Increasing Broadband Internet Penetration
In the OIC Member Countries
27
mass theory"12). Research has been successful in identifying the existence of a critical mass
effect, indicating the existence of increasing economic returns to broadband penetration.
Second, broadband has a stronger productivity impact in sectors with high transaction costs,
such as financial services, or high labor intensity, such as tourism and lodging. Third, in less
developed regions, as postulated in economic theory, broadband enables the adoption of more
efficient business processes and leads to capital-labor substitution and, therefore loss of jobs
(this could be labeled the "productivity shock theory"). Fourth, the impact of broadband on
small and medium enterprises takes longer to materialize due to the need to restructure the
firms' processes and labor organization in order to gain from adopting the technology (this is
called "accumulation of intangible capital"). Finally, broadband economic impact is higher
when promotion of the technology is combined with stimulus of innovative businesses that are
tied to new applications. In other words, the impact of broadband is neither automatic nor
homogeneous across the economic system. This emphasizes the importance of implementing
public policies not only in the areas of telecommunications regulation, but also in education,
economic development and planning, science and technology, and others.
II.3. Technological evolution of broadbandEver since its introduction in the mid-1980s, broadband technology has been evolving in terms
its performance and usage flexibility. The assessment of broadband technology trends needs to
be organized along the five components of the broadband communications value chain (see
table 6).
Table 6: Broadband communications value chain
Value Chain Link Function Alternative Technologies International Connectivity Connections to the rest of the world andInternet “cloud” Satellite
Fiber optics (submarine cable and
long-haul terrestrial)
Microwave
Domestic backbone Traffic carried between fixed points of
interconnection and to the routing switch Fiber optics
Microwave links
Switching/routing Intelligence in the network that ensures that
communications traffic is routed correctly Optical switching
Last mile distribution Access to the customer premise or individual
terminal Fixed wireline (ADSL (copper),
Cable modem, Fiber optics)
Fixed wireless (WiMax, Satellite)
Mobile (3G, 4G, 5G)
Distribution within
customer premise Modem Router Link to terminal Ethernet
Wi-Fi
Terminal Smartphone
PC Tablet
TVs
Source: Telecom Advisory ServicesEach component of the broadband value chain can be supported by a number of technologies.
Some, like satellites and fiber optics, are suited for particular environments, and should be
12 According to this, the economic impact of broadband increases exponentially with penetration of the technology as a
result of network effects.