Supporting Enhanced Pacific Connectivity
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1 Supporting Enhanced Pacific Connectivity The World Bank Transport and ICT Global Practice Smart Connections for All Commonwealth Telecommunications Organisation (CTO) Forum 2016 Nadi, Fiji, September 12-14, 2016 Natasha Beschorner
2 Regional Context-1 Mobile access increased: mobile phone penetration over 90% in most countries, including in many outer island regions Internet access increased, particularly mobile broadband; new packages/services available Costs reduced for SIM cards, calling rates, data plans Foreign direct investment (e.g. telcos, IT enabled services) Direct and indirect jobs created in the telecommunications sector; potential, selective growth in global outsourcing opportunities (esp. Fiji) Contribution to socioeconomic development and service delivery (health, education new applications), fledgling e- commerce, online business services 2
3 Regional Context-2 Accelerating move to digital economy and society, and associated service delivery platforms, requires more affordable and reliable communications platforms Regional challenges: Slow rollout of fixed broadband, faster expansion of mobile broadband (3G, 4G/LTE), but most economies in the region still under-served International bandwidth capacity and costs a major constraint World Bank working with other partners (ADB, DFAT, private sector) to support backbone/broadband expansion across the Pacific region. 3
4 Pacific Regional Connectivity Program-1 Palau 2250km Timor Leste 750km 850 km 1500km 2850km 1900 km 2800km 1300 km 1850 km PNG 1650 km Solomon Isd 2700 km 2100 km FS Micronesia 1650 km 1450 km 1400 km 2100 km 2100 km 1600 km 1750 km 1300 km 3200 km Vanuatu 600 km 1300 km New Zealand 2100 km Marshall Isd 700 km Kiribati 750 km Niue 600 km 1150 km Tonga 1100 km French Cook isd Polynesia Extreme isolation of region, high costs, small markets Successful telecoms liberalization in most countries, boosting mobile access, improving regulatory environment. Growing demand for bandwidth justifies investments Internet access the main challenge; constrained largely by high international bandwidth costs (US$ Mbps/mo.) and limited capacity Fiji 2250 km Wallis & Futuna 550 km 650 km 2000 km 1150 km 900 km 4100 km Samoa Hawaii 2400 km 4200 km 100% 80% 60% 40% Population covered by 2G (GSM) mobile signal (%) 44% 48% 51% 57% 20% 66% 79% 86% 87% 89% 92% 0% Mobile and Fixed Broadband subscriptions 4
5 Pacific Regional Connectivity Program-2 Tonga-Fiji Connectivity Project: IDA US$17.2m (2012), cofinanced with ADB, Australia Palau-FSM Connectivity Project: IDA US$47.5 million (2014), cofinanced with ADB Samoa Connectivity Project: IDA US$16.0m (2015), cofinanced with ADB Fiji Connectivity Project; IBRD US$6.8m (planned 2016) Kiribati Connectivity Project IDA US$20m (planned 2017) cofinanced with ADB Tuvalu Connectivity Project amount. & cofinancing TBC (planned 2017)
6 Pacific Regional Connectivity Program-3 Objectives: reduce the cost and increase the availability of internet services in participating countries/regions Components: investment + regulatory technical assistance Critical considerations Institutional and financing models Regulatory framework Technology approach adaptable, based on country circumstances
7 Tonga-Fiji Connectivity Project 827km cable connecting Nuku alofa, Tonga to Southern Cross Cable Network in Suva, Fiji, completed Aug2013 Owned and operated by Tonga Cable Ltd (TCL) Increase in broadband access and available, and reduced prices relative to pre-cable period Communications Act and Communications Commission Act (2015) Next steps: Operationalizing the Communications Commission and new legal and regulatory framework Restructuring of TCL Extending connectivity to Vava u and Ha apai (outer islands) 7
8 Palau-FSM Connectivity Project Palau (ADB-financed) and FSM (Yap state) to connect to new SEA-US cable (Manado-Guam); Chuuk state (FSM) to connect to Pohnpei then to Guam via existing HANTRU-1 cable Palau and FSM establishing cable open access entities New, pro-competitive legislation Next steps: Ongoing market/regulatory reforms in FSM including establishment of regulator Connecting Kosrae state to planned Kiribati- Nauru-Pohnpei cable 8
9 Samoa Connectivity Project Samoa (Apia and Upolu) to connect to Fiji on new Tui Samoa cable; bidding completed, and contract signature pending To be owned & operated by Samoa Submarine Cable Co. Subregional collaboration: - Wallis & Futuna; Fiji (Vanua Levu) Next steps: Cable supply and installation: to be operational by August 2017 Technical support to Office of the Regulator 9
10 Fiji Connectivity Project Linked to Samoa Connectivity Project To connect Vanua Levu (Fiji) the Tui Samoa cable (spur, branching unit) Cable to land in Savusavu Next steps: Contractual arrangements for cable supply and installation, in coordination with Samoa Onshore facilities construction in Savusavu Institutional and regulatory arrangements 10
11 Kiribati Connectivity Project Construction of Kiribati (Tarawa)-Nauru-Kosrae- Pohnpei cable WB supporting Kiribati s and FSM s participation; ADB supporting Nauru s & additional Kiribati components Subregional collaboration Next steps: Technical, safeguards preparation Institutional arrangements (countrylevel and subregional) Planned approval of financing by Q
12 Issues & considerations-1 How to deliver benefits to end-users of internet services (households, businesses, governments) Low cost investments, PLUS Regulations that encourage greater uptake of services: Competitively-priced wholesale bandwidth Open and non-discriminatory access to bandwidth Different ownership/operational/financing models* Demand-side interventions 12
13 Illustrative PPP models for Cable Projects PPP Model Key Characteristics Advantages Disadvantages Applicability Commercial Joint Venture Wholesale seller model with profit center Operates business separately from shareholders Cooperative Each investor assigned capacity rights based on investment Gov t can retain interest to accommodate future market entry Hybrid Commercial Joint Venture / Cooperative Splits capacity rights between separate wholesale business (commercial JV) and selfprovisioning operators (cooperative) Profit (upside potential) capable of attracting purely financial investors Very attractive to retail operators No wholesale profit Virtual facilities-based competition Minimal regulation Not complex structure Can accommodate network operators and profit (upside) motivated financial investors Potentially more options for gov t to divest interest 13 Operators unlikely to invest without majority control Bestows significant market power on bottleneck infrastructure High regulatory costs Out-of-favor, 1990s cost plus model, no longer best practice Precludes profit (upside) motivated financial investors at the wholesale level Very complex structure Inherent conflict of interest between operators and wholesale business Potential for collusion High regulatory costs Adds costs to operate wholesale business Concentrates market power over critical infrastructure Requires strong regulatory oversight Adds wholesale layer of profits/costs to sector Worth considering only if operators not attracted by cooperative Highly suitable in accommodating incumbents and future new entrants Competition at retail not wholesale level Promotes new entry and competition Levels the playing field Worth considering only if strong profit (upside) motivated financial investor interest is identified, but otherwise dilutes advantages of cooperative
14 What are digital dividends? DIGITAL DIVIDENDS Growth Jobs Services Business People Government AGENTS Are the benefits of improved internet reaching everyone, everywhere? What are the challenges? [Source: WDR 2016]
15 NATIONAL PRIORITIES Analog foundations for a digital economy SOURCE: WDR 2016 team.
16 World Bank Group ICT Strategy Digital Connectivity: scale up affordable access to broadband Internet Digital Economy: support technology innovation for jobs and competitiveness across economies Digital Government: support the use of technology to improve service delivery, promote open and accountable development The World Bank Group is supporting ICT for Development programs in more than 100 member countries, including: Catalytic project finance for network investments, e.g. backbone/broadband and rural connectivity programs Technical assistance for telecoms policy and regulatory reforms Investments in Government information systems (various departments/ministries), cloud, databases, citizen-facing services Projects and components supporting applications e.g. ICT for jobs, farmer information services, health and education information systems, transport planning, disaster early warning, location-based services Advice and knowledge-sharing for governments on ICT4D topics International Finance Corporation (IFC) investment in private sector-led activities Multilateral Investment Guarantee Agency (MIGA) support
17 Thank you Natasha Beschorner, Senior ICT Policy Specialist The World Bank
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