The Funding Mechanisms for Promoting the Deployment of Broadband

BROADBAND CARIBBEAN FORUM 2016

July14, 2016 Port of Spain, Trinidad & Tobago

There is a growing need to supply exploding data traffic

Source: Cisco VNI Mobile, 2016

Cisco Forecasts 30.6 Exabytes per Month

of Mobile Data Traffic by 2020

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… a significant broadband gap exists in many developing countries

Mobile–broadband and fixed-broadband penetration, 2015

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… much needed infrastructure investment across all sectors

Projected Infrastructure Gap (Mckinsey & Co. study)

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… and in ICTs it is the private sector that drives investment

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Why PPPs to accelerate backbone networks roll out?

6 Ownership / Risk

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Public Private

Limited Scope

Wide Scope

Management Contract

Network Leasing

IPO Full Privatization

Concession Contract

Outsource (BPO)

BOO

• Emerging international experience in the telecom sector shows that the use of PPP is the best solution to guarantee the interests of the government, private partners and consumers in frontier markets. Reducing operational risk for the public sector Reducing capital risk for the private sector Lowest cost solution and highest quality of service Faster delivery/time to market and expert project management skills Access to private capital Enables high risk /low return projects

• A Public Private Partnership (PPP) is defined as an agreement between the government and private organizations to develop, operate, maintain and market a network by sharing risks and rewards (there are several forms).

Equipment Supplier Contract

BOT

Innovative and best practices PPPs are being implemented that balance public and private interests to the benefit of

citizens (low cost access)

Model

Cooperative

Equity

Concession

Bulk capacity purchase

Management contract

Description Examples

All sector operators (MNOs, ISPs) unite to form a private company (special-purpose vehicle) for the purpose of building, owning, and operating the national backbone as a wholesale operator. The government contributes a subsidy with no related ownership to ensure national coverage, including rural access points, open access, nondiscrimination, and low-cost pricing.

Similar to the cooperative model except that the government obtains equity and shareholding ownership rights in exchange for its contribution. Generally, government divestiture mechanisms are built in.

Traditional build-operate-transfer approach, whereby the government issues a public tender to select a private sector operator to build and operate the national backbone or specific national and cross-border links. The agreement is in the form of a long-term concession (15–25 years) that requires the transfer of the networks back to the government at the end of the concession.

The government, acting as an “anchor client,” issues a public tender for the long-term (10–15 years) supply of bulk capacity (+ 1 gigabit) bandwidth. This model stimulates investment by the private sector through the aggregation of demand. In this case, the partnership is governed by a PPP agreement or supplier contract that establishes the rights and obligation of each party.

Standard management contract agreement whereby the government issues a public tender to select a private operator to build, operate, and commercialize the national backbone (or specific national or cross-border links) for a fee during a short

Burundi national backbone project, 2007

The Gambia, Guinea, Liberia, São Tomé and Príncipe, Sierra Leone, Republic of Congo, in process

Rwanda, 2011; Malawi, in process

Gabon

Source: World Bank ICT Unit Analysis 7

PPP emerging models : wholesale / passive infrastructure hybrid

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• Government / incumbent to manage and lead infrastructure build

• Jump start investment and service offerings

• Minimize duplication of investment / promote the low cost solution

Model

Passive

Wholesale / Passive

Own use / passive

Description Examples

Build-out of the Next Generation National Broadband Network (NGNBN) segmented into three components. BOO model. SingTel (incumbent) outsources first layer (passive) to OpenNet, Second layer (wholesale) to Nucleus Connect, Retail to (RSPs).

Build-out of the Qatar National Broadband Network (Q.NBN) as the FTTH carrier. Q.NBN (100% owned SPV) to provide wholesale and passive infrastructure to retail operators.

Rwanda: build-out of national backbone network. Government ownership with outsourcing of operation, maintenance, commercialization to private sector (KT). Four ducts: one for government use and three available for private sector use. Madagascar: government to subsidize build-our of passive infrastructure (towers and renewable energy) open access to private sector

Singapore - deployed

Qatar

Rwanda – deployed

Madagascar

Since 2007 the Bank has approved regional connectivity programs (WARCIP, CAB, RCIP, CARCIP…) amounting to $1.2 billion

involving more than 30 countries

Unique opportunity for international connectivity to least connected countries in W. and Cen. Africa Project & Financing: 17,000 km from South Africa to France, connecting 23 countries for a total cost of US $700 million. Launch of commercial service in Dec. 2012 Ownership: Private sector consortium led by France Telecom-Orange Structure: Partnership btn consortium and landing parties with catalytic WB funding for small, FC and landlocked states along the coast of Africa .

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Caribbean Regional Communications Infrastructure Program (CARCIP)

CARCIP (US$ 45 million, SVG, SLU, GRE, Nicaragua):

• Connectivity: PPP for provision of access to submarine cables, national backbone networks, government networks

• Support to regional ICT industry

• Platforms for e-services

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Pacific Regional Connectivity Program (US$ 190 million)

Phase 1

Phase 1: Tonga-Fiji Connectivity Project (FY12), US $ 34 million Phase 2: Solomon Islands Connectivity Project (FY13) Phase 3: Samoa Connectivity Project (FY13/14) Phase 4: Vanuatu Connectivity Project (FY13/14) Phase 5: Northern Pacific Connectivity (FY14/15)

Pacific Regional Connectivity Program

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PPP Challenges in the Caribbean

Fiscal surprises

Deal closing delays

Failures to launch & missed

opportunities

What? Why?

Inappropriate risk allocation

Inadequate due diligence and preparation

Insufficient fiscal oversight

Unclear or flawed transaction processes

Gaps in due diligence and preparation

Insufficient execution capacity

Unclear development processes and roles

No clear criteria for project selection

Insufficient project preparation capacity

Lack of awareness of PPP potential

Lack of regional coordination mechanisms

Source: A PPP Policy Framework for Grenada -St. George’s, 10-13 June 2014

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Objectives of PPP Policy: how will PPPs be managed?

Ensure PPP projects are implemented according to guiding principles:

• Value for money

• Fiscal responsibility

• Transparency

• Environmental and social sustainability

• Partnership

Source: A PPP Policy Framework for Grenada -St. George’s, 10-13 June 2014 13