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Papua New Guinea - Strategy & Project Outline (Oct 23 2008)
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Papua New Guinea - Strategy & Project Outline (Oct 23 2008)

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Presented in Port Moresby to stakeholders in October 2008.

Presented in Port Moresby to stakeholders in October 2008.

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Transcript

  • 1. Rural Telecommunications Strategy for PNG
  • 2. Agenda
    • Overall approach and methodology
    • Main Findings
    • Recommendations
    • World Bank project
  • 3. Overall Approach
    • The overall approach towards rural telecommunications is outlined by the “gaps” model:
    Universal Service Frontier (100%) Access Gap Sustainability Frontier Market Efficiency Frontier Market Gap Current access Low Income Households High Income Households Low cost Areas High cost Areas Supply Demand Penetration level achievable in a well-functioning competitive market under a stable regulatory environment Requires Universal Service Fund, but once demand catches up, service is expected to cover its operational costs. Port Moresby, main cities Mobile Competition World Bank Project
  • 4. Closing the market gap is key
    • Designing a universal access strategy without first addressing any pending regulatory issue is inefficient
      • Universal access program could end up financing otherwise commercially viable areas
      • Subsidy requirements in non-commercially viable areas could be lower with improved regulation
      • Opportunity cost of public resources is high
  • 5. Key questions in designing a universal access program
    • In PNG, the following questions need to be answered to develop a universal access program:
      • Who to finance?  define target population (e.g. all villages with minimum population of x…; all district centres…)
      • What to finance?  define target services (e.g. telephony, Internet, backbone, public access)
      • How to finance?  define funding mechanism
      • How much is required?  estimate required funds
  • 6. Agenda
    • Overall approach and methodology
    • Main Findings
    • Recommendations
    • World Bank project
  • 7. Gradual introduction of competition in PNG is reducing the market gap
    • Entry of a new mobile operator has increased the subscriber base dramatically over the past year (900,000 subscribers by Q1-2008)
    • Mobile prices have decreased approximately 60% since the entry of Digicel
    • Recent sale of 50% of B Mobile should further increase competition in the sector
  • 8. Digicel is increasing its coverage nationwide…
  • 9. … and Telikom needs to frequently update its backbone
  • 10. Internet access is still very low
    • Very low penetration (approx. 10,000 / 15,000 subscribers)
    • Mostly dial-up with very slow connection speeds
    • Limited by the low penetration of fixed lines and quality of the local loop (DSL-- copper)
    • Some broadband (DSL) available in Port Moresby; fewer than 2,000 subscribers (est.)
    • Broadband wireless technologies offer opportunities for more widespread service in PNG
      • WiMAX
      • 3G mobile
  • 11. The regulatory framework is still incomplete
    • Besides those regulations required to close the Market Gap, there is a set of regulations required to enable a rural strategy:
      • Rules for interconnection (eg. Asymmetric ix for rural operators)
      • Licensing and spectrum policies (eg. can ISPs provide voice services over IP? Will the government tender WiMax frequencies in the short term?)
      • Tariff regulation for rural areas
      • Quality of Service
      • Further definition of coverage requirements included in the licenses of B Mobile, Digicel and Greencom
      • International gateway
      • Overall institutional settings for regulation and enforcement in the sector
  • 12. Agenda
    • Overall approach and methodology
    • Main Findings
    • Recommendations
    • World Bank project
  • 13. Close the market gap
    • A progressive implementation of the required legal and regulatory framework is recommended
      • Transition towards competition in other services
      • Prepare Telikom for a new competitive environment
    • Government has retained Freehills and Concept Economics to specifically address this issue and prepare a roadmap for liberalization of the sector
    • World Bank and Freehills/Concept collaborating on Universal access policy issues, at request of Government, to ensure consistency of approaches
  • 14. Close the Access Gap: Universal Access Program
    • Who to finance?
      • An earlier World Bank study (InterConnect Communications/ICC) divided the country into three “zones”
        • Zone 1: Areas that are commercially viable
        • Zone 2: Areas that would require a one-time subsidy
        • Zone 3: Areas that would require continuous subsidy
  • 15. Close the Access Gap: Universal Access Program Universal Service Frontier (100%) Access Gap Sustainability Frontier Market Efficiency Frontier Market Gap Current access Low Income Households High Income Households Low cost Areas High cost Areas Supply Demand ZONE 1 ZONE 2 ZONE 3 Pending on-going review, and analysis of network coverage, the main target areas for the RCF should focus on zone 2 As demand expands and costs decrease, locations in zone 3 should become viable in time and eventually be included in future tenders
  • 16. Universal Access (2)
    • What to finance?
      • Earlier World Bank study proposed these targets:
      • These targets are being reviewed
      • Your feedback is requested
    At least 5km away from the nearest payphone ≤ 500 Access to broadband and value-added services ≥ 1,000 Phone coverage plus one public access point per every 500 inhab. ≥ 1,000 One public access point (eg payphone) 500 ≤ 1,000 Target service Population Threshold
  • 17. Universal Access (3) Project A tender process Operator 1 Operator 2 Operator N
    • The Universal Connectivity Fund holds a tender for a specific project (areas, services, quality, term)
    • The project is awarded to the operator that requests the lowest subsidy (“smart subsidy” approach)
    Proposals
    • How to finance? Through the Universal Connectivity Fund
  • 18. Smart Subsidies
    • It is not a direct subsidy to investment
    • Sustainability is critical
    If project is financed with private resources Net present value for private parties: -K10 million If project is financed by private and public resources Net present value for private parties: -K0 Subsidy: K10 million
  • 19. Some characteristics of smart subsidy reverse auctions
    • Technology neutral tenders allow operators propose different options
    • Successful tenders usually depend on:
      • Design of the tender
      • Credibility
      • Stability and Certainty
      • A good contract
  • 20. Universal Access (3) Operator 1 Operator 2 Operator N Universal Connectivity Fund Contribution Usually % of net revenues Universal Connectivity Fund Collection
    • How are funds collected?
  • 21. Universal Access (5)
    • Institutional setting:
      • Several options previously discussed during visits to PNG. Recommended approach at this stage is an independent RCF with institutional safeguards.
        • Transparency, accountability and independence are key to the success of the program
    • Basic design principles:
      • Management is independent (of regulated companies)
      • RCF has technical and financial expertise or access to it
      • Monies in fund are managed by experts
      • Criteria for allocation decision-making are clear
      • Recipient of funds (subsidies) have clear expectations and targets
      • RCF has capacity to monitor use of funds and performance
  • 22. Universal Access (6)
    • Legal implications:
      • RCF to be established by legislation – either amendments to existing legislation OR a separate stand-alone statute;
      • New legislation allows simultaneous focus on several issues:
        • establishing Fund;
        • imposing levies and other sources of income for Fund;
        • organization and governance of Fund and agency
    • In addition to creating an agency to manage the Fund, new legislation should include:
      • Scope of activities to be funded
      • Benchmark costs (e.g., methodology for assessing net cost, capital recovery, capital cost, and revenue)
      • Process of selection of Universal Access Provider
      • Appropriate licensing conditions
  • 23. Agenda
    • Overall approach and methodology
    • Main Findings
    • Recommendations
    • World Bank project
  • 24. Scope and activities
    • Assist the Government in the creation of the Universal Access Program
    • Project components:
      • Component 1 - Technical assistance to the Ministry of Information & Communications to support the improvement of the current legal and regulatory framework (aimed at reducing the market gap)
      • Component 2 - Technical assistance to assist in the creation of the universal service program (Rural Connectivity Fund) and the institutional settings and legal and regulatory framework required
      • Component 3 - Investment subsidy (“seed capital”) for the Fund to support the first set of tenders, both as a pilot for the newly formed entities and to jump-start the program, about US$13 m.
  • 25. Current status and next steps
    • Current mission (Oct 20 – 25) will identify specific activities to be financed:
      • Component 1 will be coordinated with the Government and Freehills/Concept Economics
      • Component 2 will be assessed on-site
      • The economic and financial model for Component 3 will be populated during the mission and the scope of the first set of tenders will be provided by the end of the mission.
  • 26.