food
Clothing and footwear
60
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Health and Education are
major factors in demand for
broadband
Canada & internet use
Canada & household internet access
%
50
email
%
80
45
40
Medical or health
information
broadband users
70
w ith children
gap
60
35
government information
30
25
50
e-banking
20
playing games
15
obtain and save music
10
5
purchase goods and
services
0
1997
1998
1999
2000
2001
2002
%
100
Couple with children (1)
90
France
80
Australia (right scale)
70
Netherlands
60
50 Couple without children
40
France
30
20
Australia (right scale)
40
30
20
10
0
1987 to 1993 (Netherlands)
1996 to 2002 (France and Australia)
20
10
1998
1999
2000
2001
2002
Korea and Education Levels
%
50
30
1997
Households with PCs
60
w ithout children
40
Netherlands
% of households w ith computers
90
College or University Graduates or higher
80
70
High School Graduates
60
Middle School
Graduates
50
40
30
Elementary School Graduates or low er
20
2001
2002
Demand for Broadband Access has
proven among the fastest growing of
all communication services
OECD Subscribers
(Million)
200
180
160
Broadband (1997-2003)
140
Narrow-band Internet (fixed
network) (1992-2001)
Cellular (1985-1995)
120
100
80
ISDN (1989-1999)
60
40
20
0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
World broadband subscribers
are growing rapidly: over 100
million by end 2003
120
100
80
Rest Of World
OECD
60
40
20
0
1999
2000
2001
2002
2003
The Macro-economics of
Broadband
Japan
 Increased
 Multiplier
latent growth by 0.5%
effect - 1.86
 Employment
 Improved
3.5%
Citeria -1.85m
labour productivity - 2.8% -
The Macro-economics of
Broadband
United States
 Doubled natural rate of employment
growth
 IT investment accounted for 65% of
growth in labour productivity in last
decade
 Brookings Institute estimate annual
savings of $370bn
 $23bn saved in reductions in
congestion, travel time etc.
The Macro-economics of
Broadband
Korea
 $225.4bn
in added economic value by
2012
 820,000
 $50.8
jobs by 2012
bn in new exports by 2012
The Macro-economics of
Broadband
Ireland
 Consumer surplus 1.2% of GDP from
broadband
 85,000 new jobs predicted over 10 yeas
 Broadband investment of €200m could
increase GDP by €4bn per annum (Fórfas)
 ICT multinationals employ approx 35,000
in Ireland
 ICT multinationals turnover amounts to
€30bn per annum
contd.
The Macro-economics of
Broadband




ICT sector employs over 93,000 people in over 4,000
enterprise companies up from 47,000 in 1993 and
foreign owned companies provide over 55,000 of
these jobs
Ireland is the 3rd largest exporter of software in the
world and seven of the worlds leading software
companies having a base in Ireland
1/3 of all PCs sold in Europe are manufactured in
Ireland.
Ireland is the 4th most successful country in the world
in attracting Foreign Direct Investment
contd.
The Macro-economics of
Broadband



Output of ICT products and services was
equivalent to almost 16% of Irelands GDP in
2001. This increased by 18% pa over the period
1993-2001, twice the rate of overall GDP
growth
Exports by the indigenous software sector
grew by 28% in 2001 and amounted to €1.4
billion
Overseas ICT companies make a significant
contribution to corporate tax receipts (€350
million in 2001)
Effects of Broadband
Effects on growth rate


Contribution to the rise of latent growth rate
Contribution to the rise of realised growth rate
Effects on production

Pervasive effects along with an increase in
demand
Effects on employment



Employment growth from production growth
Improvement of labour productivity
Employment growth from new business creation
utilising ICT
Effects of Broadband
Changes in individuals’ consumption behavior


Improvement in real consumption by the fall of
prices
Increase of consumption along with the advent of
attractive ICT related products
Changes in lifestyle


Realisation of abundant information
reception/transmission
Realisation of distance learning/telemedicine
Effects of Broadband
Changes in business behavior

Introduction of new management technologies
utilising ICT (Supply Chain Management, SCM
etc.)

New business creation utilising ICT

Restructuring and reorganisation

Realisation of new work-style such as teleworking
and benefits of reduced congestion, and design
for roads, public transport
Roscommon
Wexford
Waterford
Cork
MAN’s: 1st Phase
Region
Coverage Area
Construction
Total
Commencement Length
Progress To Date
Estimated
Completion
Cork
Cork City & Council
Feb 2003
40 Km
40 Km & 252
Chambers
Q. 1, 2004
Galway
Galway City & Council
Feb 2003
44.5 Km
41 Km & 214
Chambers
Q. 1, 2004
Mayo
Ballina
March 2003
19 Km
19 Km & 145
Chambers
Q. 4, 2003
Midlands
Athlone, Mullingar,
Portlaoise, Tullamore &
Roscommon
May 2003
76.7 Km
76 Km & 266
Chambers
Q. 1, 2004
Limerick
Limerick City & County
May 2003
41.3 Km
30km & 180
Chambers
Q. 2, 2004
SERA
Carlow, Kilkenny, Wexford,
Waterford, Dungarvan &
Clonmel
Sept 2003
86 KM
9 Km & 108
Chambers
Q. 2, 2004
Leitrim
Carrick –on- Shannon &
Manorhamilton
July 2003
14.1 Km
15 Km & 125
Chambers
Q. 1, 2004
Donegal
Letterkenny
Nov 2003
16.5 Km
2 Km & 19
Chambers
Q. 2, 2004
Gweedore
Sept 2003
4.5 Km
4.5 Km & 51
Chambers
Q. 1, 2004
Management Services Entity
Independent neutral management of
MANs
Competition underway
Target date for completion JUnen
to manage, maintain and market 26
MANs
Next Phase of MANs
91 towns
Range of open access investments
3 calls
Towns in each call to be decided
Competitive tenders
1st Call:
Summer 2004
1st Project:
Autumn 2004
Going Forward
Group broadband scheme for remote
areas
140 towns over 1,500 population –88 unserved
Regional links through semi-states
Teleworking across public service
Rolling regulatory directives-