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National broadband network development: for an effective public-private partnership

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The ICT sector plays a vital role in economic and social development and its contribution is critical to enhancing productivity and economic efficiency, creating employment opportunities, and …

The ICT sector plays a vital role in economic and social development and its contribution is critical to enhancing productivity and economic efficiency, creating employment opportunities, and achieving more balanced regional development. In a globalized world, the economy in general and the digital economy in particular cannot deliver its benefits without a world-class communication infrastructure. By providing ubiquitous superfast broadband connectivity to all, new opportunities will be offered for new communication styles (between individuals and enterprises), improve quality and accessibility of innovative services (e.g. education and healthcare), increase economic productivity, and connect small business to new customers and markets. However, what would be the best approach to achieve a cost-effective super-fast broadband infrastructure in a reasonable time-frame?

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  • 1. National Broadband Network Development Mohamed Bouanane– Director – Strategic Management Consulting November 25, 2013 The ICT sector plays a vital role in economic and social development and its contribution is critical to enhancing productivity and economic efficiency, creating employment opportunities, and achieving more balanced regional development. In a globalized world, the economy in general and the digital economy in particular cannot deliver its benefits without a world-class communication infrastructure. By providing ubiquitous superfast broadband connectivity to all, new opportunities will be offered for new communication styles (between individuals and enterprises), improve quality and accessibility of innovative services (e.g. education and healthcare), increase economic productivity, and connect small business to new customers and markets. However, what would be the best approach to achieve a costeffective super-fast broadband infrastructure in a reasonable time-frame?
  • 2. National Broadband Network Development: For an effective Public Private Partnership The digital economy cannot deliver its benefits without a world-class ICT infrastructure. Thus, the ICT sector, and in particular the high speed (and now superfast) broadband networks play a vital role in economic and social development. The ICT sector contribution to productivity enhancement (contributing between 25% and 50% of productivity growth) and economic efficiency, creation of employment opportunities is critical. Furthermore, it can help achieve more balanced regional development1. Indeed, over the last decade, a number of developed and emergent economies have drawn up broadband strategies to bridge the gap in supply in this domain. However, despite many reforms in the telecommunications sector conducted in a majority of countries and despite the impressive development of the Telco industry, much of the developed countries’ population don’t have access to super-fast and ultra-fast broadband infrastructure and few of the population in the emergent countries have access to high speed broadband services. Development of fiber infrastructure to the home / cabinet has encountered major barriers such as the level of investment required – in particular in remote areas –, competition of legacy technologies (mostly DSL), lack of national coordination, and low public incentives. Regulators and governments, realizing the importance of “enabling” the development of such infrastructures on the long term, are today considering different tools to promote the delivery of broadband infrastructure, enhance customer’s experience with multimedia and next generation services, and increase the penetration rate. Three approaches are introduced below: 1. Infrastructure sharing regulations and incentives: After the introduction and promotion of facility-based competition and strong push towards investment in infrastructure, regulators are considering more service-based competition and fostering passive and / or active infrastructure sharing strategies. The resulting decrease of capital and operating expenses will help service providers to focus on investing in innovative services bringing higher benefit to customers. The infrastructure sharing policy should be established through a clear framework taking into account fair competition, protection of existing or planned investments, wholesale model licensing (e.g. utilities companies) and lowering barriers for new entrants (end-users providers). Although beneficial for new entrants, the infrastructure sharing has proved so far that in most of the cases it does not go beyond sharing the passive infrastructure and does not lead to the expected benefits for the market (higher competition and penetration rate, better coverage in rural areas) and end-users (affordable prices, better customer’s experience). 2. Pure public funding: The government gets involved directly in building and operating a new access infrastructure. Today, and especially with the current economic downturn, the delivery of a national broadband network is costly, cash intensive, and takes time (variable depending on the country geography). Moreover, having a Government funded /operated infrastructure company competing with the private sector would false 1 Caveat: It should be noted that badly planned and uncoordinated ad hoc ICT infrastructure developments can have the reverse affect – creating imbalances through digital islands and digital divides. M. Bouanane Page |2
  • 3. National Broadband Network Development: For an effective Public Private Partnership the competition and prevent the private facility-based companies from obtaining a reasonable return on investment. 3. Public-private-partnership for an open access: The cost and long time-frame of new government-funded deployment is the main reason why governments and regulators – especially in developing countries – should seek a close cooperation with the private sector for the delivery of such challenging strategy. By extending rather than duplicating the existing infrastructure, such PPP collaboration will decrease the deployment timeframe and focus will be directed into areas where the private sector cannot primarily address. The PPP for an open access2 is a combination of both infrastructure sharing and government funding. Such partnership will significantly reduce the investment expenditure for both the communication service providers and the government. In general, the PPP is expected to encourage all facility-based owners to take part in the partnership. Therefore, incorporating part or the entire existing infrastructure (Telecom incumbent and utilities companies) will ensure an efficient delivery of the broadband strategy. Also, PPP open access projects will help introducing at a large scale the service-based competition which drives the telecommunications sector development especially in the emergent markets, thus improving customers’ experience and ensuring affordable fast broadband access to the whole community. In that regard, the Singapore and Australia initiatives are good examples for a best practice of PPP in telecommunications. The Australian government committed to build the key enabling infrastructure for the digital economy, the National Broadband Network (NBN), through a public private partnership initiative for 100 Mbps to be developed over the eight years. In 2009 the Australian government established the National Broadband Network Company (NBN Co) with a 51% stake by government and the remainder by the private sector and went out to tender for the first tranche (AU$ 4.7 billion of total invest AU$ 43 billion ) of an 8-year roll-out of a national FTTH/P (Fiber To The Home / Premises) network. The NBN Co is responsible for design, build and operate a new wholesale-only model to deliver high-speed broadband to all Australian premises. Possible approaches and models to build the PPP open access project have to be carefully assessed by the regulator, including financial, governance, and stakeholders contribution aspects – in particular with regards to the implication of the incumbent in such project. Also, potential concerns with PPP open access such as market distortion, anti-competition should be addressed at the earliest stage of the project definition. Particular regulatory provisions should 2 Open Access means the creation of competition in all layers of the network allowing a wide variety of physical networks and applications to interact in an open architecture. Simply put, anyone can connect to anyone in a technology-neutral framework that encourages innovative, low-cost delivery to users. It encourages market entry from smaller, local companies and seeks to prevent any single entity from becoming dominant. Open access requires transparency to ensure fair trading within and between the layers based on clear, comparative information on market prices and services. Source: Infodev, 2005. M. Bouanane Page |3
  • 4. National Broadband Network Development: For an effective Public Private Partnership be introduced to ensure the open access nature of the network as well as the wholesale model, thus preventing the owner from competing at the retail level. M. Bouanane Page |4