A Cross-Country Analysis of Fixed Broadband Deployment: Examination of Adoption Factors and Network Effect*

Broadband infrastructure is a key component of the knowledge economy. Employing a secondary data set, this study examines adoption factors of fixed broadband among OECD countries. The result of the regression analysis suggests platform competition, income, and education positively influence fixed broadband diffusion. Light form of Local Loop Unbundling (LLU) was positively associated with high levels of fixed broadband diffusion. Considering the result of the data analysis, it may be beneficial if countries pursue light-touch LLU regulation like bitstream access instead of a strong form of regulation. This study also suggests that network effects and the effects of platform competition co-exist in many OECD countries. A Cross-Country Analysis of Fixed Broadband Deployment-2 Continuous technological innovations in the telecommunication industry marked by convergence enable users to access high-speed Internet, wireless networks, and multimodal content and services. Broadband communications lie at the heart of this trend. Broadband infrastructure is a key component of the knowledge economy, and high-speed connections are becoming an important economic indicator. Widespread and affordable broadband access encourages innovation, spurs economic growth and attracts foreign investment. Although there are various definitions of broadband, the International Telecommunication Union (ITU) defines broadband as a network offering a combined speed of equal to, or greater than, 256 kilobit per second in one or both directions. According to the International Telecommunication Union (ITU), the total number of fixed broadband subscribers has grown more than threefold, from about 150 million in 2004, to almost 500 million by the end of 2009. Research demonstrates that a number of factors including policy, industry, demographic, and Information and Communication Technology (ICT) variables may influence fixed broadband deployment. To promote faster adoption of fixed-broadband, many countries considered local loop unbundling (LLU) and platform competition as important policy initiatives. The goal of LLU policy is to stimulate competition by opening up an incumbent fixed-broadband network for access. In contrast, platform competition aims to promote market competition among facilitybased entrants in a given telecommunications segment. In spite of a growing body of literature on fixed-broadband diffusion and impacts of broadband policies, the effects of LLU and platform competition are still not clearly understood. For instance, implementation of LLU policy widely differs among countries. Types of LLU – full unbundling, line sharing and bitstream access — and LLU prices are different across A Cross-Country Analysis of Fixed Broadband Deployment-3 countries. The effects of these different types of LLU policies are still not clearly understood through empirical studies. Furthermore, previous empirical studies of fixed-broadband diffusion use a comparatively small number of observations. In addition, previous empirical studies on fixed-broadband did not test important theoretical concepts like network effects, which may influence fixed-broadband diffusion in many countries. Using 2001-2008 OECD (Organization for Economic Cooperation and Development) data, we examine the influential factors of fixed-broadband diffusion in OECD countries through regression analysis. Moreover, we examine whether there have been network effects in the diffusion of fixed broadband in OECD countries and assess the effects of different types of LLU policies such as full unbundling, line sharing, and bit-stream access as well as platform