the roll-out of national broadband network investing for ...kpmg services pte. ltd. (registration...

The Roll-out of National

Broadband Network

Investing for 21st

Century Connectivity

September 2011

1 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity.

1 Global Status of Broadband Adoption

2

Broadband in Indonesia

3

Investment Case for Broadband

4

Government Support and Intervention

Contents

All information provided is of a general nature and is not intended to address the circumstances of any particular

individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee

that such information is accurate as of the date it is received or that it will continue to accurate in the future. No one

should act upon such information without appropriate professional advice after a thorough examination of the

particular situation.

5

Suggested Next Steps



Summary of our Experiences

• KPMG has been undertaking projects on ICT development and broadband for at least 7 years in the ASPAC region

• In ASPAC region, the key notable projects include Australia Next Generation broadband and Implementation of

Singapore Next Generation Broadband initiatives

• Globally we have worked with different operators and government in Spain, UK and the Middle East

2004 2005 2006 2007 2008 2009 2010 2011

2006

Commercial and financial advisor to the

NSW Treasury on a project to deliver

cheaper broadband to government

departments and the community in NSW

Connecting NSW Schools

A$1.1 billion

2007

Commercial, investment and financial advisor to

the Department of Communications Information

Technology & the Arts on the Broadband

Connect project for regional & rural Australia

Broadband Connect

A$2 billion

2008

Acted as commercial and

financial adviser with KPMG Singapore on

the NGNBN project

Next Generation National

Broadband Network

A$10 - 15 billion

2008

Commercial, investment & financial advisor to

the Department of Broadband, Communications

& the Digital Economy for a tender for the NBN

Fibre to the Node opportunity

National Broadband Network

A$250 million

2009

Commercial and financial advisor to the

Department of Broadband, Communications &

the Digital Economy in relation to the NBN

Regional Backbone Blackspots Project


Value not disclosed

2009

Commercial, investment & financial

advisor to the Department of Broadband,

Communications & the Digital Economy

for the early rollout of the NBN in

Tasmania


A$43billion

2010

Jointly with consortium partner McKinsey &

Co advised the Commonwealth Government

for the NBN Implementation Study




Global Status of Broadband Adoption – National e/ICT - Strategy

: In progress

: No National e-strategy in place

: National e-strategy in place

Source: International Telecommunication Union (“ITU”), as of April 2010

163 countries and territories

have national e-strategy

13 countries and territories are

formulating and adopting the

national e-strategy

The roll-out of high speed broadband (Next Generation Network) forms an integral part of

the national e-strategy in many countries

Risk of being left out of the economic competitiveness simply too great for many countries

hence doing nothing is not a viable option



Broadband Roll-out Plan of Selected Countries

It is increasingly clear that countries aspiring to be on the forefront of innovation, global trade and

knowledge leadership must have NGN roll-out on their agenda

20182009 2014 20172010 2011 2012 2013 2015 2016 2019

30%

40%

50%

60%

70%

80%

90%

100%

2020

Japan

90% of households

by 2010

Btw 30 – 100 Mbps

Singapore

95% of homes and commercial

buildings by 2012

> 100 Mbps

South Korea

~80% of homes by 2012

Speeds > 100 Mbps

The UK

45% of homes by 2012

100 Mbps

The UK


100 Mbps

Japan

Aim for Gbps class

by 2015

Australia

93% of premises by 2017

> 100 Mbps

New Zealand

75% of end-users

by 2019

> 100 Mbps

France

70% of premises by

2019

> 100 Mbps

USA

~73% of homes

by 2020 with

speed of >100

Mbps

Universal access

by 2020 with

min. speed of

4Mbps

The UK


100 Mbps



Indonesia is lagging behind in broadband development and penetration

Source: Cisco BQS

There is an opportunity to improve Indonesia to improve

its in global competitiveness through broadband

investment …

Indonesia still has a low broadband household

penetration

According to Worldbank research – there is a positive correlation between broadband penetration and GDP growth – Every 10 %

increase broadband penetration contributes to up to 1.38 percentage on GDP growth in developing countries

Source: The Global Competitiveness Report 2010-2011 – World Economic Forum



There is an opportunity for Indonesia to more ICT ready !

Source: World Economic Forum

Country Rank Score ENVIRONMEN

T SUBINDEX score

Market environment

Political and regulatory framework

Infrastructure environment

READINESS SUBINDEX

score

Individual readiness

Business readiness

Government readiness

USAGE SUBINDEX

score

Individual usage

Business usage

Government usage

Singapore 2 5.59 5.63 5.4 6.23 5.27 5.79 6.13 5.26 5.98 5.35 5.73 4.68 5.65

Taiwan 6 5.3 5.09 5.05 4.94 5.27 5.32 5.64 4.97 5.36 5.49 5.4 5.29 5.76

Korea 10 5.19 4.69 4.27 4.61 5.18 5.11 5.54 4.91 4.87 5.78 5.9 5.2 6.25

HongKong 12 5.19 5.43 5.73 5.6 4.97 5.21 6.04 4.67 4.92 4.92 5.61 3.8 5.35

Japan 19 4.95 5.02 4.74 5.54 4.79 4.75 4.75 4.91 4.59 5.07 5.43 4.96 4.83

Malaysia 28 4.74 4.47 4.72 4.97 3.72 5.23 5.63 4.88 5.18 4.53 4.26 4.24 5.1

China 36 4.35 3.97 4.04 4.31 3.54 5.11 5.72 4.56 5.06 3.96 3.54 4.16 4.18

India 48 4.03 3.93 4.43 4.28 3.09 4.82 5.5 4.47 4.48 3.34 2.83 3.38 3.82

Indonesia 53 3.92 3.89 4.49 3.94 3.22 4.74 5.55 4.34 4.32 3.14 3.01 3.21 3.2

Vietnam 55 3.9 3.66 3.92 4.14 2.93 4.78 5.28 4.18 4.88 3.27 3.28 3.17 3.36

Thailand 59 3.89 3.87 4.46 4.16 2.98 4.36 4.81 4.22 4.07 3.42 3.31 3.55 3.41

Philippines 86 3.57 3.52 3.97 3.62 2.98 3.89 4.83 3.49 3.37 3.28 3.07 3.57 3.2

Cambodia 111 3.23 3.8 4.01 3.42 3.98 3.8 4.01 3.42 3.98 2.62 2.35 2.63 2.86



Catalyst for productivity growth and wealth generation

Tool to increase social inclusion and reduce income inequality

Acute need for increased bandwidth

Case for Broadband

• Productivity gains, development of highly skilled labor, seamless

communication and innovation

• In Australia, FTTx (Fiber-to-the-x) is estimated to add Economic

benefits of $12 to $20 billion per annum

• Positive economic impact of approximately 1 to 2 per cent of GDP

per annum

• Increasing users’ access to the internet, e.g. social media, cloud

computing, and gaming

• Wireless broadband will complement the fiber based infrastructure

• Empowering universal education where broadband can be used to

impart knowledge

• Advanced social networking and digital media applications

• In Australia, FTTx (Fiber-to-the-x) is estimated to add 25,000 jobs

every year for eight years, with a peak of 37,000 jobs



Investment Case for Broadband

Limited demand in sparsely

populated areas

Significant roll-out period

Significant capital costs

No

investment

from the

private sector

The capital costs and the time involved in

rolling out NBN are significant

Network operators are only able to capture a

fraction of the efficiency gained and social

benefits generated by NBNs as fee income

In sparsely populated areas, demand is limited

and the investment cost curve starts to rise

steeply

Government intervention to ensure wide

availability of NBN services may be warranted

to provide wider benefits to society

Market

failure



Broad Categories of Government Intervention / support

Government

Intervention

Regulatory Market Financial

Mandated separation

of infrastructure owner

Access pricing

Government demand

guarantees

Concessions of private

sector operators

through open tenders

Tax incentives /

assistance funds /

direct monetary

injection / grant

Three approaches are not mutually exclusive

Intervention can reduce uncertainty, increase competition, and improve returns on investment

Government must ensure that the intervention does not crowd out private sector investment

Nature of intervention needs to be tailored to each market context



Korea*

• Korea Telecom

• Hanaro Telecom

Japan

• NTT

• KDDI

United States

• AT&T

• Verizon

Hong Kong

• HKBN

• PccW

Funding relative to project size

amount increases

Higher Degree of Open Access

No Direct

Government

Funding

Having Direct

Government

Funding

Characterised by:

• Separation of

infrastructure owners

• No retail operations

• Price controls

• Interconnection offers

Characterised by:

• Vertically integrated

incumbents

• Interconnection offers

Singapore

• OpenNet

• Nucleus Connect

Alberta, Canada

• Axia Netmedia

France (County Level):

• Covage

Stockholm, Sweden:

• Stokab

Amsterdam,

Netherlands

• CityNet

Government Intervention – Impact of Government Funding to Open Access



Types of Government Intervention

Category Intervention Types

Regulatory Australia: separating the incumbent’s infrastructure company from service provision

UK: separating the access infrastructure provider from the incumbent operationally and mandating

equal access

Sweden: coordinating the development of the backbone infrastructure

Market France: using the Public Private Partnership model (with both government and local authorities

funding) to develop broadband in rural areas

Singapore: imposing a specific market structure through competitive tendering involving demand

guarantees to encourage investment

Financial Australia: co-investing in rolling out infrastructure

France: granting subsides for building infrastructure in rural areas

Japan: supplying tax incentives and loans at preferential rate

New Zealand: co-investing in infrastructure and providing subsidies for rural areas

Singapore: providing a grant to make a transaction economically viable

South Korea: supplying tax incentives and loans at preferential rate

Sweden: providing tax incentives for investment in general, and subsidies for rural areas specifically

UK: new government considering some form of public subsidy for NGN in rural areas

United States: granting stimulus monies to encourage deployment in underserved areas



Next Steps for Indonesia broadband plan is to develop an ICT master plan

• Develop vision for the future

• Accelerates Productivity Growth

• Innovates Products and Services

• Creates Jobs & Opportunities

• Key building blocks for ICT master plan

Economy Social

Science and Technology, R&D, Knowledge hub development e.g.: development of techno park

Telecommunication Infrastructure (broadband access, e-security and data centre infrastructure )

e-Industry e.g.: Clouds, SAAS,

web conferencing

e-Commerce – e.g.: e-payment , e-

banking and industry trade hub

e-Government – eg: online

government services such e-tax

services, e-passport as well e-

healthcare services

e-Society – connected anywhere,

anytime on any devices

e-Education – eg: Virtual lecture,

online courses, tutorial & examination

Regulation and policy (cross platform content and open access regulation, convergence policy, and

government support and incentive plan for innovation )

Manpower Training and Development ( for professionals, university and tertiary education)

Content e.g.: multimedia content development for each vertical industry, animation, and gaming



Summary

Broadband Network (NBN) infrastructure is viewed as essential to economic

competitiveness, improving productivity and encouraging growth

Network operators are only able to capture a fraction of these benefits as fee

income, hence there is a case for government intervention

Government intervention vary and fall into three broad categories: regulatory,

market, and financial

For Indonesia to continue to accelerate its economic agenda, government needs

established an ICT Master Plan which includes the development of the ICT

ecosystem, regulation and policy, government support, manpower training and

implementation roadmap

Thank you



Australia

The market is dominated by a vertically integrated incumbent and

the government is focused on establishing open access to

broadband infrastructure

France

The markets in metropolitan and rural areas have different

structures. In metropolitan areas, a small number of vertically

integrated private sector companies compete with each other. In

rural areas, concession-type Public Private Partnerships (PPPs)

are used to provide infrastructure which is used by service

providers in a competitive environment

Japan

A small number of vertically integrated companies compete in the

marketplace

New Zealand

Government plans are in place to set up a structurally

independent company offering non-discriminatory network

access. The intention is to foster competition in the service layer,

albeit it is likely that one of the current participants will maintain

involvement in the active services layer

South Korea

Three vertically integrated companies compete with each other

Sweden

The market breaks into two. There is the national backbone

network that is jointly owned by a number of vertically integrated

competitors, including the incumbent. Cities and local authorities

deploy their own open access networks which are connected to

the national backbone

United Kingdom

The passive and active infrastructure layers are held by a single

business unit that has been operationally separated from the rest

of the incumbent’s business units. This business unit provides

equal access to all service providers

United States

Three vertically integrated companies compete in the broadband

market. These companies have overlapping infrastructure

networks

Appendix 1: NGN Structure in Selected Countries



Appendix 2: NGN Trends

Country Trends relating to NGN

Australia The Government announced in April 2009 its intentions to roll-out a NGN at a cost of A$43 billion (S$55.1 billion).

NGN development is still in its early stages

France The Government announced in December 2009 that they will invest €4.5 billion (S$8.2 billion) on NGN and

development of innovative services. The NGN services have been deployed and their impact on the prices of

broadband-only and bundled packages can be seen when compared to other countries

Japan Service providers such as NTT to start rolling out 1 Gbps fiber plans to subscribers

New Zealand As part of the Ultra-Fast Broadband (“UFB”) Plan, the Government will partner with the private sector and invest up to

NZ$1.5 billion (S$1.5 billion) to roll out the NGN.

Singapore The Government announced a 10-year master plan in June 2006 to liberate the telecoms market and provided up to

S$1 billion in funding to support the setting up of an open access infrastructure (OpCo and NetCo). OpCo has met

60% network coverage in 2010 and aim to reach 95% by 2012 while NetCo has started launching services in 2010.

South Korea The Broadband Convergence Network Plan (“BcN”) was launched to develop the NGN that the Government intended

to invest 2 billion Won (S$2.4 million). Service providers to start offering faster fiber speeds, such as 200Mbps or

higher

Sweden The Government presented a strategy to enable 40% of households and business in Sweden to have access to

broadband at a minimum speed of 100Mbps by 2015 and 90% by 2020.

United Kingdom The Government has chosen to leave the development of NGN to the market and focus its efforts on ensuring

widespread broadband usage and market regulation to combat uncompetitive behavior. Discounts are given for

bundled services such that they are only marginally higher than broadband-only plans

United States The three major broadband market players - AT&T Inc, Verizon and Qwest, each pursue independent fiber options. In

2009, the Government stepped in by introducing a US$7.2 billion (S$10.0 billion) stimulus package to beef up

broadband access in underserved areas

Source: Various Governments’ websites



Government Intervention – Mandated Separation of Infrastructure Owner

Passive

infrastructure

layer

Deployment of

passive

infrastructure and

provision of fiber

connectivity

Active

electronics

layer

Deployment of

active electronics

and provision of

wholesale

bandwidth Introduce

mandated

access to

upstream

layers

Service Layer

Provision of

services to retail

and business

users

Some form of mandated access to the

bottleneck upstream infrastructure can

be introduced to ensure competition

will emerge in downstream layers, and

contribute to the creation of a vibrant

retail service space.

the roll-out of national broadband network investing for ...kpmg services pte. ltd. (registration...

Documents