Broadband communication networks and the services provided over them support a variety of economic and social development goals, relating to health, financial inclusion, and education, among many others. ITU World Telecommunication/ICT Indicators Database shows that fixed broadband subscriptions have increased by 89% worldwide within just seven years – from 532 million in 2010 to one billion in 2017. Switzerland has the highest fixed broadband penetration in the OECD, with almost one subscription for every two inhabitants, while the OECD average is just below one per three inhabitants.
Communication operators have deployed fibre optics further into their networks, but often rely on other “last mile” technologies, such as copper, wireless and coaxial cable, where fibre does not reach all the way to customers’ premises. For this reason, the share of fibre (to the home/premises) can be relatively low in some high-income countries. Last mile technologies can provide relatively high connection speeds, but fibre boasts the highest maximum speeds. Countries without legacy telecommunications networks may be able to leapfrog directly to fibre – according to ITU data, it represents almost 70% of total fixed broadband subscriptions in China, for example – though these countries still tend to have lower broadband penetration overall.
A comparison of the average prices for specific OECD fixed broadband baskets, between 2013 and 2018, shows that “high usage” subscriptions appear to have decreased in cost, while prices for “low usage” have remained more stable. Prices can also vary widely between countries, with the average for the three most costly countries being around three times more than the average of the three least costly.
These price baskets are designed to provide a snapshot of prices at any given time, rather than a series. The lowest cost plan is selected at each point in time and may be different from earlier plans (e.g. with higher speed or an increased amount of data). In addition, these measures are not adjusted for the varying social, economic and geographic situations influencing prices in different countries. It is nonetheless worth considering an average for all OECD countries as an indicator of trends in these two segments of the market. However, declining unit prices do not mean that all users are paying less; consumers may choose to pay more for plans that offer higher included amounts of data, higher speeds, and so on, or may incur costs to switch plans.
The Services Trade Restrictiveness Index (STRI) for telecommunication services endeavours to capture characteristics of the policy environment that can restrict the free international trade of fixed, mobile and Internet services. Common restrictions include limitations on foreign ownership, government ownership of major suppliers, screening of foreign investment, and nationality or residency requirements for directors and managers. Pro-competitive reforms in the telecommunications sector are associated with a substantial reduction in the trade costs for business services in the overall economy. Since telecommunications is a capital-intensive network industry, improving access to essential facilities and reducing switching costs may enable new entrants to compete with incumbent firms.
