public private partnerships in telecomunications infrastructure mark williams senior economist...
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Public Private Partnerships in Telecomunications
InfrastructureMark Williams
Senior Economist Global Information and Communications Technologies Group
World Bank
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Why?Where?
How?
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Why?
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Investment into privately-owned operators has driven network expansion
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
East Asia and Pacific Europe and Central Asia Latin America and the CaribbeanMiddle East and North Africa South Asia Sub-Saharan Africa
US$bn
*Excludes China
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Network coverage has expanded dramatically
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
90%
99%
21%
91%
56%
86%
8%
67%
LIC LMC UMC HIC
% p
op
ula
tio
n c
ove
rag
e
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What’s the problem ?
Evolving policy objectives◦ Voice coverage is growing and access is increasing◦ 10 years ago, broadband was seen as a luxury –
increasingly seen as a necessitySearch for ubiquitous basic network coverage
◦ Even in optimum market and regulatory conditions, 10% of Africa’s population will remain beyond networks (AICD).
◦ Same likely in other regions◦ Greater gap for broadband – upgrading rural exchanges
for broadband, upgrading backhaulLimitations on broadband speeds – mainly in
access networks◦ 2-50Mbs using xDSL/Cable modem◦ Fiber to the customer premises
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PPPs – one policy among many
Public demand aggregationTraining, education and computer literacy
More competition, better regulationAccess regime for incumbent networks
Rights-of-wayPublic infrastructure (electricity, pipelines)
Common passive infrastructurePublic co-investment (PPPs)
Broadband network
investment
Supply-side
Demand-side
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Where?
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Range of approaches
Urban vs Rural◦Sweden, France, USA, Australia – rural
connectivity◦Singapore - urban
Backbone vs Access vs bundled◦Backbone – Australia◦Access – Singapore◦Bundled - USA
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How?
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Ireland – submarine fiber-optic cable
Problem◦ Pre-1999, Ireland dependent on international fiber-optic cable
that passed via the UK (Cable and Wireless)◦ Paying high prices for international connectivity – stifling local IT
industryStrategy
◦ Attract new cables through financial incentives from government, guarantee access through public intervention as reseller
◦ Industrial Development Authority (IDA) under the Ministry of Public Enterprise entered into $80m agreement with Global Crossing
◦ Global Crossing owns and operates cable◦ IDA acts as anchor client and resells to domestic market at non-
discriminatory terms
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Singapore – fiber-to-the-home access network
Problem◦ High levels of broadband but no operator willing to invest
in fiber-to-the-home so top-speeds limited◦ Government willing to invest but wanted to maintain
competitionStrategy
◦ Public financial support for core infrastructure through PPP
◦ Competition runs on top of government-financed infrastructure
◦ Competitive tendering for PPP contracts. Owned and operated by private sector
◦ Split into two layers – passive (ducting and dark-fiber) and active (IP transport)
◦ Operators were required to form separate companies/consortia to bid to ensure non-discrimination
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Australia – rural backbone
Problem◦ Fully liberalized market but no competition to Telstra on
small-town/rural routes◦ Limits to regulated access to Telstra’s network
Strategy◦ Create competition to Telstra on 6 priority up-country
routes (6000km, 100 locations) through subsidizing new entrant (up to A$250).
◦ Routes selected by government and then contracts tendered.
◦ Winner required to provide on a non-discriminatory basis – enforced through PPP contract. Operation for 5 years
◦ Operator required to provide range of wholesale services (Managed wavelength, Carrier managed leased line services (SDH), Carrier managed Ethernet, interconnection)
◦ Contract and awarded to Nextgen (mid 2009).
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Australia – rural backbone
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World Bank experience of PPPs in telecoms infrastructure
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EASSy
Problem◦ No submarine fiber along the east coast of Africa◦ Desire to avoid cartel approach of SAT-3
Strategy◦ DFIs finance new cable (EASSy). ◦ Total project cost = $263m. $70million DFI debt financing◦ Privately-owned (some SOEs). No direct government role◦ Regulatory controls built into cable consortium contracts◦ Internal competition between operators on EASSY◦ Target subsidies at smaller operators to give them access
to cable at optimal prices◦ Open-access and internal competition created through
WB role in negotiation of consortium agreement and DFI loan covenants
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EASSy
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EASSy
Conclusions◦ Successfully closed project and stimulated development
of other cables◦ Role of WB and DFIs crucial in initial design and
agreements◦ Role of DFIs essential in forcing open-access conditions -
opposed by all shareholders◦ Opposition from governments after exclusion from
projects◦ Regulators incapable of successfully regulating
submarine cables◦ Regulation through contract is a feasible alternative◦ Long-run driver of success will be competition within
EASSy and with other cables◦ Private-ownership and strong sponsor essential◦ DFIs cause delays…
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RCIP Burundi
Problem◦ All domestic network infrastructure is wireless◦ Limited broadband
Strategy◦ Government co-finances development of national backbone
network through WB project◦ Government finance is through subsidy, no public ownership◦ Operators form company to develop and operate network◦ WB project finances studies and designs◦ Operators invest equity, government injects subsidy/pre-
payment◦ Construction and operation governed by PPP contracts and
license/concession agreement
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RCIP Burundi
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RCIP Burundi
Conclusions◦National fiber optic network would not be feasible without
government subsidy◦Negotiated (ie non-competitive) process creates problems –
financing, phasing◦Difficulties in getting cooperation between competitors.
However, cooperative solution in which users are owners allows self-regulation
◦Opportunities for corruption in procurement◦WB procurement process creates delays but helps with
transparency and provides neutral, commonly acceptable process for management
◦Requires high-calibre legal and financial advisory support
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RCIP Rwanda and Malawi
Problem◦Land-locked countries needing access to coastal
landing stationsStrategy
◦Stimulate investment through aggregating demand (anchor tenant)
◦Competitive tender to supply fiber-based connection to submarine cables
◦Long-term supply contract to government. Operator acts as wholesaler in the market
◦No government ownership in project
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Alternative approaches
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Nigeria –infrastructure competition between backbone networks
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Kenya – mix of public and private
Competitive private-sector
routes
Non profitable routes
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Zambia – 2 national fiber backbone networks
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Zambia – 2 national fiber backbone networks
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Zambia – 2 national fiber backbone networks
Government recently announced it is giving
control of ZESCO’s fiber to Zamtel to create
monopoly in order to raise privatization sale
value of Zamtel
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Rwanda – three private backbone networks
MTN – investing in fiber backbone for domestic backhaul and for regional transit
LAPGreen (ex incumbent) has metro fiber and domestic backbone. Linked to business in Uganda
KDN/Altech – regional backbone network connecting Rwanda to Mombasa
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Rwanda – government has built fourth national backbone network
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Rwanda – government has built fourth national backbone network
c. $100m total costDesigned for government traffic100% government-owned. Plans to introduce private partner for
management/investmentAdditional ducting included for
private operators
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What have we learned ?
Design/policy ◦Target the PPP at the problem – rural ? ◦PPPs only work if they are part of the correct
policy environment◦Government appetite for PPPs is very important –
can’t force a PPP on a government if they don’t want to do it.
◦Private-sector is very suspicious of governments ◦Strong political-economy forces: “national
assets”, protecting SOEs, trophy projects, off-budget financing
◦Public investment may be storing up problems for the future – Zambia, Tanzania, Republic of Congo, Kenya ?
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What have we learned ?
PPP structure◦Strong private financial and operational interest
in the project is essential. Need private sector to validate technical design.
◦Ability of governments to regulate is very low so any solution that depends on regulator is likely to fail. Better to have structural solution (e.g. competition on EASSy).
◦Competitive tendering process have advantages over negotiated arrangements but operation will be more dependent on regulatory supervision.
◦Government equity investment (e.g. Kenya TEAMS)?
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What have we learned ?
Implementation◦Involvement of WB/DFI systems provides
reassurance to private operators. ◦WB procurement systems are not ideally suited
for PPPs.◦Need high-level advisory services for design,
running tenders and negotiating contracts.◦Governments and WB are slow. The market
moves very quickly. ◦Corruption is a problem.