Increasing Broadband Internet Penetration
In the OIC Member Countries
1
EXECUTIVE SUMMARY
Broadband is defined as a high capacity data transmission technology that allows a large
number of messages and telecommunications traffic types (video, data, voice) to be
communicated simultaneously. Ever since its introduction in the early 1990s, broadband
technology has undergone a dramatic diffusion around the world, including within the
countries of the Organization of Islamic Cooperation (OIC). As of the end of 2015, 14.95% of
households in the OIC Member Countries are connected to broadband technology, while
29.41% of individuals have mobile broadband connectivity. In several OIC Member Countries
(such as Azerbaijan, Lebanon, Malaysia, Qatar), fixed broadband household penetration has
exceeded 50%, while in others (Bahrain, Saudi Arabia, and UAE) mobile broadband
penetration is higher than 70%.
Conceptual framework and best practices for fostering broadband investment and
adoptionBroadband is a critical infrastructure for fostering economic growth and citizen welfare.
Beyond the benefits linked to GDP growth, broadband contributes to job creation and
enhancement of consumer surplus. Broadband penetration has been proven to have an impact
between 0.25 and 1.38 percent for every increase in 10 % of fixed broadband penetration.
Beyond the contribution to GDP growth, broadband also has a positive effect on job creation.
The impact on this variable can be split into two types of effects: jobs generated by the initial
deployment of infrastructure and employment resulting from network effects and their
spillover into other areas of the economy. As with GDP, the spill over employment effects of
broadband are not uniform across sectors. The job creation impact of broadband tends to be
concentrated in service industries, (e.g., financial services, education, health care, etc.)
although a positive effect has also been detected in manufacturing. Broadband adoption also
contributes to an increase in household income by raising the efficiency in labor markets and
enhancing the population digital skills.
The economic contribution of broadband increases with penetration: research evidence
indicates that the higher broadband penetration is, the stronger its effect on economic growth.
This effect is labeled “critical mass” or, in economic terms, the return to economies of scale.
Thus, countries and their citizens will benefit from accelerating broadband adoption.
Yet, some barriers prevent an increase in broadband penetration. The first one is driven by
supply: citizens do not acquire broadband service simply because they lack service in the area
where they live or work. This barrier has been called the supply gap. The second one is called
the demand gap, and measures the potential users that could acquire broadband service (since
operators offer it in their territory,), but do not. While the digital divide represents the sum of
both supply and demand gap, the critical success factors and policy initiatives aimed at
addressing each of them are different. At the highest level of analysis, the residential
broadband demand gap is the result of three challenges: