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The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU or its Membership. The author can contacted by e-mail at [email protected]. 1
International Telecommunication Union
12 April 2002
International Telecommunication Union
Improving IP Connectivity in Improving IP Connectivity in the Least Developed Countriesthe Least Developed Countries
Background studyBackground study
Claudia Sarrocco
Strategy and Policy Unit
International Telecommunication Union
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International Telecommunication Union
12 April 2002
OutlineOutline
- Introduction
- Background
- Vicious circle
- Conclusions: barriers
- What can we do? Proposal
- Virtuous circle
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International Telecommunication Union
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BackgroundBackground
Digital divide initiatives - DOT force
- UN ICT task force
“Improve connectivity, increase [ICT] access and lower cost”
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12 April 2002
ObjectiveObjective
To provide low cost Internet connectivity to LDCs through the utilization of flexible, less expensive and simple technology, like VSATs, engendering a “virtuous circle” which can help reducing the digital divide among countries.
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Scope: LDCsScope: LDCs Forty-nine countries, with a total population
of about 670 million inhabitants, are currently designated by the United Nations as “least developed countries" (LDCs).
Cambodia, Gambia, Lao PDR, Mali, Mozambique, Nepal, Rwanda, Samoa and Uganda have been chosen as representative of the LDCs group and will be object of a deeper analysis.
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In LDCs problems are more extreme than those of developing countries, and
deserve special attention
Why Least Developed Why Least Developed Countries?Countries?
• There is less than one Internet user per one thousand people, against one user per 36 people in developing countries
• In LDCs teledensity is 0.59%, compared to 10% in developing countries
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Why focus on connectivity?Why focus on connectivity?
Connectivity is the possibility for a user of an electronic network to communicate with other networks
Connectivity is fundamental, as it precedes access to and use of the Internet
LDCs have very low levels of connectivity …
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International Internet International Internet Bandwidth…Bandwidth…
……is not equally distributedis not equally distributed
Source: TeleGeography Inc. Data valid for September 2001
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LDCs are falling behind…LDCs are falling behind…
Estimated Internet Users
Population
Total: 6 billionLDCs: 680 million
10%
World: 360 millionLDCs: 0.58 million
0.13%
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……and failing to catch upand failing to catch up
Internet users growth rate (56%) in LDCs is only a few points above average growth worldwide (49%)
230%
444%
281%
167%
234%
56%
0
100
200
300
400
500
600
700
1995 1996 1997 1998 1999 2000
Th
ousa
nd
s
116%64% 57% 49%
LDCs % growth
World % growth
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Low growth, high demandLow growth, high demand
0.20.2
0.10.1 0.1
0.1 0.10.1
0.5
0
10
20
30
40
50
60
70
80
Cambod
ia
Gambia
Lao P
.D.R
.M
ali
Moz
ambiq
ue
Nepal
Rwanda
Uganda
Wes
tern S
amoa
International Traffic
International Internet capacity
Bit-Minute Index
Bit-minute Index: any amount under 1 indicates the existence of latent demand for the Internet (selected countries)
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Infrastructure: LimitedInfrastructure: Limited
Country Uplink/downlink capacity
Population
(million)
Lao PDR 1.644/ 1.244 Mbit/s 5.23
Rwanda 1.256/1.5 Mbit/s 7.73
Mali 2/3 Mbit/s 11.23
Samoa 512/2.256 Kbit/s 0.18
Cambodia 3.5/6 Mbit/s 13.11
Mozambique 1.6/2.2 Mbit/s 19.68
Gambia 5/5 Mbit/s 1.30
Nepal 5.5/10 Mbit/s 23.04
Uganda 4/12 Mbit/s 23.30
Proportionate cost per 64 Kbit/s unit/month
n.a.
n.a.
USD 1’500
USD 840
USD 625
n.a.
USD 625/265
USD 625
n.a.
and Expensiveand Expensive
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Result: High ISP costs for the Result: High ISP costs for the end-userend-user
90
50 4526 30 32 25 19 17 9.4
462
209
169
136112 99 96 96
0
50
100
150
200
250
300
350
400
450
500
ISP charges (month) USD ISP charges (month) PPP
This translates into a “ vicious This translates into a “ vicious circle”circle”
Low internationalInternet connectivity
High connectivity Charges for ISPs
Low demand for Internet services
Little investment inNew infrastructures
Low bargaining Power of ISPs
Lack of competition
No exploitation ofEconomies of scaleNo growth of
infrastrctures
International Telecommunication Union
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Conclusions: Conclusions: There are many barriers to There are many barriers to
Connectivity for LDCsConnectivity for LDCs Infrastructure:
High cost, low availability Restrictive regulation:
Monopoly of telecommunication sector Only one provider imposing its tariffs Limited competition on the end-user side (ISPs)
Market Failure: Small market Operators cannot benefit from economies of scale Operators do not have bargaining power to obtain more
attractive prices Latent demand is not satisfied
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What can we do? What can we do?
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The proposalThe proposal
Internationally-funded project
Objective: to provide VSAT bandwidth to LDCs at low cost
This bandwidth would be provided to ISPs
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International Telecommunication Union
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Why target ISPs? Why target ISPs?
- Allows not to bypass local market and local network (less regulatory problems)- ISPs are the most appropriate target for the project, as they already have technical knowledge and equipment to provide services. - Computer services shops and cybercafés could also be targeted.
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- Increased bandwidth
- Drop in costs
- Increased number of users
The effect of improved connectivity:The effect of improved connectivity:Catching up…?Catching up…?
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International Telecommunication Union
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The financing: VSAT costs are The financing: VSAT costs are still too high for LDCsstill too high for LDCs
- Internationally-funded Project structured over 5-7 years, decreasing each year to support bandwidth provision
- Financing allocated to ISPs through a competitive tendering process based on the reverse auction system (least cost subsidy):The winner will be the entity providing the service at given conditions with the smaller financing
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Summary: Summary: How will it work? How will it work?
Connectivity will be provided to ISPs in LDCs Partial funding: ISPs will participate in the financing In exchange for funding they will provide basic access
at lower prices to private end-users, schools, etc. In addition, ISPs will be able to make commercial use of
part of the bandwidth provided to offer enhanced services to business, foreign entities, etc.
At the end of the 5-7 years, with the growth of the user base, ISPs should be able to be completely self-financed, and provide Internet services on a fully commercial basis, at affordable cost.
Higher internationalInternet connectivity
Lower costs
Higher Demand For Internet services
New investment ininfrastructures
Market growth
Bargaining power
Economies of scale
Marketliberalization
IP Connectivity Project: virtuous circleIP Connectivity Project: virtuous circle
International Telecommunication Union
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International Telecommunication Union
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Thank you !Thank you !
http://www.itu.int/ipdc