Closing the ICTs access gaps study

1. CLOSING THE ICTs ACCESS GAPS
IN KENYA
by
Paul Kiage

2. Presentation Outline
1. ICTs Access Gaps Study Objectives
1. Methodology & Modelling Process
2. Key Findings
1. Closing the ICT Gaps: Proposed USF Projects FY 2016/17
2. USF Projects Implementation Plan

3. Objectives of ICTs Access Gaps Study
• Map out the gaps in voice, data, broadcasting
and postal &courier services at sub-location
level across all counties in Kenya.
• Engage the industry and other stakeholders to
identify the gaps in service provision.
• Closing the Identified ICT Access Gaps –
Priority Projects

4. Access Gaps Methodology
4

5. Methodology and Modelling Process
• Populations based on 2009 Census up scaled to 2016 at 2.6% av. per annum
growth
• Population distribution within sub-locations provided by LandScan dataset
• Mobile -90dBm coverage prediction maps from the three operators for Q4 2015
GIS Analysis
Integrates all
data and
provides output
to the Gap
Model
Then displays
the results
The
Access Gap
Financial
Model
Excel
Spreadsheet
Inputs from
KNBS,
Operators and
other
infrastructure
& service
providers
Gap projects
and
estimated
Maximum
Subsidies

6. The GIS-Referenced Model for Mobile Gaps
Identifies:
• Uncovered areas & populations per sub-location (from the GIS)
• How many new mobile base stations (BTSs) required
– based on assumed tower height & coverage radius
• Demand side assumptions
– User penetration and average revenue per user (ARPU)
• Cost side assumptions
– Direct sales costs (% of revenues spent on customer acquisition & sales)
– Base station CAPEX costs (towers, power, backbone & equipment)
– Base station OPEX costs (O&M, fuel, spectrum fees and security)

7. Key Findings
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8. The 2G Voice Service Gaps today
• Minimum 94.4% of population covered
• 5.6% unserved (2.66 Million @ 2017
projection)
– Halved since 2011
• 5,657 sub-locations 100% covered
• 418 sub-locations with less than 50%
population coverage
• Max. 164 sub-locations with zero %
coverage
Sub-location population 2G coverage
Coverage 100% >90% 50% - 90% < 50% 0%
Sub-locations 5,657 485 425 418 164

9. 3G Data Service Gaps and Fibre access
• 78% population covered
• Only 17% of the land area
• Huge geographical gap areas,
• But fibre routes reach a high % of
population concentrations along
the major routes, incl. schools &
other institutions
Table 4-2: Sub-location population 3G coverage
Coverage 100% >90%
50% -
90% < 50% 0%
Sub-locations 2,454 1,324 1,146 977 1,244

10. Post & Courier Sub-Sector
• Decline from 900 PO’s (2000) to 695 (2011) has been
halted since 2014
• While representation has declined seriously in the North
and East, so have volumes of letter mail
• International letter mail and parcel traffic are is
increasing
• E-Commerce offers a lifeline but private couriers may be
taking the most advantage
• Over 1,000 couriers but only 146 are licensed
– Permanent footprint of the larger companies <200
locations
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0 10 20 30 40 50 60
ISIOLO
WAJIR
GARISSA
TANA RIVER
LAMU
MARSABIT
MANDERA
TURKANA
SAMBURU
WEST POKOT
NANDI
KILIFI
TRANS NZOIA
ELGEYO-MARAKWET
NAROK
LAIKIPIA
KWALE
KAJIADO
BOMET
MIGORI
BARINGO
NYANDARUA
KIRINYAGA
THARAKA
NYAMIRA
BUSIA
TAITA TAVETA
EMBU
KERICHO
KITUI
UASIN GISHU
MURANG'A
SIAYA
NYERI
MOMBASA
MERU
MAKUENI
HOMA BAY
VIHIGA
KAKAMEGA
KISII
NAKURU
BUNGOMA
KIAMBU
KISUMU
MACHAKOS
NAIROBI
Post Offices per County
667 634 622 622 623 623707 707 707 788
2117 2117
JUN-2013 DEC 2013 JUN-2014 DEC-2014 JUN-2015 DEC-2015
Postal and Courier Outlets
PCK Private courier outlets

11. Postal and Courier Analysis
• Universal Service defined but no access
standards
• Average penetration varies from 1: 25,000 in Nairobi to 1:
178,000 in the worst cases
• Largest area per outlet 10,000 Km2 (100 Km square)
• PCK claims making loss in most departmental PO’s, but costs
due to universal service not yet well defined
• Courier presence also economically constrained
– Largest domestic network by G4S has 141 POPs, 26 of
which are “operating at a loss”
– Some limited efforts to network with smaller couriers in
remote areas
Country wide distribution of Post Offices
Administrative
Level
Total At least one
PO present
Penetration of post offices
Min Average Max
County 47 47 2 13 55
Constituency 295 264 0 2 14
Ward 1,450 480 0 33% 10
Sub-location 7,149 524 0 7% 7

12. Broadcasting Sub-sector
• Over 100 FM radio stations
• TV Digitalisation well advanced
– Two licensed signal distributors
• 40-50 Digital Terrestrial Television
(DTT) have been commissioned
• Will be 70-80 by mid 2016
• Presence in all counties
• Will be 69% population coverage
Digital TV Stations (contracted to Mid-2016)
(dbµV/m)
DTT Broadcast coverage to sub-location level (% of
population)
Coverage
100% >90% 50% - 90% < 50% 0%
Sub-locations
2,704 677 884 957 1,927

13. Closing the ICT Gaps -
Proposed USF Priority Projects
• Maximum population impact
• Sustainable projects
• Areas not soon to be covered under
operator obligations

14. 1. Voice Infrastructure Projects
• Note these estimates are being checked visually with GIS, aggregated if feasible and
bidding lots optimised
No. sub-locations with >30% uncovered population 746
Total subsidy for all sub-localities and spaces without prioritisation US$ 157 M
Total persons covered if all reached 2.3 M
Cost per unserved person if all covered KES 6,800
Sub-locations meeting best-case* impact and sustainability
criteria
349
Total subsidy for best USF candidates, with populations above 1,000 US$ 41.8 M
Average subsidy per sub-location US$ 120,000
Total persons covered if all reached (*50% of the existing gap) 1.3 Mn
Cost per unserved person if all covered KES 3,262

15. USF reduction due to operator licence commitments
Obligations (No. of sub-locations)
Years of
commitment
Safaricom Airtel
2016 243 10
2017/18 138 30
2019/2020 140 9
2021/2022 71 22
• Operators agreed on roll-out obligations under
their licence renewal negotiations in 2015
Licence Framework
• “The Licensee shall expand its network
coverage to all population centres in the sub-
locations listed by the end of the respective
financial years indicated”
• Commitments similar to USF objectives and
therefore USF need not duplicate these in the
short term (2016-2018)
• Beyond 2018, a reduced subsidy formula will
be applied

16. USF potential project overlaps with operator
commitments
• Bidding lots will be reduced through aggregating sub-location within wards
• Also competitive tenders will reduce USF expenditures to around 67-70% of the budgeted
maximum subsidy estimates
Sub-locations meeting best-case USF criteria 349
Total subsidy for best USF candidate sub-locations US$ 41.8 Mn
Sub-locations committed by operators in 2016 81
Sub-locations committed by operators in 2017/18 53
Net priority sub-locations needing subsidy from the USF 214
Maximum net subsidy for USF US$ 22.6
Net Population covered (over half of the 1.3M identified) 693,000
Average subsidy per sub-location US$ 105,00
Average subsidy per person KES 3,262

17. Budget for Voice Projects
• Field validation done in April to
finalise maximum subsidies
• Demand
• Sites & coverage
• Aggregation & Lot development
• Following competition, it is expected
that 67-70% of the maximum estimate
will be awarded as subsidies
• Due to progressive tranche-based
payment of subsidies over 1 year, max
67% of the budgeted subsidies will be
awarded in Fiscal 2016/17
Voice Gap Budgeting
Maximum subsidy estimate
US$ 22.8 M
Distribute
in Fiscal 2016/17
US$ 10 M
Expected award amounts
US$ 15.0 M

18. Example of potentially viable USF projects
• Identified at the Sub-location level
• But some could be combined into
ward level projects and extended to
neighbouring sub-locations
• Important to build contiguously
from
existing network to avoid repeater
sites

19. USF should not Fund sub-locations
already committed under operator licence obligations

20. Potential projects after overlaps eliminated
Map legend:
Combined Operator 2G coverage
Potential USF Selection
Operator commitments 2016
Operator commitments 2017/2018
Overlap - potential USF & 2016 commitment
Overlap - potential USF & 2017/2018 commitment
Potential USF single or
multiple sub-location
Bidding Lot
Close with
modified
criteria

21. How to address the worst cases after Year 1 E.g., remaining sub-
locations with zero coverage
Status of 164 sub-locations with zero coverage in 2015
USF
Year 1
Operator license commitments Remain
2016 2018 2020 2022 2024
Sub-
locations
42 43 20 25 6 - 28
• 85 to be covered or
awarded in 2016
– A further 20 by 2018
– 28 outstanding after all
commitments made
– 7 are commercially
viable
• Some can be addressed with
partial coverage through
LandScan analysis in year 2
and 3 projects
– Reaching the most
populated parts only,
contiguous with existing
network coverage

22. 3G and broadband
• Mobile coverage is very
limited in the Northern and
Eastern regions
• Current 3G coverage at 78%
– Fibre services also have a very
limited last mile reach into
spacious rural areas
• But NOFBI, KETRACO and
KPLC routes have strong
potential to reach all major
population centres and key
major institutions

23. Broadband & 3G Options considered
• Cover all gap area projects with UMTS900 3G base stations
– Maximise revenues - offer broadband, incl. schools & institutions
 Not recommended for new areas for several technical & user reasons
• Upgrade 2G served areas
– USF finance the upgrade of priority 2G sites to 3G throughout the country
(using 900 MHz on a national scale)
• Include telecentres and connect schools & Huduma centres within range
 Not recommended to “drive” this market except in specific instances after
Year 1
• A national demand-driven approach
Gear broadband advance to a schools connectivity program
National gap - educate and assist the emerging generation to become more
IT literate
Leverage the project for public access & capacity building

24. 2. Schools Broadband connectivity Project
The public system:
• 22,000 primary schools
 18,000 electrified
 Many communities preparing lab
facilities
 Some teachers trained in ICT
integration
in all schools
 Laptop initiative upcoming
• 7,000 secondary schools
 90% electrified
 3-4,000 have computers
 Computer studies program
examinable at Form 4
 Many ICT trained teachers
Situation with connectivity
• Very few schools connected
• Other operators have small sized CSR
initiatives
• The environment for USF to support
progressive connection of schools is in
place, while MoICT / ICT Authority role
also strategic
24

25. Reasons for USF Schools Connectivity Projects
 ICT capacity in schools – upcoming generation – biggest
potential impact on country’s economy
 For Kenya’s digital aspirations to thrive - school connectivity &
integrating ICT into education – the gap transcends geography
 Demand stimulation among future users of ICT - broadband
market still expanding
 Internet readiness – the ecosystem is developing with
electrification, computer studies curriculum, teacher ICT
integration training & the laptop initiative
 But also allows more industry players to participate

26. The USF Educational Broadband Strategy
• Focus on secondary schools & tertiary colleges below university level
– Primary school e-learning initiative already supported by Safaricom and Airtel
• Define the conditions for Internet connectivity readiness
1. Connection to the National Grid
2. Existing ICT facilities – e.g., secure computer lab with min. 10 computers
3. ICT specialist teacher or support staff
4. Active support of KCSE Computer studies curriculum
• First year Schools broadband project to connect 1,000 schools in Kenya
1. Controlled access to Internet and to KICD Content “Kenya Educational Cloud”
2. Cloud access via an education portal
3. Training and Help-desk support
4. CAPEX and OPEX for 3-4 years
5. Innovative solutions to be solicited through bidding lots

27. Budget for Year 1 USF School Connectivity Project
• All counties – with Min. of Ed. select
minimum of two demonstration schools
from each county
– Based on readiness selection
criteria
• Educational portal - gateway into
approved educational resource content
• Expert Help Desk - IT specialists
• Teacher ICT and Internet training for
the participating schools,
– Or candidate schools demonstrate
already meet min. capacity criteria;
• Competition - All network
infrastructure and last mile access
provided competitively under USF
tenders
School Broadband Connectivity Project Approx.
(KES M)
Year 1 Year 2 Total
Details CAPE
X
Recurrent
School ICT
Infrastructure
420 80 80 580
Last Mile costs
International capacity
Schools Portal cost
ICT Capacity
development
Network operations
Monitoring & Evaluation
Subtotal
Grand total 500 80 580

28. The Authority has in FY 2016/17 allocated Ksh 1.5 billion from the
Universal Service Fund to support;
 Support roll-out of Voice Infrastructure projects in
approximately 214 sub-locations areas without voice services
(Kshs 1 billion)
 Support Education Internet Connectivity in 1,000 secondary
schools and tertiary institutions to be selected by the Ministry of
Education Science and Technology (Kshs 0.5 Billion).
NB: Award will be through competitive tendering process
Summary of USF Projects FY 2016/17

29. USF Projects Implementation Plan
Final
Bidding Lot
preparation
Commence
Bid
Submissions
Bid
Evaluations
Subsidy
awards
contracts
USF Service
Contracts
signed
ICTs Access
Final Report
Industry
Workshop
USF Issue
Bidding
Documents
Pre-Bid
Meeting
Stakeholders
Report /
Industry
Workshop
2016
29-Feb 25-April 2-Jun 26-Jun 5-July 18-Jul 15-Aug 29-Aug 26-Sept
Prepare
Bidding
Documents
Approval &
Confirmation

30. Thank you!
Q & A