The Economist Intelligence Unit has warned that between 2015 and 2020 there will be a significant divide in broadband which threatens to split urban and rural populations.
This will be particularly prevalent in countries like the UK, Germany, the US and Australia which are actively focusing on achieving broadband speed targets. Because of policy in the US and EU, broadband subsidies for difficult to reach areas are likely to be scrapped, which the Economist’s report says will take away incentives for connecting these regions.
Although service providers are still expected to bid for contracts in harder to connect areas, they will have to balance risk with cost management to keep the projects profitable.
The report warns of a deep divide in Thailand – which aims to provide broadband speeds of 100 Mbps to its most important urban centres but has committed only to basic speeds for everywhere else. Countries like Hungary and Romania plan basic access for the majority, with the quality infrastructure building happening in the cities.
Citing the World Bank, the Economist points to a study that concluded developed countries experience average economic growth of 1.21 percent for every 10 percent increase in broadband penetration. Similarly, in low and middle income countries, growth is pegged at 1.38 percent.
Following the 2008 crash, the top economic powers were quick to launch broadband building initiatives – a move that can make politicians look popular while providing quick means for stimulus in a downturn.
The report (PDF summary available here) points to an Estonian model, where a public-private agreement has seen the government and the EU provide some financing to get 100 Mbps infrastructure into place in rural and hard to reach areas. In this instance, the Estonian Broadband Development Foundation and the EU pledged funding for up to 25 percent of the total project, as well as €22 million from the EU for the first 2,000 km of the network.
Recognising the scope for profit and connectivity, the private sector has agreed that it will share remaining costs – a plan that is likely to benefit them in the long term.