PRIVATE INVESTMENT PROMOTION CELL

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FINANCING BROADBAND FOR UNIVERSAL SERVICES at
APT FORUM BRUNEI
MAY17-20,2004 by Shyamal Ghosh Administrator Unive
rsal Service Fund Department of
Telecom Government of India
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Financing Broadband for Universal Services

• OUTLINE OF PRESENTATION
• Perspectives of Broadband services in low
  tele-density countries
• (A) What will be Broadband?
• (B) Why Broadband?
• (C) Technological Options.
• 2. Options for promoting Broadband
• - Government policy support.

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Financing Broadband for Universal Services

• - Regulatory incentives.
• - Financing options.
• International experiences.
• Indian Model for Universal Services.
• Conclusions.

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(1) Broadband in low teledensity countries
(A) - Basic characteristics of Broadband (i) Fa
st connection to internet. (ii) Always
connected. (iii) Flat rate of billing
(Unlimited usages) - Associated with
particular set of services a moving
target. - ITU definition Transmission
capacity at 1.5 Mbps to 2.0 Mbps
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Broadband in low tele-density countries

• OECD definition 256 Kbps
• RUS definition (USA) 200 Kbps
• TRAI definition Always on data connection that
  is able to support various interactive services
  and has minimum download speed of 256 Kbps.
• Even basic rate ISDN is sometimes labeled as
  type of Broadband
• What moving target for low tele density
  countries?

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(B) Why Broadband

• - Conflicting claims on limited resources in
  low tele-density countries.
• - Can Broadband services resolve conflicting
  claims?
• - Internet as a public utility
• Social Infrastructure Support
• (a) Education (Tele-education)
• (b) Health (Tele-medicine)

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Why Broadband
(c) Employment (Tele-working) (d)Empowerment
(access to information) (ii) Increase
Productivity (a) Reduction of transaction
costs on line facilities. (b) Improvement
in production processes. (c) Death of time
and distance.
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Why Broadband
(iii) Transparency in Government. (a) e-governan
ce (b) improve Government delivery system.
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(C) Technological Options

• Wireline
• (a) Use of legacy architecture
• Copper Cable DSL 59
• Cable TV Cable Modem 39
• (b) Fibre to the Home (FTTH)/Fibre to the
  Kerb (FTTK)

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Technological Options
- Leap Frog Technology - Wireless WLL? 3G
Mobile Wifi/WiMax Broadband Satellite
Services (iii) Convergence of Utilities - Power
line providing broadband access.
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Options of Promoting Broadband

• Government policy support Vision Statement.
• Regulatory incentives
• Financing options.
• (i) SubsidyPublic/private partnership.
• (ii) Soft Loans (RUS)

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(2) Options for promoting Broadband
(iii) USO (iv) Ploughing back
resources (v) Fiscal incentives. (vi) Third
party creation of civil infrastructure
concept of civil infrastructure utilities.
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International Experiences
(A) South Korea - Broadband penetration nearing
25. Regulatory Unbundling of Local loop
and line sharing at low prices - Govt.
support (i) Korea Information Infrastructure
(KII) master plan (1998) national
broadband access.
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International Experiences

• South Korea .(Contd.)
• (ii) Cyber Korea 21 (CK21) (1999) Universal
  Access to 1.5/2 Mbps at reasonable prices.
• Basic plan for upgrading ultra-high speed
  information network (2001) Household access at
  20 Mbps.
• Global leader e-Korea includes e-Korea project
  (2002) improving e-governance.

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International Experiences

• (B) Canada
• Broadband penetration nearing 15 (2002)
• Regulatory Unbundling of local loop at regulated
  rates.
• Federal Govt. support
• National Broadband Task Force (2000)
• Plan to make High Speed Internet Access
  available everywhere (2001)

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International Experiences

• Canada .(Contd.)
• Sept. 2002 Funding for pilot programme for
  innovative and sustainable broadband services.
  Broadband task force to assist community without
  access to broadband services.
• Regional initiatives to stimulate network build
  up.

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International Experiences

• (C) Japan
• Broadband penetration exceeding 10.
• Regulatory Local Loop unbundling
• - Govt. Support
• Tax incentives/subsidies to encourage pvt.
  Sector to provide fibre network
• (a) Subsidy for loan interest from Telecom
  Advancement Organization of Japan (TAO)

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International Experiences
Japan (Contd.) (b) Corporate and property tax
incentives for telecom carriers for deployment
of subscriber optical fibre network. (c) TAO
guarantees debt liability of operators
introducing broadband access networks. (d) Public
/Private partnership for building optical fibre
network in sparsely operated areas as part of
public works project.
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International Experiences

• (D) USA
• Broadband penetration (around 8)
• Regulatory Local loop unbundling changes for
  incentivising investment in high bandwidth
  infrastructure.
• LECs not required to unbundle connection on
  FTTH Competition Vs Investment.

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International Experiences

• USA (Contd.)
• Federal Govt. Support
• - Grants to non-profit public bodies to deploy
  advanced communication technologies to under
  served communities.
• - Rural Utilities Service (RUS) programme
  facilitates spread of broadband network to
  small community in rural areas.

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International Experiences
USA (Contd.) - Provides loans and guarantees for
broadband services in rural community with
population upto 20,000. - FCC schools/libraries
programmes (200 Kbps or more) from USO. - For
deployment of infrastructure supporting
advanced services in school.
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International Experiences

• (E) EU
• The e-Europe 2002 Action Plan 5 recommends new
  infrastructure and services be supported by
  European funding.
• Should not distort competition/technological
  neutrality (10 billion Euros to be disbursed
  until 2006).

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International Experiences

• EU (Contd.)
• Financial support limited to open infrastructure
  i.e. installations and equipments
• Available to all operators and service
  providers.
• can be owned by public authority or public
  private partnership.
• In Sweden municipal authority projects deploy
  fibre in access networks made available on open
  access basis to operators.

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Indian Model for Universal Services

• Features of Universal Service Policy (1999)
• Access to all at affordable prices.
• Cover all villages for voice access.
• Provide internet access to District Head
  Quarters.
• Raise resources by a levy as percentage of
  revenue of Telecom Operators.

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Indian Model for Universal Services
(ii) Creation of Statutory fund. - Amendment of
Indian Telegraph Act - Levy of 5 of Adjusted
Gross Revenue on all telecom operators except
ISP . - Appropriations to the fund to be done by
Parliament based on projected expenditure - Anti
cipated availability of funds 2 Billion over
five year period from 2002-03.
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Indian Model for Universal Services

• - Scope for Govt. to provide more funds than
  accruing from USO levy.
• Formulation of Scope of Universal Services.
• - Transparent process in consultation with
  regulator/stake holders.
• - Priority for public access (Voice and data)
  maximum data speed 128 Kbps.

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Indian Model for Universal Services
- Support for household services in
rural/remote areas (high cost/low
income) - Separate administrative body for
implementation. - Disbursement on multi layered
bidding process. - Will provide public voice
access to all 607,000 villages and voice and
data access to 40,000 villages household access
8 to 10 million new subscribers.
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Indian Model for Universal Services
(iv) Basis of support - Net cost approach. Net
cost (Annualized capital recovery Annual
operating costs) (Annual Revenue) where
annualized capital recovery equals Aggregate
of depreciation return on equity interest on
debt.
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Indian Model for Universal Services
(v) Other initiatives for IT Services (a )
Federal Government - Communication Information
Centers in remote states - V-SAT based
information kiosks with PCs, content enabling
citizen centric services (like e-governance /
e-learning / e-health / e-commerce)
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Indian Model for Universal Services
- 626 kiosks at total cost of 60 million
(including operational expenditure for 5
years) (b) Provincial Governments - Many
providing e-governance facilities like land
records/ certificates/ payment facilities/
licensing/ video conferencing based on leased
lines / ISDN / V-SAT / Wireless technologies
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Indian Model for Universal Services
(c) Private initiatives for citizens centric
services/specific services for farmers based on
V-SAT/ Cor-DECT/ Dial-up facilities
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Indian Model for Universal Services
(vi) Broadband and universal services (a) Availab
ility of infrastructure - Public sector 400,000
route Km. Of optical fiber. - Public utilities
and Pvt. Sectors 100,000 route Km. Of optical
fiber (estimated). - Almost all main exchanges
connected to fiber.
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Indian Model for Universal Services
- No place away for more than 25 Kms. from
fiber access. b) Issues - Low level of
Internet penetration (0.4) - Low level of
broadband connections (0.02) c ) Technological
Limitations
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Indian Model for Universal Services
- Copper cables may require rehabilitation- for
ADSL (Only 50 of incumbents copper lines can
handle DSL services quality less in rural
areas). - Poor quality of cable TV
infrastructure for reliable bi-directional
communication.
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Indian Model for Universal Services
- High cost of customer premises
equipment. - Bulk of current wireless
infrastructure cannot support high speed
transmission. (d) Regulatory action
- Unbundling of local loop (shared
unbundling/bits stream process not mandatory
for links less than 5 years old)
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Indian Model for Universal Services
- Encouraging V-SAT based links. - Fiscal
incentives. - Revisit USO/Universal Service
License issues need for local service providers
in rural areas.
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Conclusions

• Strong policy support from Government.
• Funding
• - USO funds may not be adequate.
• - Budgetary support to compete with other
  priority claims.
• - Explore enhancement of USO
• - Ploughing back of resources
• License fee
• Service tax

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Conclusions
- Synergising resource utilization. - Fiscal
incentives/soft loans. (c) Prioritizing
Broadband Access - Universal Broadband public
access versus Universal Broadband services.
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Conclusions

• - Rationalizing Broadband with technology
  option / needs / funding requirements /
  affordability.
• Application and Content Development.
• - Localized needs/languages/applications
• - e-governance initiatives for demonstration
• Regulatory issues.
• - Role of local service providers.

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• Thank you