2011-02-10 06:35:59
Feb 9th 2011, 12:32 by I.M.
VISITORS to South Korea cannot fail to be impressed by the speed of the country's online connections. While even basic broadband access is unobtainable across parts of the developed world, most South Koreans can enjoy high-speed fibre-optic services for just $30 a month. Closing this broadband gap has become a priority for some governments. In April 2009 Australia unveiled a hugely ambitious plan to bring superfast broadband connections to more than 90% of the population by 2018, at a cost to the public purse now estimated at around A$27 billion ($27 billion). The British and American governments also want to use taxpayers' money to plug the broadband holes in their rural communities.
Why do governments feel such a need for speed? Many private-sector companies insist there is no commercial case for investment in high-speed networks. Although internet usage is soaring, network operators earn no more from traffic on bandwidth-gobbling sites like YouTube, which functions better over faster connections, than from customers accessing simpler web pages. Yet authorities increasingly see broadband as integral to economic prosperity, with the energy, education and health-care sectors among those set to benefit from the roll-out of improved infrastructure. That means broadband is bound up with governments' political fortunes, too.
The question is whether such vast public-funding commitments as Australia's are desirable, or even effective. Critics say taxpayers' money would be better spent elsewhere and that broadband development is best left to the private sector. Others argue for less heavy-handed public-sector involvement. South-East Asia, notably, appears to have built its broadband lead by encouraging companies to stump up the huge investments required.
A new study from the Economist Intelligence Unit, our sister company, makes some judgments about what governments should and should not be doing. While broadband rankings typically measure factors such as the speed, availability and retail prices of existing services, a measure created for the study, the government broadband index (gBBi), looks instead at the components of the highest-profile public-sector plans. Besides targets for speed and population coverage, these include the cost to the taxpayer as a percentage of annual government revenues and the deadlines for universal access. The gBBi also considers the regulatory aspects of the various plans. Here are the results:
The index leaders are countries that usually perform well in more traditional rankings of current broadband capability. South Korea tops the index with a score of 4.4 out of 5, with Japan in second place and Singapore in third. What is perhaps surprising is just how badly marked are those countries most desperate to catch up. Australia's plan ranks ninth out of the 16 that feature in the index, with a score of 3.4. The plans announced in Britain and America fall even further down the list.
What factors unite the countries that do well? Ambitious targets for speed and coverage are certainly important, as is an ambitious timetable for network deployment. Japan is now eyeing services of one gigabit (ie, 1,000 megabits) per second, compared with targets of 100 megabits per second in Australia, and wants them made available to at least 90% of the population by 2015. South Korea hopes to realise a similar goal next year. Perhaps more importantly, the index rewards countries that are not hurling taxpayers' money at the broadband agenda, and penalises the big spenders. Public-sector broadband spending as a percentage of annual government budget revenues is just 1% in South Korea and a paltry 0.06% in Japan. In Australia, in contrast, the figure is a whopping 7.6%.
To some observers, a low level of public-sector funding could simply indicate a lack of broadband ambition, especially given the huge civil-engineering cost of laying fibre-optic lines. But the gBBi index's rationale is that governments are most effective when they avoid such big financing commitments, focusing instead on appropriate market regulation and incentives for private-sector investors. Sweden's plan mandates that fibre ducts be laid in parallel whenever any electricity or water networks are expanded or upgraded. Finland offers tax breaks for those hooking up to high-speed, fibre-optic connections. Each country has similar speed and coverage targets to Australia but is providing much less in public-sector funding. Besides performing well in typical broadband-comparison tables, both rank highly in the gBBi.
Meanwhile, in Greece, the gBBi's lowest-ranked plan has suffered long delays. A public-sector consultation has already identified potential problems with regulatory aspects of the proposed scheme, while its public-sector funding commitment is also a stumbling block for such a debt-ridden country. At a cost of more than 12 times the commitments in South Korea (per household covered), that is hardly a surprise.