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Ensuring Low-cost and High Speed Broadband to Rural Areas

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Bangladesh Telecommunication Regulatory Commission Bangladesh Telecommunication Regulatory Commission [email protected] 1 Ensuring low-cost and high speed broadband to rural areas Bangladesh: Connecting the Unconnected
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Page 1: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory CommissionBangladesh Telecommunication Regulatory Commission [email protected] 1

Ensuring low-costand high speed

broadband to rural areas

Bangladesh: Connecting the Unconnected

Page 2: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 2

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Page 3: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 3

• Benefit of Broadband, Correlation between GDP and Penetration?

• Broadband Myths?

• National Broadband Plan, what others are saying?

• Bangladesh: Ensuring a better price point or connecting the unconnected?

CORRELATION BETWEEN PENETRATION

FINANCIAL GROWTH

DEMAND SIDE AND SUPPLY SIDE DRIVERS

Page 4: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 4

• Higher per-capita incomes mean - can more people afford to purchase broadband connectivity?

• Does broadband stimulate the economy, or does a growing economy lead to take-up of broadband?

• Bangladesh Government keeps slashing the wholesale bandwidth priceresulting very minor or no effect on the consumer benefit?

Primary Idea Source: Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

Page 5: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 5

Supply-side issues affecting broadband adoption in Broadband; promote effective competition or regulation that limits SMP?

*Significant Market Power

Primary Idea Source: Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

Cost based Critical Support Infrastructure (CSI) ?

CSI=Infrastructure required to provide telecom services; that cannot be efficiently replicated (i.e. submarine cable landing stations, fiber ducts and cables)

Page 6: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 6

Broadband Penetration and Gross National Income in Various Economies

For every 10 percentage increase in broadband penetration; there is an increase of 1.3 percentage points in economic growth.

Between 2000 and 2007, the ICT sector accounted for 3 to 7 percent of GDP, regardless of the country’s level of income.

Source: The World Bank Group (Washington, DC, 2009), Information and Communications for Development 2009: Extending Reach and Increasing Impact.

Page 7: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 7

Source: The World Bank Group (Washington, DC, 2009), Information and Communications for Development 2009: Extending Reach and Increasing Impact.

Page 8: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 8

Developing Economy

with an average of 10

broadband subscribers

per 100 people would

have enjoyed a 1.38

percentage point

increase in per capita

GDP growth.

Page 9: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 9

Correlation between GDP Growth and Broadband Penetration

• Introduction of high-speed communications infrastructure makes it possible to welcome foreign business, such as outsourcing, and also facilitates innovation, with business and connectivity aggregation to local level.

ICT Related patents as a percent of National total

Source: OECD Patent Database 2005

Page 10: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

The USA has committed USD7.2 billion to the expansion of rural broadband coverage.

Australia has dedicated just over half (USD30 billion) of its total economic stimulus package to broadband.

In 1990s, South Korea created a durable backbone structure for long-term broadband policy by passing a law requiring review of a national broadband strategy every 5 years.

The Korean government built this national optic backbone in the initial stage, followed by a facilitation role in the growth stage.

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Page 11: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

Japan created an IT Strategy Headquarters to oversee the execution of its broadband strategies, beginning with the e-Japan Strategy of 2001.

In June 2009, the U.K. government published Digital Britain, its first broadband plan.

Department for Culture, Media and Sport and Department for Business, Innovation and Skills, Digital Britain: Final Report (2009), available at http://www.culture.gov.uk/images/publications/digitalbritainfinalreport-jun09.pdf.

In Japan, government used financial incentives in the growth phase of industry to develop core & access infrastructure.

BB market in Australia has been developed under the PPP model supported by financial incentives from government.

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Page 12: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 12

Source: US Connecting America: The National Broadband Plan. www.broadband.gov/plan/

Page 13: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 13

FCC analysis finds that the level of additional fundingrequired is approximately $24 billion (present value in 2010dollars) for this gap.

Source: US Connecting America: The National Broadband Plan. www.broadband.gov/plan/

Page 14: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

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Telekom Malaysia predicts that its high-speed broadband roll-out will boostGDP by 0.6% by 2017 and create 100000 jobs.

Telekom Malaysia Berhad (Kuala Lumpur, 2009), HSBB project boosts capacity building, technology transfer and business activity for the economy.

14

Govt Kick-started BB Growth By Deploying Backbone Infra

Page 15: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

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Mostly PPP/Financial Incentives/Divesting Incumbent’s Backhaul

15

Page 16: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

• 1% increase in broadband penetration will contribute INR 162 bn, or 0.11% to Indian GDP in 2015.

• Allocation of additional 5 MHz of 3G spectrum will increase BB penetration by 3.3% of population and enhance GDP by INR 538 bn in 2015.

Source: 1. Based on World Bank report; 2. Consultation Paper on National Broadband Plan – 10th June 2010 – TRAI, GSMA Report

16

Page 17: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected]

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Page 18: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

South Korea aggregated the guaranteed demand from public-sector bodies in

order to improve operators’ business plans.

Aggregate and guarantee demand from the public sector.

Source: 1. The World Bank Group (Washington, DC, 2009), Broadband for Africa: policy for promoting the development of backbone networks.2. Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

Demand aggregation

Ensuring low-cost and high speed broadband to rural areas

18

Three phases of roll-out of broadband services, the government paid a total of

USD900 million for fiber backbone and access network, in exchange forbroadband services being provided to all public-sector bodies.

[email protected]

Page 19: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

In a reverse subsidy auction the winner is the party that bids the least, for the value of the subsidy for which they are willing to carry out the specified task.

Minimizing the cost of the subsidy awarded.

Peru, with the aim of providing broadband access to 2840 localities - competitive bidding process (Reverse subsidy auctions), the winning bids totaled USD15.1 million from USD18.6 million.

Source: 1. The World Bank Group (Washington, DC, 2009), Broadband for Africa: policy for promoting the development of backbone networks.2. Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

Reverse subsidy auctions

Ensuring low-cost and high speed broadband to rural areas

19

Source: 1. The World Bank Group (Washington, DC, 2009), Broadband for Africa: policy for promoting the development of backbone networks.2. Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

[email protected]

Page 20: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission 12

20

0%

10%

20%

30%

40%

2010 2012 2014 2016 2018 2020

Overall1

% of households with at least one Internet subscription

Projected overall household penetration

1. Overall household penetration ratio as ratio of HH with at least one connection to total HH, includes households below poverty lineSource :BBS; EIU; CIA World Factbook; Manobi; UNCTAD; OECD; EU; Deloitte; MIT/CMU; Expert interviews; Boston Consulting Group analysis

0%

20%

40%

60%

80%

100%

Adoption rate (%)

Projected overall business penetration

2010 2012 2014 2016 2018 2020

Overall2

2. Businesses are divided into 4 segments based on (a) sector- manufacturing or service and (b) number of persons employed: Small firms defined as ones with < 10 employees; large firms defined as ones with 10 or more employeesSource :BBS; EIU; CIA World Factbook; Manobi; UNCTAD; OECD; EU; Deloitte; MIT/CMU; Expert interviews; Boston Consulting Group analysis

32% households, 66% business connects to the Internet by 2020

[email protected]

Page 21: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission 13

0%

1%

2%

3%

Pre 2010 2010 2015

2.6%

2020

% of GDP

(incremental growth to pre 2010)

0

20

40

42New business activity (K)

0

50

100

150129

No. of new jobs (K)

0

50

100

150 128

BDT B

Pre 2010

Pre 2010

Pre 20102010

2010

2010

2015

20152015 2020

2020

2020

2.6% GDP contribution 42000 new business activities

129000 new jobs BDT 128 Billion to government revenue

Source :BBS; EIU; CIA World Factbook; Manobi; UNCTAD; OECD; EU; Deloitte; MIT/CMU; Expert interviews; BCG analysis

Significant economic benefits: BCG Analysis

[email protected]

Page 22: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Wholesale capacity must be cost based pricedWholesale pricing acting as a barrier to low prices in the retail access market

COST BASED PRICING

•SPV Operation by board

• Entity ensuring open access for all operators and new entrants by selling backhaul on non-discriminatory cost-based principles.

•Releasing point to point backhaul and 2.6 GHz and 700 MHz spectrum

PROCESS

•Aggregate public-sector demand

•Create a SPV (Special Purpose Vehicle) for divesting incumbent’s backhauls for optimum resource utilization

•PPP model encouraged for operation & efficient management

BB COMMISSION

•Create a broadband promotion agency, Broadband Commission

•Supply-side issues must be tackled for affordable and widespread broadband access, structural separations

• Reduction of VAT on Internet, Devices, Capital

ANALYSIS

•Undertake an analysis of competitiveness in the broadband market

•The introduction of effective competition, or regulation that limits SMP, will push operators to set prices that are closer to their average costs.

Primary Data Source: Creating successful broadband policies in developing countries by Daniel Jones and Martin Scott; August 2009; Analysys Mason.

Ensuring low-cost and high speed broadband to rural areas

[email protected]

Page 23: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Operation & Management

Infrastructure Rollout

Setup of the Company

Board will run Operations and Management

of Subsidiary SPV, members from Consortium and Government

Government will issue guidelines for non-

discriminatory open access model for

interconnection and bandwidth charge

Government will monitor the timely rollout, issuing rollout obligation for all subsidiaries

Being the consortium of Infrastructure providers, they will lead the rollout

One pair of fibers from different Government entities will be included in SPV’s assets

Grant from USOF will add to the funding requirements for the backbone’s rollout

The Government will offer rights to the infrastructure provider a pre-determined ratio (50%) for their own

use)

Government requires setting up another Parent SPV with # of

Subsidiaries

The Parent SPV will own the assets, the other subsidiary will have the rights of usage for the

deployed Infrastructure

Potential Investment Model for Core and Middle Mile: The Sacrifice

Government to Setup a USOF Company

Idea Source: Deployment Models and Required Investments for Developing Rural Broadband Infrastructure in India; December 2010Confederation of Indian Industry, Analysys Mason; Telco Led, Jointly Funded and Owned SPV Modules

[email protected]

Page 24: Ensuring Low-cost and High Speed Broadband to Rural Areas

Bangladesh Telecommunication Regulatory Commission

Ensuring low-cost and high speed broadband to rural areas

[email protected] 24

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