Broadband Funding Mechanisms

1. International Workshop on Broadband Pretoria, South Africa, 11-12 November 2013 Broadband Funding Mechanisms Nancy Sundberg, Senior Programme OfficerTelecommunicationDevelopment Bureau (BDT) International TelecommunicationUnion (ITU)

2. Setting the regulatory scene Regulatory trends worldwide • Some 57 per cent of countries in Africa have a partially or totally private incumbent operator • Competition in most ICT markets is the norm in the region • 91 per cent of countries in Africahave a separate regulator Source: ITU World Telecommunication Regulatory Database

3. Creating an enabling environment • Regulatory reforms Create an enabling environment fostering private investmentand innovation by: • maintaining a level playing field among all players • stimulating inter and intra platform competition • removing entry barriers • encouraging open access • technology neutrality • Spectrum licensing (refarming) • Rights of way • Infrastructure sharing • Unbundling • Tax incentives • Investment incentives • When private investment isn’t enough • Direct government investment (Equity participation) • Public private partnerships (PPPs) • Dedicated Funds • State aid • Extending the definition of “universal service” and “universal access” to broadband • Use of Universal service Funds

4. Means of financingbroadband plans, 2012 Increasing reliance on Public Funding for high cost broadband networks Source: ITU World Telecommunication Regulatory Database

5. Fundingmechanisms a regional perspective 2012 Source: ITU World Telecommunication Regulatory Database

6. Universal service funding worldwide, 2012 76 USFs are operational worldwide Source: ITU World Telecommunication Regulatory Database

7. Addressing USF challenges https://www.itu.int/ITU-D/treg/publications/bbreports.html

8. Developing successful PPPs to foster investment in broadband networks • Using public funds more effectively • Monitoring outcomes, to ensure the project achieves the aim of providing broadband access or services to the locations/people it is supposed to target • Managing risks, to ensure it is delivered on time and within budget • Stimulating and creating demand to ensure the broadband infrastructure is used effectively. https://www.itu.int/ITU-D/treg/publications/bbreports.html

9. PPP Methods to fund broadband projects Committed to Connecting the World • Bottom-up or local community model • Private Design Build and Operate (private DBO) model • Public outsourcing model • Joint venture (partnering) model • Public Design build and operate (DBO) model

10. Best practices in establishing successful PPP projects Committed to Connecting the World • Conduct a public consultation • Be technology neutral • Conduct pilot projects • Provide funding in line with milestones and targets • Mandate open access and monitor compliance • Consider multiple investment models and funding • Consider setting up parallel initiatives to stimulate demand

11. Consider multiple investment models and funding Committed to Connecting the World • Mixed broadband projects may consider • different investment models • different funding sources • Setting up parallel initiatives to stimulate demand - To be funded publicly, privately or through PPPs

12. A mix of private and public funding Mauritius • Private operators are investing in infrastructure deployment • Governmentinvestment in the adoption and promotion phases and in building e-government applications • USF financingused to create free WiFIhotspots and to addressconnectivityissues where there is real-access gap Kenya • TEAMS: PPP between the government of Kenya and Etisalat, United Arab Emirates (UAE) to construct and manage a submarine cable between Kenya (Mombasa) and UAE (Fujairah) • Privateinvestors (83% ) and government of Kenya (17%) (Ministry of Finance) • All consortium memberscansellcapacity (atwholesale and retaillevels) equivalent to theirshare of the cablecapacity

13. More examples • Malaysia • The high-speed broadband (HSBB) service: FTTH to the main economic areas funded by government grants through a 10 year PPP agreement • The Broadband to general population (BBGP) using less advanced access technologies and rural areas are funded through the USF • Public funding only: Australia’s NBN Co • Government-owned wholesale-only open-access network • Government to sell down its interest in the company within 5 years after the network is built and fully operational • Structural separation of the incumbentTelstra’swholesale and retail services http://www.itu.int/ITU-D/treg/publications/bbreports.html

14. GSR10 Best Practice Guidelines www.itu.int/bestpractices III Open networks: how to ensure that every citizen has access to the benefits of ubiquitous broadband networks • We recognize that efficient allocation and assignment of the digital dividend spectrum, will result in social and economic benefits that could stimulate innovation for the provision of lower-cost communications and services, especially in rural and remote areas. • We suggest that governments update the definition of universal service as needs evolve to ensure technology neutrality and the inclusion of broadband access. • We note the need to put in place concrete national plans and strategies to stimulate deployment of broadband networks, particularly in developing countries. Furthermore, given the challenges in attracting investment for large scale deployments, these strategies should consider the role of the state in funding the national broadband infrastructure, inter alia through Public Private Partnerships and promoting the involvement of municipalities or cities. • We stress the importance of legislation to set out the general principles of open access –non-discrimination, effectiveness and transparency – highlighting the importance of both active and passive infrastructure sharing in the deployment of electronic communications networks in property owned by any operator, private entities and public bodies, even if they are operating in other sectors • We recognize the importance of wholesale regulation, including the obligation to publish reference offers for access to essential facilities and prices oriented to costs, as means to ensure open access.

15. GSR11 Best practice guidelines on regulatory approaches to advance the deployment of broadband, encourage innovation and enable digital inclusion for all I. Funding mechanisms for promoting the deployment of broadband infrastructure Leveragingpartnerships; and Modernizing universal service programmes and funds. II. Fostering private investment in broadband through incentive regulation Providing overall direction through a national policy,; Rationalizinglicensingregimes; Making spectrum available for mobile broadband; Removing barriers to broadband build-out and access to broadband networks; Grantingtaxincentives. www.itu.int/ITU-D/treg/Events/Seminars/GSR/GSR11/consultation/consultation.html

16. ITU Reports Trends in Telecommunication Reform 2013 : Transnational aspects of regulation in a networked society • Net neutrality: a regulatory perspective • Spectrum policies in a hyperconnected digital mobile world • International roaming services: a review of best practice policies   • Global and regional IP interconnection  www.itu.int/en/ITU-D/Regulatory-Market/Pages/Regulatory-Publications.aspx • Broadband Thematic reports in 2013: • Developing successful Public-Private Partnerships to foster investment in universal broadband networks • Competition and regulation in a converged broadband world www.itu.int/ITU-D/treg/publications/bbreports.html • Regulatory, Economic and Financial Reports 2013: • Strategies for the deployment of NGN and NGA in a broadband environment – regulatory and economic aspects • ITU Study on Taxing telecommunications/ICT services: an overview • Regulating broadband prices • International Internet Connectivity in sub-Saharan Africa www.itu.int/en/ITU-D/Regulatory-Market/Pages/Studies.aspxl