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 Cisco Forecasts 30.6 Exabytes per Month of Mobile Data Traffic by 2020 Source: Cisco VNI Mobile, 2016 2
a significant broadband gap exists in many developing countries Mobile broadband and fixed-broadband penetration, 2015 3
much needed infrastructure investment across all sectors Projected Infrastructure Gap (Mckinsey & Co. study) 4
and in ICTs it is the private sector that drives investment 5
Scope of Enterprise Functionality / Service Offering Why PPPs to accelerate backbone networks roll out? 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). 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 Wide Scope Limited Scope Management Contract Network Leasing Outsource (BPO) IPO Concession Contract BOT Full Privatization BOO Equipment Supplier Contract Public Ownership / Risk Private 6
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 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 Examples 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 Model Description Examples Passive 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). Singapore - deployed Wholesale / Passive 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. Qatar Own use / passive 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 Rwanda deployed Madagascar Government / incumbent to manage and lead infrastructure build Jump start investment and service offerings Minimize duplication of investment / promote the low cost solution 8
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 $700 million. Launch of commercial service in Dec. 2012 Ownership: Private sector consortium led by France Telecom-Orange Structure: Partnership btn consortium and landing parties with catalytic WB funding for small, FC and landlocked states along the coast of Africa. 9
Caribbean Regional Communications Infrastructure Program (CARCIP) CARCIP (US$ 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 10
Pacific Regional Connectivity Program 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) 11
PPP Challenges in the Caribbean What? Fiscal surprises Why? Inappropriate risk allocation Inadequate due diligence and preparation Insufficient fiscal oversight Deal closing delays Failures to launch & missed opportunities 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 12
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