Building High Speed Connectivity:

Policy Development Considerations

May5, 2009
 High speed connectivity is considered to be an important
objective by many governments

Opening Remarks

 High speed connectivity is high on the agenda of many governments

 Rapid technological and application innovations are introducing new services that demand greater
bandwidth capacity to perform multimedia and other data-related functions (e.g. IP-based TV); Such
services are being introduced into the norm of developed societies
 Many services are increasingly supporting society and business needs, e.g. online conferencing, online
education, online medical advice - reducing the barriers of distances and therefore enhancing
knowledge and information exchanges
 Governments believe new ICT-based services are valuable to their societies and economies as a whole;
many believe all citizens should have equal access to capacity and speed
 Connectivity can be through fixed or wireless networks; fixed broadband has attracted much attention
and prioritization in a number of countries
 Regulatory attention has traditionally made a clear distinction between fixed and wireless businesses;
this is beginning to fade with next generation regulations but full convergence or acceptance of
complimentary use of technologies still needs to progress
 Government engagement has intensified in the recent economic downturn, but any form of
engagement needs to be measured to ensure the ongoing development and sustainability of
competition, as well as to minimize economic inefficiencies
 New business models involving government engagement in high capacity network deployment are
emerging
 It’s a common view that many governments place importance
on telecoms to advance social and economic development

Telecom Sector: Development Drivers

National Welfare Service Provider

Advancement Development
Dynamic market where multiple
Advanced nation with high facility- and service- based service
technology and service adoption providers compete on offering
leading to greater sector and innovative services and operating
economic growth different networks
IP/TV
Broadband IP Network

More Productive
2G/3G
Users and Higher 802.xx
Quality of Life Access

Packet Circuit
Mobile Mobile
Network Network

Technology and
Service Deployment
Progressive environment that
facilitates the development and
deployment of advanced
technologies and services
New technologies like NGN are heralding the convergence of
multimedia services over a unified platform …

NGN and Convergence

NGN’s Enabling Convergence

NGN

Entertainment Applications

Interactive Services

Guides/Directories
Internet Access
Video
Voice

IP

Different Access Modes

 … and such services are increasing bandwidth demand
worldwide

Bandwidth Demand
Worldwide International Bandwidth Demand Growth
(Tbps, 2002 - 2007) Regional Growth:
Cumulative Bandwidth Demand
CAGR: 12.4
(Gbps, 2007 - 2011F)
47%

CAGR:
1,480
31%
8.6
Growth

1,107

5.7 802

559
3.6
382
2.4
1.8

2002 2003 2004 2005 2006 2007 2007 2008F 2009F 2010F 2011F

 Competition and introduction of new low-cost technologies are driving new services and
network use
Drivers

 International voice traffic (circuit switched and IP) is growing and prices are declining
 Penetration of broadband is increasing as it becomes more affordable in the region
 Driven by the wide adoption of broadband, media applications are becoming more popular
thus requiring more bandwidth. Such applications include video streaming, video
conferencing, Internet radio, etc.
Source: : DRG/Telegeography
 High speed connectivity government policies can be driven
by a number of reasons

Generic Government Policy Drivers

Address Capacity Demand Cost Efficiencies

 Capacity demand may not  Some country markets measured
beadequately met, hindering might find high cost
businesses as well as private inefficiencies in:
user’s enjoyment of new services - Network duplication
- Network replacement
 Likely to arise in under-
National
competitive markets Industrial
Policy

Ensure Leadership Text Create Employment

 National positional among peers  Major economic downturn may
considered important be countered by capital injection
- Supports attracting into significant projects with
investment into the country external benefits to local
- Supports exports (image of communities or the country at
country contributes to trust in large
the services/goods)
 Recently announced government funding underlines the
importance of ICT and broadband for national economies

Government Funding - Country Case Studies

US EU Malaysia Singapore

   
Initiatives

Rural Broadband

High-Speed Broadband  ×  
Economic Downturn
Mitigation    ×
2009 US economy stimulus EU Commission proposes 2009 economic stimulus Singapore authorities
program, the American to target €1BN to extend program, $0.81BN was have granted in 2008 up
Recovery and Reinvestment and upgrade high-speed allocated to government to $0.525BN to a
Act includes $7.2BN for a internet in rural investment agency consortium to deploy a
Description

broadband rollout that communities to provide Khazanah to facilitate and fiber network that will
increases speed and access to 30% of the improve broadband access 60% of buildings by
penetration ($4.7BN in population infrastructure via its 2010 and 95% 2012
national high-speed EU members are subsidiary Wholesale prices for
broadband network, additionally providing broadband fiber access are
$2.5BN in rural areas economic stimulus for $0.65BN has also been set to $10 for residents
broadband) broadband rollouts such provided to government and $35 for business
as UK, Portugal, Germany regulator MCMC to connections
facilitate broadband
community centers in
rural areas and achieve
50% population
penetration rate by 2010
 Government roles may vary - directional, engaged or
detached - and each involves risks of economic efficiencies
Directional
 Government assumes social-economic
needs of the country
- Usually politically motivated
- Typically requirements imposed are
symmetrical across society
 Prescribe coverage
Description
- USO - universal service obligation -
initiatives require rollout of network
types (e.g. fiber, 3G) in specific areas;
areas that are at risk of not being
addressed (low density, rural areas, low
income areas)
- Specific USO obligation on a dominant
operator
- Obligation in mobile ( or possibly other
wireless) licenses
 Prescribe criteria (e.g. speed)
 Government has no financial onus
 Politically determined need and not
Market Risk
necessarily based on economic
rationale; requirement imposed on
selected industry providers
 Costs are responsibility of affected
providers; risk of financial failure
Low Risk High Risk
Government Role
Engaged
 Government assumes social - economic
needs of the country, but market failure
may have been identified/proven
 Develop and initiate government program
- Public Private Partnership (PPP): Seed
money; Build Operate Transfer (BOT)
 Establish new infrastructure company
 Financial onus may be shared between
government and industry
 Politically determined need, but
economic rational is more-likely
especially if funding comes from the
government; private sector
willingness to engage
 Costs shared or taken on by willing
providers
Detached
 Leave to providers in the market to identify
needs, deploy and develop infrastructure
and services accordingly
- Services may vary according to market
segmentation, including geographical
needs (i.e. asymmetrical requirements
applied)
 Financial onus on industry, but decisions
based on economic costs and investment
rationale, not policy
 Industry identifies actual needs
based on market demands and costs
of investment
 High likelihood of efficiencies, but
inequality in services - key question:
is there always real need for equality
(e.g. in data access speed etc.)?
 Potential for market failure in some
uneconomical areas
 Any government involvement in the sector, however,
should be less prescriptive and allow operating flexibility

Operating Flexibility: Technology Use

 Operators should choose the technology that best suits their business
plan
Technology - Regulators should not prejudge and prescribe technologies, however
Neutrality should require interoperability in order to guard against anti-
competitive behavior through technology-based barriers to entry
- Spectrum use should, where possible, be technology neutral

 Regulators should consider adopting more network neutrality.

- Fixed and wireless convergence should be acceptable, allowing
“fixed” operators the flexibility in deploying cables and wireless
infrastructure (e.g. fiber optics and WiMAX) to deliver broadband
Complimentary services
- It may be impractical and unrealistic to expect full national
deployment / coverage of cables
- Emphasis should be on service access rather than the means of
service delivery
While continuing to advance market competition, capital
intense initiatives might need support - handle with care

Concluding Remarks

 Ensure regulatory practices enable providers flexibility to utilize the choice of available
technologies and means to deliver connectivity
 Balance the political benefits of universal equality with the practical need and subsequent
costs of access to connectivity speed
 Engagement by authorities in the sector should be as an enabler and not as a participant (e.g.
new teleco) - i.e. offering financial support and PPP over entering as a state operator (it failed
before)
 Ensure providers have the choice and fair opportunity to participate in government
sponsored schemes/initiatives and funding
 Encourage winners over weak providers, without being bias in decision-making or otherwise
demonstrating favoritism
 Ensure market liberalization continues and anti-competitive practices are addressed