Transcript In “connected”

Booz & Company
Baku, November 2008
Building Connectivity to the World
Proposal for a Eurasian information super highway
This document is confidential and is intended solely for
the use and information of the client to whom it is addressed.
The connected world of today
The Eurasian disconnect
How to close the gap
Next Steps
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
1
ICT is a significant enabler to socio economic development; a
strong correlation between GDP & ICT growth can be observed
GDP Growth vs. Growth of ICT Sector
(1995 – 2007)
Role of ICT in
Socio Economic Development
7
ICT Growth (CAGR %)
6
 Growth of ICT sector contributing to
overall economic growth
Ireland
Norway
Economic
Growth
Czech Republic
United States
Sweden
Spain
Finland
United Kingdom
Denmark
Portugal
New Zealand
5
4
3
 Creation of new jobs through growth
of ICT sector
Italy
Belgium
 Increasing productivity in other
sectors through use of ICT
Social
Benefits
Austria
 Social inclusion and reduction of
inequalities among citizens
 Increasing business and income
opportunities, efficiency and job
creation
Germany
2
 Improving infrastructure services
1
Quality of
Life
 Improving education and health
services
 Improving information & knowledge
0
2
3
4
5
6
7
8
9
10
11
GDP Growth (CAGR %)
Note:
R²=0,7041
Source: World Bank, OECD, Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
2
In “connected” countries the information age is transforming
today’s societies across governments, the public & businesses
Dimensions of “e-Society” Transformation
1
 Governments offer services online in order to increase efficiency and
effectiveness of their services, and for increased satisfaction of citizens
Government
2
Public
3
 In various country portals, citizens can obtain information on administration
related topics (e.g., obtaining a passport), download forms, change their
residency, search for jobs, pay taxes, obtain information on authorities
 The population is increasingly using on-line media to
gather information, download multimedia content and
engage in social networking
 Consumption of high-bandwidth multimedia content leads
to decreasing time with traditional media and increasing
bandwidth demand
 Enterprises have been re-defining their business models in order to
adapt to the new norms of doing business
Business
 Many applications and solutions are utilized to enhance competitiveness
and efficiency of companies e.g., ERP applications, CRM/service
provisioning solutions & efficiency/productivity improving applications
such as fleet management, mobile e-mail…
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
3
1 Governments
Through information technology, governments are increasing
efficiency of their services with significant benefits to citizens
Example e-Government Applications
EU
Benefits to Governments
Singapore
 Increased efficiency
 Easy and effective provision of
information
E-procurement initiative:
Member States committed to
giving all public administrations
the capability of carrying out
100% of their procurement
electronically by 2010
Belgium
Turkey
On the
Singapore eCitizen portal,
citizens can
report crime,
search for jobs
and pay taxes
 Increased responsiveness
 Lower cost of service
 Better synchronization and
coordination of government
agencies/ institutions
Benefits to Citizens
The Regional
Employment Offices’
websites allow users
post their CVs,
search for available
jobs and obtain
information about
companies
The Internet Tax Office
enables
taxpayers to follow their
tax obligations,
transactions, payments,
penalties etc
 Increased service access, speed
and availability
 Increased satisfaction
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
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1 Governments
To realize the benefits, governments need to develop and
implement e-initiatives within a structured framework
Strategy Development Approach
Sources of
Potential Initiatives


Environment 




Customer Interface
Online Service Portfolio
International
Best Practices
Usage
Agency 1
Local
Sources
(Institutions)
Education
 e-Education
centers
 e-library



 e-learning portals 
 Development of
ICT Curriculum

 Formation of
model schools

Health
Identify clinician
Health awareness
eHR viewer
Health monitoring
and research
Diagnostic image
sharing
Appointment
manager
Agency n
General Government IT Readiness
IT Resources and Capabilities
Shared Components
Government IT Architecture and
Standards
Agency 4
Readiness




Agency 3
Interviews and
Surveys
Political Leadership
Overarching ICT Strategy
General Country IT Readiness
Fit with Cultural / Local Nuances
e-Gov Laws and Policies
Agency 2
Existing
Initiatives
Example Initiatives
E-R-U Framework
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
5
2 Public
From a public perspective, the internet is playing an increasing
role in people’s lives
Growth of Time Spent with
Consumer Media: 2001 and 2006
(US, hours per year)
Changing Usage Habits
 Over the past few years, the Internet has
increasingly become a key source of information
Music -19%
Broadcast Television
Newspapers
Magazines
 Social media sites and services, influence the way
people spend their time and interact with each
other
-13%
-11%
 People have developed new usage habits on the
internet:
-5%
Box Office
-3%
Radio
-2%
Books
– Watch Tv shows and
other audio video
content
3%
Video Games
15%
Cable and Satellite
– Create and publish own
content
28%
Home Video
31%
Internet
41%
Mobile
1,264%
– Network with other
people
– Buy and trade online,
banking transactions
Source: Veronis Suhler Stevenson, PQ Media, Adams Media Research, Alexander&Associates, Arbitron, Audit Bureau of Circulations, Ball State Uni. Media Design Center, Booz & Company Analysis
Booz & Company
November 2008
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3 Business
From a business perspective, ‘e-business’ has revolutionized the
way of doing business – further impact expected
Labor
Facilities and
Outsourcing
Processes
Relationship with
Customers and
Suppliers
Source:
 Increased efficiency of human resources
 More skilled workforce
 Reduction of facilities
 Outsourcing/off-shoring of certain functions
 Automated processes and workflows
 Process improvements e.g. manual to
electronic
 Improved Customer Relationship
Management
 Improved interfacing with suppliers
(e.g., e-Procurement)
0%
Small Companies
(10-49 Employees)
Management
Processes
 More timely and accurate management
information
 Centralization of decision making
 Improved communication and reporting
systems
% of companies expecting that ICT will have an
impact on their business areas in the future
(EU-10, 10 sectors)
Large Companies
(>250 Employees)
Impact on Business
20% 40% 60% 80%
Management
Accounting
R&D
Production
Logistics
Marketing
Customer Support
Management
Accounting
R&D
Production
Logistics
Marketing
Customer Support
High
Medium
Booz analysis, The European E-business Market W@tch 06/07 Edition
Booz & Company
November 2008
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Overall, e-society and its development have strongly contributed
to an exponential increase in the demand for global bandwidth
Global International Bandwidth Demand Growth
(Tbps, 2002 - 2012)
81.1
60.5
44.7
30.2
20.1
12.4
1.8
2.4
3.6
5.7
8.6
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Actuals
Forecast
 Emerging bandwidth rich mass applications
(e.g. YouTube, digital music, IPTV) and
Businesses have ignited incremental demand
for bandwidth
 Increase in usage has been triggered primarily
by the uptake of broadband services with
higher speeds - from 2001 until 2007, the
number of broadband subscribers increased
from 30 to 337 million subscribers world wide
 Tremendous infrastructure investments
continue in Europe and the US
– In 2006, DT invested 3bn€ in VDSL fiber
network to guarantee >50Mb/sec in 50
cities of Germany
– BT recently revealed plans to invest £1.5
billion to replace copper wire with a fiber
network to provide super fast broadband
(up to 100 Mbps in 2012, potentially over
1000 Mbps in future)
Source: Telegeography, Cisco, Booz & Company Analysis
Booz & Company
November 2008
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Being “connected” is essential to meet today’s needs of businesses,
the public & governments – countries need to respond accordingly
Summary of Findings
Implications
 ICT growth in the last couple of decades
created the information economies of today;
bringing considerable economic and
social prosperity
 The ‘information age’ is changing and reshaping the society:
– Governments providing service online
– People spending more time online and reshaping social interaction patterns
– Businesses developing new, more efficient
ways of doing business
 Lack of participation in the information
society will lead to
– widening the gap with developed &
“connected” economies
– “isolation” from the rest of the world
– missing out on the opportunity for social
and economic development
 Countries need to take the necessary
steps and ensure that they become part
of the “connected” world
 Such developments translate into increasing
bandwidth requirements on a global scale
Booz & Company
November 2008
Azerbaijan Regional Data
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The connected world of today
The Eurasian disconnect
How to close the gap
Next Steps
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
10
While internet and broadband penetrations are high in developed
countries, the Eurasian digital divide is quite significant
Telecommunication Services Penetration (2007, Subscribers %)
43.13
34.34
34.11
Internet
30.57
29.44
28.81
26.55
25.55
22.47
Digital Divide in
Eurasia
18.56
Broadband
17.28
15.95
13.85
12.00
7.37
6.09
6.41
6.26
2.03
Sweden
Norway
U.K
Czech
Rep.
Bulgaria
11.31
Turkey
Russia
1.73
Ukraine
2.30
1.06
0.03
0.15
0.03
Georgia Azerbaijan Uzbek.
5.00
5.15
China
Malaysia
2.43
0.05
2.14
0.08
0.42
Pakistan
Kyrgyz.
1.150.27
India
Kazakh.
Japan
S.Korea
Source: ITU
Booz & Company
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Disproportionately high price levels are one of the main reasons
for lack of internet take up and low penetration
Average Broadband Service Pricing (USD / 1 Mbps) (Monthly, 2007)
Consumer price
USD/ Mbps
3.720
70%
Speed
(Mbps)
100
300%
300% 118%
580
: % of GDP per capita
95
: broadband penetration (%)
90
:speed of the fastest connection offered
(in Mbps)
85
80
560
75
27%
70
540
65
520
60
500
55
50
480
10%
3,3%
45
460
40
3,1% 0,7%
440
35
420
3,8% 0,5%
3,1%
30
0,7%
25
0,0% 0,09%
60
20
0,15% 0,13%
0%
40
0% 0,09% 0%
15
0%
0,05% 0%
0% 0,07% 0%
0%
0%
0%
20
5
0
0
KazakhTajik. Uzbek.Kyrgy.Azerbai.Belar GeorgTurkey Mexi Pakis.Greece Ukr. Austral.Russ Swed Spain Irel
Penetration
(%)
10
0,60 0,01 0,03
0,05 0.03 0,12 1.06
5,8
4,2
0,08
9,1
1,7
23,2
2,03 34,4
17,9
8,2
Finl. Norway Pol
USA Slova Czech Hun. U.K Bulgar Italy Korea Fra. Japan
34,4 16,4
21,4 8,2
7,5
15,9
15
25,5
7,3
18,4
29,4 25,2
22,4
Source: OECD; CIA World Factbook, ITU, Company Websites, Booz & Company analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
12
International access costs account for a significant portion of the
total cost for getting customers connected
Estimated Cost Breakdown of End User Price (1 Mbps, Monthly USD)
- Example Europe(1)Cost
Split
2-10%
82-94%
4-8%
- Example Azerbaijan 100%
55%
44%
1%
100%
238
5
540
Cost to pass
subscriber
CPE
Total existing
local access
297
-90%
0-3
International
Access
25-28
1-2
30
Cost to pass
subscriber
CPE
Total existing
local access
International
Access
 International
 Fiber central
Access and
office to
Interconnection connection
point
 Splitter/
DSLAM
2007 Europe prices range between USD 5-30. USD 30 assumed and demonstrated as upper bound
 DSL modem  Assumes local
subsidized
copper is used
over avg.
lifetime of
customer
1)
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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As a result, bandwidth usage is very low in Eurasian countries,
revealing the notion of ‘disconnectedness’
International Bandwidth per ‘000 Capita (in Mbps)
4.000
“Connected”
3.550
“Emerging”
“Disconnected”
3.500
3.000
2.500
2.000
1.789
1.337
1.500
953
1.000
703
407
1
1
0
• Established regulatory
framework
• Liberalized but further
competition targeted
• Lack of national/ regional
infrastructure
• Long history of competition &
infrastructure investments
• Ongoing infrastructure
investments
• Limited access to int’l connectivity
(most countries land-locked)
• Over-supply of infrastructure
• EU framework as a
target model
• Lack of sufficient competition
0
0
Afghan
2
Tajik.
2
Pakistan
4
Uzbek.
4
Georgia
10
Turkmen.
Kazakh.
11
India
13
Azerb.
19
Kyrgyz.
58
Russia
60
Mexico
125
Belarus
Czech
Rep.
Spain
171
Poland
223
Greece
270
Turkey
339
U.S.A
Hungary
Australia
Germany
Norway
U.K
Sweden
Denmark
0
560
Bulgaira
500
General
lack of
supply
Source: ITU, World Bank 2006-2007
Booz & Company
November 2008
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On the other hand a growing demand for regional bandwidth can
be observed, showing need for intra-regional connectivity
Split of Asian Bandwidth
(2012 Forecast) (Tbps)
Intra-Asia Bandwidth Forecast
(2006 – 2012) (Tbps)
23.5
∑ = 35,2 Tbps
Europe-Asia
15.7
CAGR
64%
5%
Trans
Pacific 28%
9.7
6.4
4.1
2.7
1.2
67%
Intra-Asia
% of Total
Asia
Bandwidth
2006
2007
2008
2009
2010
2011
2012
50%
52%
54%
57%
59%
63%
67%
1)
Includes international submarine demand for Asian countries: China, Japan, South Korea, Taiwan, Turkey, India, Hong Kong, Singapore, Saudi Arabia, Philippines, Israel, Malaysia, Iran,
Thailand, Egypt, Indonesia, Pakistan, UAE, Morocco, Vietnam, Others
Source: Telegeography, Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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However intra regional networks are underdeveloped - for example
the TAE network provides heterogeneous connectivity in Eurasia
Trans-National Network
-Example TAE Technological Gap:
– Inadequate capacity to
satisfy intra-regional
traffic demand
Frankfurt
Vienna
– No unique technology
for end-to-end quality
in connectivity
Kyiv
Almaty
Budapest
Varna
Tblisi
Istanbul
Ankara
Urumgi
Baku
Erivan
Tashkent
Bishkek
Ashkhabad
Beijing
 Administrative
Problems:
Dushanbe
Teheran
Kabul
Islamabad
Shanghai
TAE Network
DWDM
10 Gbps to 400 Gbps
> STM-16 >2,5
Gbps
STM-16
2.5
Gbps
STM- 4
622
Mbps
STM-1
155.52 Mbps
– No single
administration and
monitoring of the
network
– No uniform pricing
policy
Non TAE
Under Construction
Source: Expert view
Booz & Company
November 2008
Azerbaijan Regional Data
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GDP per capita and penetration levels indicate sizable broadband
growth potential and need for investment
Broadband Penetration vs. GDP per Capita (2007)
25
Broadband Penetration (%)
20
1)
Czech Rep.
15
Lithuania
Hungary
Slovenia
Portugal
 GDP per Capita and
penetration levels
show growth potential
and need for
investment to reach
higher penetration
levels
Romania
10
Slovakia
Bulgaria
Poland
Turkey
5
Need for
Investment
Afghanistan
Tajikistan
0
Georgia
Uzbekistan
Kyrgyzstan
Ukraine
Kazakhstan
Azerbaijan
 Broadband per
capita penetration in
countries of the region
is far below 5%
Russia
India
0
5000
Mongolia
Turkmenistan
Pakistan
10000
15000
20000
25000
GDP per Capita (US$)
1)
Trend-line includes developed countries: Spain, Italy, Japan, France, Belgium, UK, USA, Finland, Sweden, Switzerland & Denmark
Note:
R²=0,9148
Source: U.N , ITU
Booz & Company
November 2008
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For example countries such as Azerbaijan have set ambitious
growth targets, translating into tremendous bandwidth demand
Azerbaijan International Bandwidth Demand Plans (Gbps)
Azerbaijan Government Plans
The Azerbaijani government has set
itself ambitious broadband targets
2008
2012
465
38
– Internet coverage of 45% in 2012,
resulting in 9% subscriber
penetration
– 80% of connections expected to be
broadband connections by 2012
– Average connection speed per
user of 12 Mbps
427
2
Total
Demand
(Gbps)
0.5
Voice
Fixed
Communication Data/Internet
Mobile
Data/Internet
Total Demand
(Gbps)
Broadband infrastructure & investment is
required to reach ambitious growth
targets
Source: Booz & Company Analysis, based on goals set by MCIT
Booz & Company
November 2008
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Provision of the required infrastructure is needed to decrease the
digital divide between the “connected world” and Eurasian countries
Summary of Findings
 Internet and broadband penetration levels reveal a “digital
divide” in connectivity between strong economies and
Eurasian countries
 International bandwidth per capita is very low in Eurasian
countries and users pay disproportional high prices mainly
driven by high international access costs due to;
– Lack of national/ regional infrastructure
– Limited access to int’l connectivity (most countries landlocked)
– Lack of sufficient competition
 To realize broadband growth potential, required back-bone
connectivity at more reasonable prices and intra-Asian
connectivity needs to be ensured
Booz & Company
November 2008
Azerbaijan Regional Data
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Implications for Eurasian Countries
Provision of required backbone
infrastructure for Eurasian countries to
pursue national broadband plans is
needed
– ensuring optimal connectivity at
reasonable access prices
– maximizing benefits for
inhabitants
– maximizing benefits for
stakeholders
– leveraging regional synergy
potential
19
The connected world of today
The Eurasian disconnect
How to close the gap
Next Steps
Booz & Company
November 2008
Azerbaijan Regional Data
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Prepared for MCIT
20
We will address the objective of providing required backbone
broadband Eurasian infrastructure by answering key questions
Objective
Key Questions
Provision of required backbone
infrastructure for Eurasian countries to
pursue national broadband plans
– ensuring optimal connectivity at
reasonable access prices
– maximizing benefits for
inhabitants
– maximizing benefits for
stakeholders
– leveraging regional synergy
potential
1 How can optimal connectivity at reasonable prices
be achieved, maximizing benefits for all stakeholders?
1.a– What are the benefits for investing participants?
1.b– Who should participate in infrastructure build-up?
1.c– What is the most effective and suitable
technological option?
1.d– How should the infrastructure be designed?
1.e– How should the infrastructure be managed?
2 How can economic viability be ensured?
3 What will be overall resulting benefits to the region?
Booz & Company
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1.a What are the benefits for investing participants?
Being a part of a regional connectivity solution will significantly
minimize financial & operational risks and leverage synergies
Facts
Benefits of Participation
 Many countries in Eurasia are land-locked or
located away from broadband highways: For such
countries, it is not feasible to build own terrestrial
network reaching to global highways, even if they
have the permission from all the countries they
have to pass through
 Due to limited connectivity between the countries,
intra-regional traffic has to be routed through
irrational paths, leading to unnecessary
interconnection costs
 Minimization of financial risk through investment
sharing
– For land-locked countries having the similar
access problems, participation is already a must
– Other countries will have the chance to improve /
establish their connectivity with additional supply
– All countries on the route of the network will benefit
from it as an in-country backbone to telecom
services
 Leverage of regional synergies
– Intra-regional traffic potential
– Sharing of expertise
– Utilization of existing assets in international
connectivity
Booz & Company
November 2008
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1.b Who should participate in infrastructure build-up?
In order to identify the optimal country participation , we used a
deductive approach taking into account a wide range of criteria
Potential Country Participation
Selection Criteria
 International connectivity
 Broadband penetration
 Topological fit
 Geopolitical factors e.g.,
– Multilateral relations
– Cultural proximity (language,
region, historic roots)
 Partnership experience in
consortiums (e.g., Pipelines)
:potential transit countries with high priority
:potential transit countries with medium priority
:potential transit countries with low priority
:potential access countries
1)
Iran and Pakistan as both access and transit
Source: Booz & Company analysis
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1.c What is the most effective and suitable technological option?
Terrestrial fiber or satellite were considered options to provide the
required backbone capacity – terrestrial seems most feasible
Terrestrial Fiber
Satellite
Pros
 Potentially leverages existing cross-border
 Capability to link remote geographical areas
infrastructure
 Potential to provide International Connectivity
(IC) though multiple routes
 Low CapEx to connect to IC points
 High capacity and up-to-date technology
Cons
 Dependency on regional operators’ network
and capacity
 Cross-country digging is required
 Reliance on transit countries for connectivity
supply
 Economically effective option
Assessment  Success dependent on participation,
operating model and minimization of
“transit risk”
 Relatively expensive
 Low bandwidth capabilities & latency to run
bandwidth intensive applications
 Connectivity option particularly for difficultto-reach destinations
 Part of an overall connectivity solution with
relative low performance parameters
Source: Booz & Company analysis
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November 2008
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1.d How should the infrastructure be designed?
Terrestrial fiber network will connect the Eurasian region to the
data highways of the western and eastern world
Potential Access Countries
Potential Transit Countries
(Countries Having Access to International Gateways)
(Countries in Most need of a Transnational Backbone)
Topologic Considerations
East
West
Available International Access
Turkey
 Telecom Austria JetStream (under construction)
 Submarine access: SEA-ME-WE3
Azerbaijan
 Located well near Caspian Sea
 High urban population
Bulgaria
 Telecom Austria JetStream
Uzbekistan
 Located central to possible routes
 High urban population, many cities
Russia
 Rostelecom network
 TransTeleCom Network
Turkmenistan
 Located central to possible routes
 High urban population, many cities
Romania
 Telecom Austria JetStream
Kyrgyzstan
 Located central to possible routes
Ukraine
 ITUR, BSFOCS
Tajikistan
 Located central to possible routes
 Telecom Austria JetStream
Kazakhstan
Poland
 Located convenient to possible routes
 High urban population
India
 Submarine Access: SEA-ME-WE3, SEA-ME-WE4, Flag
Georgia
Pakistan
 Submarine Access: SEA-ME-WE3, SEA-ME-WE4, Flag
 Critical location to establish the west connection
 High urban population
Iran
 FALCON
Pakistan
China
 Submarine Access: SEA-ME-WE3, SEA-ME-WE4, Flag
 RosTelecom
 TransTeleCom
 Provides international access option
 Very dense urban population
Iran
 Provides international access option
 Very dense urban population
Afghanistan
 Located convenient for possible routes
Mongolia
 Relatively distant to possible routes
 Population density in capital
South Korea  TransTeleCom
 Submarine Access: SEA-ME-WE3, SEA-ME-WE4, Flag
Source: Booz & Company analysis
Booz & Company
November 2008
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25
1.d How should the infrastructure be designed?
The proposed network topology, open to extensions, aims to
provide an optimal coverage for as many households as possible
Proposed Network Topology
Stage 1(1)
6270
Stage 2(2)
19874
Potential Population (mn)
309
383
# of cities on route
36
68
Population on route (mn.)
35
55
Households on route (mn.)
6
9
125-200
400-600
Total Length (km.)
Investment (mn. $)
BASIC PRINCIPLES
Kiev
 Cover as many
countries as possible
and an immediate
population with the
shortest route
Astana
Bucharest
Aqtau
Sofia
Tiflis
Istanbul
Marmaris
Baku Turkmenbashi
Tehran
Ashgabat
Bandar
Abbas
(FALCON)
:minimum requirement to provide optimum connectivity
:alternative extension routes
:connection points to international backbones
:submarine cables (representing SEA ME WE 3-4, FLAG)
:Terrestrial cables (representing Trans TeleCom,, RosTelecom, NTT)
1)
2)
Note:
Source:
Tashkent
Almaty
Bishkek
Ulanbataar
Dushanbe
Beijing
 Reach alternative
international
connectivity points
Kabul
Islamabad
New Delhi
Karachi
Mumbai
Shanghai
 Establish more than
one trans-Caspian
route, to ensure:
–intra-regional
connectivity
–back up for
disruption
Red colored route
Red and Blue colored routes
Figures are based on immediate population within range of route – does not include additional access and inter-country network
Booz & Company analysis
Booz & Company
November 2008
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26
1.e How should the infrastructure be managed?
Key principles should be set and agreed in order to build the most
suitable operating model to ensure the success of the initiative
Key Principles
1
High Service Availability
and End-to End Quality
2
Economic Viability
 High availability standards as in connected should be
ensured - recovery plans should be in place for cases of
disruptions
 Homogeneous quality over the whole network should be
ensured, as the infrastructure will only be “as strong as the
weakest link”
 The participants should be able to financially benefit from
the venture – costs borne in the beginning should be
covered in a reasonable payback period
 Ideally, the venture has to be profitable or at least fund itself
3
 The system should be immune to political developments
that may arise in the region
Long Term Stability /
Robustness
Define best suited
operating model
 The dependency on limited alternatives for international
connectivity should decrease
 Continuous control and monitoring functions should be in
place to ensure sustainability
4
Serving Long Term
Objectives
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
 A strategic planning effort should periodically take place in
order to attain assumed social and economic benefits and
address changing needs of the region
Prepared for MCIT
27
1.e How should the infrastructure be managed?
In this context two options for implementation exist: end-to-end
managing entity with shared ownership & cooperation agreement
Option 1
Key Questions
 How will the ownership structure look like?
 How will the funding structure look like?
Managing
Entity
Single entity builds,
operates and manages the
infrastructure
Operating
Model
 Who will own, run and control the entity driving the infrastructure project
 How will decision mechanisms be implemented?
 How will a fair distribution of profits and risks across stakeholders be ensured?
 How will de-regulation/competitive access on national levels be driven?
 How can the quickest ramp-up and division of activities be ensured?
Option 2
 How will an end-to-end quality in building and operations be ensured?
Cooperation
Agreement
Countries responsible for
their own infrastructure in
accordance with agreed
upon KPIs
 What control mechanisms need to be implemented?
 How will decision mechanisms be implemented?
 How can national investments be guaranteed to ensure the success of the
venture?
 How can risks and profits for national investments be shared?
 How can the quickest ramp-up and division of activities be ensured?
Source: Booz & Company Analysis
Booz & Company
November 2008
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1.e How should the infrastructure be managed?
Out of the options, the managing entity model is the most relevant
for the planned infrastructure investment
Managing Entity
Cooperation Agreement
High Service
 Quality and service aspects managed and monitored
Availability
& End1
by a single entity undertaking the whole responsibility
to End quality
 Not easy to intervene in disruptions within a country
 Quality depended on “weakest link”
 Profit oriented & entrepreneurial organization
 Economies of scale for building/operating the network
 Ability to later privatize or sell assets
2 Economic Viability
 Possibility to leverage public-private partnership
models
 Profit orientation may drive underinvestment
 Every country maximizing own economic interests
 However, profit focus maybe lost in some countries,
as it can automatically be seen as a public service
 Scale advantages not existent
 Dedicated entity to ensure continuity
 Centralized control and monitoring
Long Term Stability  International Connectivity provided through member
3
/ Robustness
countries - improved negotiation power with
representation of many countries, decreasing
dependency
 Questionable performance of control and monitoring
at country level
 Countries on an individual basis have limited chance
to reach International Connection at favorable
conditions
4
Serving Long Term  Strong integration to serve common interest and
realize possible synergies
Objectives
Overall
Assessment
 Design & implementation of single entity, including
partnership negotiations required
 Best compliance with key principles
Preferred Option - Focus on following pages
 More difficult to realize the synergy potential when
countries act for themselves
 More autonomy within the country
 Less effort needed in terms of setting up
governance & operating model
 Weak compliance with key principles
Very high fit
No fit
Source: Booz & Company Analysis
Booz & Company
November 2008
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1.e How should the infrastructure be managed?
When designing the operating model lessons learnt from other
infrastructure initiatives should be taken into consideration
Lessons Learnt from International
Infrastructure Development Ventures
Operating Model Building Blocks
1. Agree on “Initiator” for driving the
venture in launch phase
Operating Model
2. Plan on how to share the wealth
among stakeholders
Ownership and
Share/Cost
Allocation
- Supplier (i.e. Termination points)
Governance &
Decision
Mechanisms
Key Processes
& KPIs
- Customers (i.e. ISPs and Telcos)
- Infrastructure venture per se
National (de-) regulation to enable equal access and
competition
3. Build momentum - stage the
construction effort and start building
with the first section as soon as
possible to build momentum
Legal Basis
Source: Booz & Company Analysis
Booz & Company
November 2008
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1.e How should the infrastructure be managed?
The Dolphin project is an example of a successfully implemented
infrastructure investment model towards a managing entity
Dolphin Pipeline (2008)
Key Success Factors
Pakistan
connection not
yet built
• Participation of countries secured at the beginning:
• Qatar
(Supplier)
• Dubai
(Buyer)
• Oman
(Buyer)
• Pakistan
(Buyer)
• UAE
(Orchestrator)
• Clear agreements through Memorandum of
Understanding (MoU)
• One clear orchestrator, initiating and leading the
whole process
Shareholding Structure (2008)
MUBADALA
INVESTMENT
COMPANY
(on behalf of the
Government of
Abu Dhabi)
25%
• Public-private partnership model (import of knowhow and expertise)
TOTAL
(France)
51%
25% OCCIDENTAL
(US)
• Identifying and meeting a solid need:
– first cross-border refined gas transmission
project
– a major step to improve insufficient intra-regional
trade
Source: Dolphin web sire, Booz & Company analysis
Booz & Company
November 2008
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2
How can economic viability be ensured?
The infrastructure investment can offer services ranging from dark
fiber through to VAS – PoP connectivity as most relevant service
Supply/Service Models

Additional
VAS
Provision of additional Value Added Service such
as VPN, Firewall
 Too “sophisticated” for a new infrastructure
investment, focus should first be on providing
connectivity, then VAS

PoP

Connectivity

Service
Platforms
Service
Platforms
Router
Router
Router
Router
Router
Router
Entity provides TCP/IP connectivity and deploys
equipment to provide services e.g., DWDM
Priced according to bandwidth and distance
Entity manages and maintains the network
 Most feasible service for participating countries
Most relevant Service
Leasing
Dark Fiber/
Wavelength

Customers deploy own equipment

Usually least costly option for intense bandwidths
Site
Site
 Business model for highly competitive markets with
over- supply (not assumed feasible/relevant for the
new network)
Source: Booz & Company analysis
Booz & Company
November 2008
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3
What will be overall resulting benefits to the region?
Increasing infrastructure capacity will drive down market prices
dramatically, as the case of cross-Atlantic submarine cables shows
Drivers for price Reductions
Capacity Increase vs. Price Declines
Monthly STM-4 Price
(‘000 USD)
Capacity
Gbps
7.8
8
7
11,000
7.6
STM-4/OC-12 Monthly Prices,
London-New York (‘000 USD)
-18%
6
6,927
6.4
9,000
7,347
8,000
7,000
5
+32%
4
4,708
10,000
5,547
6,000
4,587
5,000
4,072
3
4,000
3,000
2
2,000
1
1,000
0
 New cable deployments and
capacity upgrades on existing
transatlantic cables resulted in
massive increases in bandwidth
 The continuous supply of new
undersea capacity has given
impetus to the rapid decline in
prices
 Overcapacity of operators and
shortage of cash have also
resulted in price declines
 There is still significant capacity to
offer on submarine cables: total
potential capacity for the transAtlantic route was 31,927 Gbps in
2007
0
2002
2003
2004
2005
2006
2007
Source: Telegeography
Booz & Company
November 2008
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3
What will be overall resulting benefits to the region?
In our case, an infrastructure investment has the potential to bring
sizable reduction in access costs per household
Estimated Cost Breakdown of End User Price (1 Mbps, Monthly USD)
-Effect of Int’l Access Reduction55%
44%
1%
100%
238
5
540
- 45-53%
297
International Access
275
Cost to pass
subscriber
CPE
1)
Effect of international access demonstrated Additional upside for local access expected
Source: Booz & Company Analysis
Booz & Company
November 2008
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Existing Local Access
Reduction in Int’l
Access
Reduction of
Int’l Access to
European levels
(2-10%)
Potential Local Access
Expected
immediate
impact on enduser price
34
3
What will be overall resulting benefits to the region?
Besides reducing access costs, the new infrastructure will bring
substantial social and economical benefits to the region
Benefits to the Countries
Increased Internet
1
Adoption
Short/Medium
Tem Benefits



Improved price and quality
Easy access to information and applications
“Integration” of citizens with the rest of the world

Improved
2 Telecommunication

Infrastructure
Strengthened backbone service alternative to telecommunication
companies of the region
More people to access telecommunications services such as fixed and
mobile voice



No more need for routing internet traffic to international directions
International interconnection burden for intra-regional traffic eliminated
Opportunity to develop and store local content

Increase in trade links between consumers and companies at regional
and global levels
Development of regional e-commerce
Opportunity for regional e-marketplace
Regionalization of
Internet
3
4
Economic
Development
Long Term
Benefits



Realization of
information society
targets
4
Fundamental enabler for information society initiatives by the
governments:
– e-government
– e-education
– e-health
Source: Booz & Company Analysis
Booz & Company
November 2008
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Eurasian countries wishing to close the digital divide should join
discussions on a possible broadband backbone investment
Summary of Findings
Implications for Eurasian Countries
 Being a part of a regional connectivity solution will significantly
minimize financial & operational risks and leverage synergies for
Eurasian countries
 Terrestrial fiber was identified as the most feasible option,
connecting the Eurasian region to the data highways of the western
and eastern world; there will be a set of access & transit countries
 A managing entity model offering PoP connectivity is the most
relevant implementation model for the planned infrastructure
investment, adhering to a set of predefined criteria (high service
availability & end-to-end quality, economic viability, long term stability,
serving long term objectives)
 Increasing infrastructure capacity will drive down market prices
dramatically with the potential to bring sizable reduction in access
costs per household
Eurasian countries wishing to
close the “digital divide” gap and
jump on the broadband train
should join discussions on a joint
infrastructure investment
The operating model as well as
possible services should start to
be detailed as soon as possible
 Besides reducing access costs, the new infrastructure will bring
substantial social and economical benefits such as increased
internet adoption, improved telecommunication infrastructure,
regionalization of internet, economic development & realization of
information society targets
Booz & Company
November 2008
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The connected world of today
The Eurasian disconnect
How to close the gap
Next Steps
Booz & Company
November 2008
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37
MCIT should focus on leveraging the Bakutel event in the most
effective manner to get the intended results
Next Steps for MCIT
Before
Bakutel
During
Bakutel
After
Bakutel
Booz & Company
November 2008
What
When
 Decide on a presentation strategy of the infrastructure investment concept
at BakuTel
– General presentation
– One-on-one meetings and lobbying efforts
Week of
27.Oct
 Present the concept and consolidate immediate feedbacks
11-14.Nov
 Identify potential candidates willing to be the members of the
consortium/cooperation
11-14.Nov
 Raise the idea of a separate convention with participation of the candidate
countries – agree on a specific date
11-14.Nov
 Start preparations of the operating model framework to be discussed in the
convention and define the
TBD
 Organize the convention
TBD
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Consortium candidates should first of all come together for a
convention to develop a mutual understanding and agreement
Next Steps for Consortium Candidates
What
During
BakuTel
After
BakuTel
During
the
‘Convention’
After the
‘Convention’
Booz & Company
November 2008
When
 Provide immediate feedbacks on the presented concept
11-14.Nov
 Agree on a specific date for a separate convention
11-14.Nov
 Discuss the agenda and requirements for the convention
11-14.Nov
 Assign a ‘task force’ to manage the correspondence, to join the meetings and
to represent the countries
Week of
17.Now
 Discuss and agree on fundamentals and principles
TBD
 Define the ‘modus operandi’ going forward –meeting frequency, roles and
responsibilities
TBD
 Sign a memorandum of understanding to initiate the detailing of the
implementation –e.g. technical project, construction plan, establishment etc.
TBD
 Design and detail the operating model
 Start developing the feasibility study and the detailed business plan
Azerbaijan Regional Data
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TBD
39
Appendix
Booz & Company
November 2008
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40
Case Studies
Country Selection and Profiles
Sections of the Proposed Network
Further Supporting Slides
Booz & Company
November 2008
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We examined four infrastructure investment case studies
providing key learnings for any infrastructure initiative
1
2
3
4
Description
 Satellite consortium
consisting of 29
countries, initially
established to improve
maritime communications
 Private satellite initiative
by Google and HSBC to
provide connectivity to
emerging markets
 Fiber optic network
consortium among
Eurasian countries
 TEAMs, a submarine cable
consortium among East
African countries, established
as a reaction to delays in
EASSy
Key Learnings
TEAMs
 Several countries of
different interests can
successfully come
together to build an
infrastructure for the
benefit of all the parties,
as long as the
administrative issues are
well addressed
 Connectivity
requirements in
developing parts of the
world are a common
phenomenon
 A trans-national initiative
cannot reach its full
potential if end-to-end
quality and uniformity
cannot be ensured
 Countries in under-invested
regions in terms of
connectivity are developing
their own initiatives to close
the gap
Booz & Company
November 2008
 Private initiatives in
place to meet part of the
demand
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
 When interests of a certain
party in a consortium are very
much different from the other
involved parties e.g.,
monopolistic power, the
consortium can fail
42
1
INMARSAT was initiated as an inter-governmental consortium
Brief History of INMARSAT1 success
1979
1999
Foundation of ‘IMSO’
 Foundation of the
International Maritime
Satellite Organization
(IMSO) [later International
Mobile Satellite
Organization]
 Was conceived and
established as an intragovernmental and fully
global organization
2003
2005
Transition to Private
Withdrawal
IPO
 To meet the changes and
challenges which have
taken place in the
telecommunications
industry, namely
liberalization and fierce
competition, INMARSAT
was also changed into a
private corporate structure
 Most of the
Signatories of “old”
INMARSAT sold
their shares in
Inmarsat Group
Holdings Ltd,
although some
have retained a
minute share. They
remain, however,
Parties to the
residual
intergovernmental
organization IMSO
 Inmarsat Ltd
continued to be
financially sound
even with fierce
competition and
went public
 Original purpose was to
provide satellite capacity
necessary to improve
maritime communications
INMARSAT Today…
Company Profile
 Leading provider of mobile
satellite communications
services
 Provision of data and voice
connectivity to end-users at
sea, on land and in the air,
worldwide
 Complete portfolio of mobile
voice and broadband data
services, including safety and
control communications,
instant communications and
high-speed data solutions
 IMSO still holds a “Golden
Share”, which gives it special
rights related to Inmarsat’s
obligations with respect to
certain public services
1)
International Maritime Satellite Organization
Source: Booz & Company analysis, Company information
Booz & Company
November 2008
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1
The success was created at the very beginning, with significant
effort dedicated to design of the operating mode
Key Success Factors
Solid legal
base
 The establishment of INMARSAT was based on two international
public law instruments:
– Convention on INMARSAT between State Parties
– Operating Agreement between telecommunications entities public
or private (one per Party) called “Signatories”

Well defined
operating
model (with
relevant
governance
mechanisms)

Transparent
and agreeable
allocation of
costs / shares


Initial investment shares
0% 5% 10% 15% 20% 25% 30%
USA
USSR
UK
Norway
Japan
Italy
France
INMARSAT was structured with three principal organs:
W. Germany
– The Assembly of Parties (one State, one vote), which dealt with
Greece
Netherlands
general policy matters and the long term objectives of the
Canada
Organization
Kuwait
– The Council, composed of 22 Signatories, or groups of
Spain
Signatories. It decided on all financial, operational, technical and
Sweden
administrative matters. Voting rights linked to parties’ utilization of
Denmark
the system via investment shares
Australia
India
– The Directorate, which was the executive body of the
Brazil
Organization headed by a Director General
Poland
Singapore
Initial investment shares had to be determined through negotiations
P.R. China
Belgium
at the Conference, since Signatories’ utilization of the space
Finland
segment could not be known in advance
Argentina
It was agreed that initial shares should reflect expected usage. The New Zealand
Bulgaria
delegations made bids based on their own estimates.
Portugal
It proved to be extremely difficult to reach a total of 100% and
Algeria
resolution required many negotiations
Egypt
14.2
23.5
9.9
7.9
7.0
3.4
2.9
2.9
2.9
2.9
2.6
2.0
2.0
1.9
1.7
1.7
1.7
1.7
1.7
1.7
1.2
0.6
0.6
0.6
0.3
0.1
0.1
0.05
0.05
Total:
100%
Source: Telektronikk
Booz & Company
November 2008
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2
O3b (other three billion) aims to provide high-speed, low-cost
connectivity to Africa and other emerging markets
O3b Key Facts





Founded with US$65m by Google, HSBC, Liberty Global and Allen & Co.
HQ in Jersey Island
Satellite production already started (by Thales Alenia Space), 16 in total
Operative launch expected for late 2010
Total investment until launch: US$650-750m
Business model / service offering
 Provide low cost bandwidth via satellite to Africa, large parts of Asia
and the Pacific Islands
 Wholesale to local ISPs and telcos for 3G cellular and WiMax backhaul
 Average available speed to the internet to increase 5-10 times
 Reduction of cost down to about 5% of current level estimated
 Competition expected with already existing fiber networks connecting
Europe to Africa, Asia to ME
 Advantages for…
– …fixed line operators: Speed multiplies by factors 5 to 10, cost of the
bandwidth decreases by factors 5 to 10, reduction of latency by factor 5
tremendously improves quality of connection
– … mobile operators: Network simplification with centralized core,
flexibility to react to special events via ‘steerable’ spot beams
– … ISP’s & cable operators: Access to new geographies, cable
headend or WiMax backhaul without high costs of fiber infrastructure
Strengths:
 Significant cost reduction from current
levels, even compared to current
satellite transmission offers (~US$500
vs. US$4,000 per Mb per month)
 Total bandwidth of 1 Mbps to 10 Gbps
with low latency
 Reduction of reliance on terrestrial
infrastructure in areas of geographically
or politically restricted access
 Determined and capable shareholders
 Reduction of latency due to mediumearth orbit (MEO) satellites
Weaknesses:
 Limited latitude range of +/- 40 degrees
requires occasional use of additional
terrestrial infrastructure (fiber networks)
 Northern parts of Central Asia, e.g.
Kazakhstan, not covered by satellite
Source: o3b website, NY Times, Booz & Company Analysis
Booz & Company
November 2008
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2
The O3b system features high speed and low latency - however,
large parts of Central Asia remain uncovered
Geographic coverage
Russia
Uzbekistan
Technical details
Kazakhstan
China
 With a total of 16 satellites, system will provide speeds
of 1 to 10 Gbps with low latency. (A minimum
constellation of five satellites is needed to cover 360
degrees over the Earth. O3b has more than twice of the
needed number)
Mongolia
 Providing high speed and reducing latency is feasible
for O3b because
Azerbaijan
Armenia
– Satellites are positioned in altitude of 8063 km. which
allows to add new satellites
Kyrgyzstan
40°
Tajikistan
Satellite-covered
spectrum of +/- 40°
of latitude
Iran
Turkmenistan
Afghanistan
Pakistan
India
– O3b uses parabolic antennas which reduces latency
– Satellites are Ka-Band, which helps delivering
bandwidth at high speeds by leveraging large KaBand spectrum
– Satellites will orbit the earth at about one-third the
altitude of a geo-synchronous satellite, which means
it takes less time for data to travel up and back
 Coverage zone is between +/- 40 degrees of latitude.
For some parts of Africa, because of limited satellite
spectrum, fiber cable infrastructure is planned
Source: o3b website, NY Times, Booz & Company Analysis
Booz & Company
November 2008
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3
TAE, the fiber optic network consortium among Eurasian countries,
was first initiated in 1992 and developed with new participations
History of TAE
1992
1994-1995
1998
2003
2006
Signing of “Agreement
on the Construction
and Organization of
TAE”
13 Countries join the
TAE project - start of
the construction
Start of traffic between
Frankfurt and
Shanghai
Signing of the new
TAE agreement
Modernization:
Upgrade to STM-16 ,
conversion to DWDM
Technology
 Agreement for
establishment of
TAE (planned
21,000 km in total)
was signed by
China, Germany,
Kazakhstan,
Kyrgyzstan,
Poland, Ukraine
and Uzbekistan
 In January 1994
Turkmenistan,
Turkey and Iran
joined the TAE
Agreement
 In November 1998,
the system was
tested for the first
time with a
videoconference
between Shanghai
and Frankfurt
 New “TAE
Agreement”
contains
statements on
operation,
maintenance and
loading the system
with international
traffic
 In connection with
Internet
development, new
services such as
ADSL, MPLS were
introduced
 TAE System was
planned for
140Mbps level and
higher
 In April 1995
Belarus,
Romania,
Hungary, Austria,
Pakistan and
Afghanistan
joined the TAE
Agreement
 Transmission of
international traffic
started at the end
of 1998
 The process of
TAE modernization
to DWDM
technology started
 Each Party was
responsible for
construction of its
own TAE
segments
Source: TAE Website
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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47
3
Today, TAE has 15 member countries represented by public abd
private entities
Member Countries and Representative Institutions/Companies
Armenia
Austria
Azerbaijan
China
Georgia
Germany
Hungary
Iran
Kazakhstan
Kyrgyzstan
Pakistan
Tajikistan
Turkey
Ukraine
Uzbekistan
Observer Countries
Afghanistan
Belarus
Poland
Turkmenistan
Source: TAE Website
Booz & Company
November 2008
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48
3
TAE’s network of 29.000 km. connects Shanghai to Frankfurt - with
however inferior and heterogeneous technology in Eurasia
TAE Overview
Frankfurt
Vienna
Cons
 Technology Gap:
– Inadequate capacity
– No unique technology to
have end-to-end quality in
connectivity
 Administrative Problems:
– No single administration
and monitoring of the
network
– No uniform pricing policy
Kyiv
Almaty
Budapest
Varna
Tblisi
Istanbul
Ankara
Urumgi
Baku
Erivan
Tashkent
Bishkek
Ashkhabad
Beijing
Dushanbe
Teheran
Kabul
Islamabad
Shanghai
Pros
 Consortium Experience:
– Countries already have
experience of coming
together
 Laid fibers:
– Certain sections and
network elements of TAE
can be re-used (dependent
on available technology)
TAE Network
DWDM
10 Gbps to 400 Gbps
> STM-16 >2,5
Gbps
STM-16
2.5
Gbps
STM- 4
622
Mbps
STM-1
155.52 Mbps
Non TAE
Under Construction
Source: Expert view
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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49
4
EASSy was initiated in order to solve the int’l connectivity gap of
East Africa –major delays shadowed the progress
Overview of EASSy
Comments
Description
 Eastern Africa Submarine Cable System,
EASSy, is planned to run from South Africa
to Sudan.
Highlights
 EASSy was planned to run from Mtunzini in South
Africa to Port Sudan in Sudan, with landing points
in six countries, and connected to at least five
landlocked countries – who will no longer have to
rely on expensive satellite systems
Technical
Aspects
 Total length of the system will be 10500 km
 The system is expected to have initially 30
Gbps capacity which is upgradeable to 320
Gbps
 The project, funded by the World Bank and the
Development Bank of Southern Africa, was first
initiated on January 2003. Although the African
Development Bank and various governments have
pledged financial support, funding has not been
fully solved
Financial
Aspects
 EASSy project cost would be about US$247
Million of which US $218 million for the
system supply and US $29 million for project
management.
 The slow process of implementing the project (it is
behind schedule by at least a year) has caused
frustration among some governments in the region
Participating
Countries
Booz & Company
November 2008
 Sudan, Djibouti, Somalia, Kenya, Tanzania,
Madagascar, Mozambique, South Africa
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
 South Africa, the major supplier of international
connectivity in the region, was accused of
prolonging the process
 A representative of the Government of Kenya
declared in May 2006 that they may support the
TEAMs initiative
50
4
TEAMs
TEAMs was as a reaction to delays in EASSy
Overview of TEAMs
Comments
 East African Marine System linking Mombesa of
Kenyan Coast with Fujairah of UAE
Description
Technical
Aspects
Financial
Aspects
Participating
Countries
Booz & Company
November 2008
 Total length of the system will be 4887 km.
which is estimated to finish in 16 months
 Initial capacity will be 40 Gbps which is
upgradeable to 1.2 Tbps
 Project is estimated to cost about $110 Mn.
(Kenyan Government 20%, Etisalat(UAE) 15%,
private investor 65%)
 Shareholders are expected to operate on an
internal rate of return of 32.71 per cent with a
pay back of 2.4 years
 Rwanda, Burundi, Uganda, Tanzania and
Southern Sudan have shown interest in
participating in the project.
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
Highlights
 TEAMs was initiated by the Kenyan government
to reduce the dependency to South Africa and
create an alternative to EASSy (Eastern Africa
Submarine Cable System)
 The TEAMs cable has an expected life span of 25
years
 Cost of internet connectivity is expected to fall by
more than 80 per cent from the current average of
$5000 per Mbps
 The government of Kenya has awarded an $82million contract to French company Alcatel-Lucent
to build the submarine cable linking the port city of
Mombasa (Kenya) with Fujairah, in the UAE
 Five firms qualified to bid for the project, but
Alcatel-Lucent edged out the other four
competitors (Fujitsu, NEC, Tyco
Telecommunication and Huawei Technologies) on
price and timescale
51
Case Studies
Country Selection and Profiles
Sections of the Proposed Network
Further Supporting Slides
Booz & Company
November 2008
Azerbaijan Regional Data
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52
In order to identify the optimal country participation , we used a
deductive approach taking into account a wide range of criteria
Potential Country Participation
Countries Long
List




















Azerbaijan
Uzbekistan
Turkmenistan
Kyrgyzstan
Tajikistan
Kazakhstan
Belarus
China
South Korea
Turkey
India
Iran
Afghanistan
Pakistan
Georgia
Russia
Ukraine
Bulgaria
Moldova
Mongolia
Selection Criteria
 International connectivity
 Broadband penetration
 Topological fit
 Geopolitical factors e.g:
– Multilateral relations
– Cultural proximity
(language, region,
historic roots)
 Partnership experience in
consortiums (e.g.
Pipelines)
:potential transit countries with high priority
:potential transit countries with medium priority
:potential transit countries with low priority
:potential access countries
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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53
Country Comparison
Base Data for Selection Criteria – Broadband Thirst
Broadband Penetration (%)
Fixed Penetration (%)
Broadband Thirrst
Azerbaijan
0,03
14,81
High
Uzbekistan
0,03
6,74
High
Turkmenistan
0,00
8,24
High
Kyrgyzstan
0,05
9,07
High
Tajikistan
0,00
4,31
High
Kazakhstan
0,21
20,99
High
Pakistan
0,08
3,01
High
Afghanistan
0,50
0,30
High
Georgia
0,61
12,47
High
Russia
2,03
30,80
Low
Ukraine
1,73
27,83
Medium
India
0,27
3,37
High
South Korea
29,44
49,57
Low
China
5,00
27,51
Low
Belarus
0,12
37,90
Medium
Bulgaria
7,37
30,11
Low
Moldova
1,24
28,47
Medium
na
33,47
High
Mongolia
0,00
5,93
High
Turkey
5,80
24,59
Low
Iran
Source: ITU
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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54
Base Data for Selection Criteria –Broadband Topology (within the
country)
Number of Big Cities vs. Population Density
# of cities
(population >20K)
200
Ukraine
Pakistan
190
Iran
180
170
160
150
140
130
120
Uzbekistan
110
100
90
80
Kazakhstan
70
60
50
Azerbaijan
40
30
Turkmenistan
Afghanistan
20 Tajikistan
10
Kyrgyzstan
Moldova
Georgia
Mongolia
0
20
Booz & Company
November 2008
25
30
Azerbaijan Regional Data
Highway_081107_GU.ppt
35
40
Prepared for MCIT
45
50
55
60
65
Urban
Population
70 (%)
55
India
Geographical Location
Country Data
 Population
1.123.318.991
 Urban Population Density
 GDP (PPP)
29%
$ 2,966 Billion
 GDP/Capita (PPP)
$ 2600
 PC Penetration (%)
2,76
 Fixed Line Penetration (%)
3,37
 Mobile Penetration (%)
19,98
 Internet penetration (%)
1,15
 Broadband Penetration (%)
0,27
 E-Readiness Index
0,3814
Comments
 Submarine cables going through Egypt provides the most direct route to Europe for India’s IP traffic
 Bharti and VSNL are members or the SEA-ME-WE4 consortium whereas Reliance owns the FLAG submarine cable systems
 BSNL is contemplating building its own cable to Singapore
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
56
Iran
Country Data
 Population
Geographical Location
71.021.038
 Urban Population Density
 GDP (PPP)
70 %
$ 762 Billion
 GDP/Capita (PPP)
$ 11700
 PC Penetration (%)
10,53
 Fixed Line Penetration (%)
33,47
 Mobile Penetration (%)
41,81
 Internet penetration (%)
23,37
 Broadband Penetration (%)
 E-Readiness Index
na
0,4067
Comments
 Iran’s international gateway is controlled by the state-owned operator, TCI
 Currently, Iran does not have landing stations for Europe-Asia submarine cables
 Iran can potentially have easy access to Europe by constructing a submarine cable through the Caspian Sea and interconnecting with
Russian network
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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57
Pakistan
Country Data
 Population
Geographical Location
162.389.013
 Urban Population Density
 GDP (PPP)
36%
$ 412 Billion
 GDP/Capita (PPP)
$ 2400
 PC Penetration (%)
0,46 (2002)
 Fixed Line Penetration (%)
3,01
 Mobile Penetration (%)
48,11
 Internet penetration (%)
2,14
 Broadband Penetration (%)
0,08
 E-Readiness Index
0,3160
Comments
 Pakistan is connected to the international submarine network by joining SEA ME WE-4 in Karachi
 International gateway access in Pakistan is fully competitive
 Pakistan’s main fixed-line operator, Pakistan Telecom Company Limited (PTCL), is a member of the SEA-ME-WE3 and SEA-MEWE4 consortiums
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
58
China
Country Data
 Population
Geographical Location
1.319.982.595
 Urban Population Density
 GDP (PPP)
43,3%
$ 7,099 Billion
 GDP/Capita (PPP)
$ 5400
 PC Penetration (%)
5,60
 Fixed Line Penetration (%)
27,51
 Mobile Penetration (%)
41,19
 Internet penetration (%)
11,31
 Broadband Penetration (%)
 E-Readiness Index
5,00
0,5017
Comments
 China’s market is regulated with international wholesale carriers seeking to deliver services having to interconnect with either China
Telecom, China Netcom, China Unicom or China Railcom
 China Netcom and China Telecom have direct access to Europe via interconnection with the pan-Russian networks operated by
TransTeleCom and Rostelecom
 Terrestrial networks provide a more direct route to Europe for China and thus China was excluded from the high priority countries
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
59
Azerbaijan
Country Data
 Population
Geographical Location
8.570.966
 Urban Population Density
 GDP (PPP)
50%
$ 65 Billion
 GDP/Capita (PPP)
$ 8000
 PC Penetration (%)
2,31
 Fixed Line Penetration (%)
14,81
 Mobile Penetration (%)
50,78
 Internet penetration (%)
2,30
 Broadband Penetration (%)
0,03
 E-Readiness Index
0,4609
Comments
 Customers of the broadband market in Azerbaijan are mainly corporate cutomers, not individuals
 Largest market players are the ISP subsidiaries of the incumbent Aztelecom and Baktelecom. Incumbents also resell connectivity to
the remaining twenty registered ISPs.
 Vast majority of the internet subscribers are on dial-up, broadband subscription is at very low levels
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
60
Uzbekistan
Country Data
 Population
Geographical Location
26.867.800
 Urban Population Density
 GDP (PPP)
36%
$ 64,4 Billion
 GDP/Capita (PPP)
$ 2,400
 PC Penetration (%)
3,08
 Fixed Line Penetration (%)
6,74
 Mobile Penetration (%)
9,27
 Internet penetration (%)
0,15
 Broadband Penetration (%)
0,03
 E-Readiness Index
0,4057
Comments
 First DSL broadband package has been offered in 2007
 Government plans to privatize 49% of the incumbent Uzbektelecom in efforts of liberalizing telecommunication market
 Uzbekistan is part of TAE (Trans Asia Europe) Network, which is the main access of Uzbekistan to international broadband network.
Broadband connection is only available to large companies and very wealthy individuals because of high tariffs.
 While DSL services are only available in Tashkent and Samarkand, Wimax is planned to be provided by companies for other parts of
the country
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
61
Turkmenistan
Country Data
 Population
Geographical Location
4.963.331
 Urban Population Density
 GDP (PPP)
46,8%
$ 27 Billion
 GDP/Capita (PPP)
$ 5,300
 PC Penetration (%)
7,20
 Fixed Line Penetration (%)
8,24
 Mobile Penetration (%)
4,43
 Internet penetration (%)
na
 Broadband Penetration (%)
na
 E-Readiness Index
0,3262
Comments
 Government is the only authorized arty to provide internet in Turkmenistan and internet access is highly inspected by government
 In 2007, MTS has launched GPRS and Edge services for Turkmen organization and they claim to have thrashed out a deal to allow
residential usage of the offered services
 MTS also plans to offer Wimax for rural areas of the country although government’s high pressure is on over the residential usage
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
62
Kyrgyzstan
Country Data
 Population
Geographical Location
5.242.826
 Urban Population Density
 GDP (PPP)
33,9%
$ 10,5 Billion
 GDP/Capita (PPP)
$ 2,000
 PC Penetration (%)
1,90
 Fixed Line Penetration (%)
9,07
 Mobile Penetration (%)
40,47
 Internet penetration (%)
0,42
 Broadband Penetration (%)
0,05
 E-Readiness Index
0,4195
Comments
 20 Internet Service Providers are competing with Kyrgyztelecom in the internet market
 Internet access is strongly biased towards urban customers in Kyrgyzstan, as online services are available in only capital and some
other major cities of the country
 Internet cafes are commonly used by citizens which comprises half of the internet usage, other half includes government usage,
education and workplaces
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
63
Tajikistan
Country Data
 Population
Geographical Location
6.740.084
 Urban Population Density
 GDP (PPP)
24%
$ 12 Billion
 GDP/Capita (PPP)
$ 1700
 PC Penetration (%)
1,30
 Fixed Line Penetration (%)
4,31
 Mobile Penetration (%)
4,07
 Internet penetration (%)
0,01
 Broadband Penetration (%)
 E-Readiness Index
na
0,3150
Comments
 Internet services are provided both by incumbent and private companies. There are various services offered from Dial-up to DSL and
Satellite.
 A number of ISPs , including incumbent Tajiktelecom, are investing in their own IP based New Generation Network
 DSL services are exclusively for corporate customers because of extremely high prices. Rural areas are only covered by satellite
services
 Tajikistan is part of the NATO initiated Virtual Silk Road programme which aims bringing high speed connectivity to education,
scientific, technical and management institutions.
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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64
Kazakhstan
Country Data
 Population
Geographical Location
15.481.262
 Urban Population Density
 GDP (PPP)
56%
$ 168 Billion
 GDP/Capita (PPP)
$ 11,000
 PC Penetration (%)
na
 Fixed Line Penetration (%)
20,99
 Mobile Penetration (%)
81,62
 Internet penetration (%)
2,43
 Broadband Penetration (%)
0,60
 E-Readiness Index
0,4743
Comments
 Competition in Kazakh telecom market is well developed compared to other countries of the region
 Kazakhstan is relatively a more developed country in terms of internet and broadband penetration in the region, though access for the
rural areas is a problem. Most of the internet connection is via dial-up due to the poor coverage and high prices of the broadband
services.
 Main competition in the broadband market is in corporate segment
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Prepared for MCIT
65
Belarus
Country Data
 Population
Geographical Location
9.701.870
 Urban Population Density
 GDP (PPP)
73%
$ 103.5 Billion
 GDP/Capita (PPP)
$ 10,600
 PC Penetration (%)
na
 Fixed Line Penetration (%)
37,90
 Mobile Penetration (%)
61,44
 Internet penetration (%)
4,20
 Broadband Penetration (%)
0,12
 E-Readiness Index
0,5213
Comments
 Four-fifths of internet subscribers use dial-up connection in Belarus, cable connection is getting popular among citizens as a
broadband service. Belarus’ incumbent owns all of the country’s backbone and has monopoly on provision of internet access.
 To increase international bandwidth capacity, Beltelecom hosted additional STM-4 channel, reaching total of 3.1 Gbps capacity
 Under the National Development Plan, in 2006, Belarus government has declared to roll out 7200 km. fiber optic network to improve
the broadband access technologies of the country
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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66
South Korea
Country Data
 Population
Geographical Location
48.530.415
 Urban Population Density
 GDP (PPP)
81%
$ 1,206 Billion
 GDP/Capita (PPP)
$ 25,000
 PC Penetration (%)
54,44
 Fixed Line Penetration (%)
49,57
 Mobile Penetration (%)
90,20
 Internet penetration (%)
29,44
 Broadband Penetration (%)
29,44
 E-Readiness Index
0,8317
Comments
 South Korea broadband market is one of the world’s most advanced market. Government’s “National Broadband Strategy” is one of
the important reasons behind this success.
 Most of the broadband demand comes from homes and because 93% of the households are in the 4 km. radius from local exchanges
over 90% of the households have broadband internet connection.
 Three Korean ISPs control nearly 85% of the market for Internet access largest of which Kornet provide half of ADSL lines, making it
the largest ADSL provider in the world.
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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67
Turkey
Country Data
 Population
Geographical Location
73.887.732
 Urban Population Density
 GDP (PPP)
68%
$ 854 Billion
 GDP/Capita (PPP)
$ 12,000
 PC Penetration (%)
5,93
 Fixed Line Penetration (%)
24,59
 Mobile Penetration (%)
82,77
 Internet penetration (%)
6,26
 Broadband Penetration (%)
5,80
 E-Readiness Index
0,4834
Comments
 Turk Telekom is the main broadband internet access provider in the country. ADSL services started to be provided in 2003. In the
progress of broadband penetration, ADSL services is much more prevalent than cable access.
 Monopoly of the incumbent Turk Telekom finished after the privatization in 2005
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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68
Afghanistan
Country Data
 Population
Geographical Location
32,738,376
 Urban Population Density
 GDP (PPP)
26%
$ 35 Billion
 GDP/Capita (PPP)
$ 1,000
 PC Penetration (%)
0,32
 Fixed Line Penetration (%)
0,3
 Mobile Penetration (%)
17,20
 Internet penetration (%)
0,18
 Broadband Penetration (%)
 E-Readiness Index
na
0,2048
Comments
 Seven ISPs are licensed in Afghanistan for broadband service. Because of the countries very inadequate infrastructure, internet use
is restricted to public areas via wireless broadband networks.
 In efforts to make internet usage more common, Ministry of Communications began a project together with United Nations
Development programme to install web access kiosk in post offices countrywide
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
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69
Georgia
Country Data
 Population
Geographical Location
4.395.769
 Urban Population Density
 GDP (PPP)
51%
$ 21 Billion
 GDP/Capita (PPP)
$ 4,400
 PC Penetration (%)
4,70
 Fixed Line Penetration (%)
12,47
 Mobile Penetration (%)
38,43
 Internet penetration (%)
6,41
 Broadband Penetration (%)
1,06
 E-Readiness Index
0,4548
Comments
 Georgia is connected to Russia via a submarine fiber optic cable. This segment is also part of TAE network
 Dial-up is the mostly used internet service among citizens, while there are wide range of broadband platforms such as; cable, satellite, Wimax,
Wi-Fi and ADSL. Though broadband penetration is limited because of prices.
 Caucas Network, the main player of broadband market, has announced to lay a submarine cable stretching 1100 km. across Blacksea,
connecting Georgia to Bulgaria
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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70
Russia
Country Data
 Population
Geographical Location
141.636.177
 Urban Population Density
 GDP (PPP)
73%
$ 2,097 Billion
 GDP/Capita (PPP)
$ 14,800
 PC Penetration (%)
13,33
 Fixed Line Penetration (%)
30,80
 Mobile Penetration (%)
 Internet penetration (%)
 Broadband Penetration (%)
 E-Readiness Index
119,30
12
2,03
0,5120
Comments
 Due to the lack of capable infrastructure outside Moscow, broadband prevalence is strongest in Moscow. ADSL accounts half of the internet
connection in the country. Golden Telecom, third biggest ISP in Russia is investing to offer FTTB technology in large cities.
 In the business market, leased lines access is the main way of broadband connection, while ADSL is getting popularity
 State owned Svyazinvest announced its plan of investing up to $ 500 Mln. To “triple play” services. A number of companies are deploying Wi-Fi
hotspots. Several companies have launched or announced to launch Wimax service for areas poorly covered by DSL
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
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Ukraine
Country Data
 Population
Geographical Location
46.382.836
 Urban Population Density
 GDP (PPP)
68%
$ 325 Billion
 GDP/Capita (PPP)
$ 7,000
 PC Penetration (%)
4,61
 Fixed Line Penetration (%)
27,83
 Mobile Penetration (%)
119,55
 Internet penetration (%)
13,85
 Broadband Penetration (%)
 E-Readiness Index
1,73
0,5728
Comments
 Broadband access via Cable TV and xDSL is available in the urban areas of the country. Wireless access such as Wi-Fi and Wimax
are gaining market share recently
 The incumbent Ukrtelekom is the owner of the national backbone and introduced IPTV and IP Telephony in November 2007
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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72
Bulgaria
Country Data
 Population
Geographical Location
7.642.177
 Urban Population Density
 GDP (PPP)
70%
$ 87 Billion
 GDP/Capita (PPP)
$ 11,800
 PC Penetration (%)
5,94(2004)
 Fixed Line Penetration (%)
 Mobile Penetration (%)
30,11
129,57
 Internet penetration (%)
7,37
 Broadband Penetration (%)
6,09
 E-Readiness Index
0,5719
Comments
 Bulgaria has the lowest broadband penetration in EU. Four fifths of total broadband subscription is cable access.
 ADSL technology is adapted relatively late, in February 2004 which is the reason of the lag between cable and ADSL services
 Fixed line incumbent BTC is the countries sole provider of xDSL services, as local loop unbundling is not commercially available yet
 Opposite to the traditional broadband technologies, Wimax is well developed, as in February 2008 Max Telecom has announced completing the
deployment of 10 city strong high speed Wimax network, covering 30% of population
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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73
Moldova
Country Data
 Population
Geographical Location
3.792.142
 Urban Population Density
 GDP (PPP)
47,1 %
$ 10 Billion
 GDP/Capita (PPP)
$ 2,300
 PC Penetration (%)
10,11
 Fixed Line Penetration (%)
28,47
 Mobile Penetration (%)
49,63
 Internet penetration (%)
2,90
 Broadband Penetration (%)
1,24
 E-Readiness Index
0,4510
Comments
 Moldova telecommunications market was fully liberalized in 2004. After liberalization with the increased number of ISPs, broadband
market grew significantly.
 Incumbent Moldtelecom started to provide ADSL service in November 2004 with 1024 Kbps Currently it offers up to 2048 Kbps ADSL
service.
 Cable, ADSL, FTTH and Wireless broadband services are offered in Moldova
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
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Mongolia
Country Data
 Population
Geographical Location
2.612.294
 Urban Population Density
 GDP (PPP)
57,6 %
$ 8,5 Billion
 GDP/Capita (PPP)
$ 2,900
 PC Penetration (%)
13,44
 Fixed Line Penetration (%)
5,93
 Mobile Penetration (%)
28,94
 Internet penetration (%)
2,65
 Broadband Penetration (%)
 E-Readiness Index
na
0,4735
Comments
 Mongolian incumbent Mongolia Telecom had launched a DSL service by early 2004, sold through its ISP subsidiary Micom
 Almost half of the population lives in capital city Ulaanbaatar, rest lives in 1,5 million sq. km. which makes broadband access
economically infeasible
Source:
World Bank, ITU, CIA Factbook, Booz analysis
Booz & Company
November 2008
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Case Studies
Country Selection and Profiles
Sections of the Proposed Network
Further Supporting Slides
Booz & Company
November 2008
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Georgia
Kutaisi
international
backbones
Tiflis
Rustavi
Batumi
Ganca
(Azerbaijan)
Source: Booz & Company Analysis
Booz & Company
November 2008
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77
Azerbaijan
Aqtau
(Kazakhstan)
Rustavi
(Georgia)
Ganja
Sumgait
Mingacevir
Baku
Turkmenbashi
(Turkmenistan)
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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Turkmenistan
Urganch
(Uzbekistan)
Tashauz
Bukhara
(Uzbekistan)
Baku Turkmenbashi
Charjew
Ashgabat
Mary
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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Uzbekistan
Urganch
Nukus
Tashauz
(Turkmenistan)
Tashkent
Namangan
Andijon
Farghona
Bukhara
Charjev
(Turkmenistan)
Qarshi
Khujand
(Tajikistan)
Osh
(Kyrgyzstan)
Samarqand
Source: Booz & Company Analysis
Booz & Company
November 2008
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Kyrgyzstan
Almaty
(Kazakhstan)
Bishkek
Calalabad
Farghona
(Uzbekistan)
Naryn
Osh
Source: Booz & Company Analysis
Booz & Company
November 2008
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81
Kazakhstan
Qostanay
Pavlodar
Astana
Aqtobe
Oral
Ulanbataar
(Mongolia)
Semey
Qaraghandy
Arqalyk
Uryl
Atyrau
Kulsary
Ayagoz
Turkistan
Aqtau
Baku
Almaty
Taraz
Shymkent
Bishkek
(Kyrgyzstan)
Source: Booz & Company Analysis
Booz & Company
November 2008
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Tajikistan
Uzbekistan
(Tashkent)
Khujand
Ura Tyube
Dushanbe
Kulop
Kurgan Tyube
Kunduz
(Afghanistan)
Source: Booz & Company Analysis
Booz & Company
November 2008
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Afghanistan
Kurgan Tyube
(Tajikistan)
Kunduz
Mazar-e
Sharif
Mary
(Turkmenistan)
Kabul
Herat
Jalalabad
Peshawar
(Pakistan)
Kandahar
Quetta
(Pakistan)
Source: Booz & Company Analysis
Booz & Company
November 2008
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Pakistan
Jalalabad
(Afghanistan)
Islamabad
Peshawar
Kandahar
(Afghanistan)
Multan
Karachi
Booz & Company
November 2008
Azerbaijan Regional Data
Highway_081107_GU.ppt
Gujranwala
Lahore
Faisalabad
Bahawalpur
Jacobabad
Source: Booz & Company Analysis
Rawalpindi
Sargodha
Quetta
New Delhi
(India)
Hyderabad
Submarine
cables
Prepared for MCIT
85
Mongolia
Uryl
(Kazakhstan)
Russia
Choybalsan
Ulanbataar
China
Darhan
Source: Booz & Company Analysis
Booz & Company
November 2008
Azerbaijan Regional Data
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Iran
Baku
Bandar
e-Anzali
Resht
Karaj
Tehran
Esfahan
Shiraz
Bandar
Abbas
Submarine
cables
Source: Booz & Company Analysis
Booz & Company
November 2008
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Case Studies
Country Selection and Profiles
Sections of the Proposed Network
Further Supporting Slides
Booz & Company
November 2008
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88
Western governments offer e-government services with very high
online availability
e-Government Readiness Index
0,92
0,86
0,83
0,79
0,77
0,75
0,71
0,70
0,67
Background Information
World: 0.45
0,63
0,61
 e-Government Index is measured by
assessing the “Online Availability” ,
“Telecommunication Infrastructure” and
“Human Capital” of the countries
0,39
Sweden
U.S.A
S.Korea
U.K
Japan
Finland
Germany Singap.
Czech
Rep.
U.A.E
Malaysia
CIS
Region
e-Participation
1,00
0,98
0,93
0,93
0,89
0,80
World: 0.19
0,73
0,66
0,64
0,61
 e-Government Readiness Index shows
that western countries and some
important pacific countries are highly
developed about the issue
 e-Participation Index is measured by
considering e-Information, eConsultation and e-Decision Making of
citizens. e-Participation shows the
citizens’ influence on policymaking
supported by online tools.
0,61
 The Western and Pacific Countries are
far above the world average on both
indexes
0,09
United
States
S. Korea Denmark
France
Australia New Zel.
Estonia
Sweden
Singap.
Canada
Japan
CIS
Source: U.N e-Government Survey 2008
Booz & Company
November 2008
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Broadband content revenues are projected to grow strongly,
especially in E. Europe/Asian/Middle East regions
Broadband Content Revenues (bn. USD)
19.2 0.1
2.4
0.1
9.9
0.3
1.6
1.9
2.8
0.5
6.8
4.4
2.8
13.7
5.3
2.2
4.2
6.6
3.2
2007
2008
2009
2010
2011
MEA
74%
3.2
0.5
Asia-Pacific 89%
China-India 90%
4.1
E. Europe
0.6
W. Europe
5.9
4.4
69%
3.2
70%
L. America
8.3
8.5 0.1
97%
2.2
30%
N. America
1.2
1.6
2.0
2.4
2007
2008
2009
2010
7.0
0.9
0.7
2011
2012
MEA
21.8 0.3
1.8
IPTV
11.2 1.1 0.9
7.5
6.9
4.8
1.3
9.1
0.6
0.6
1.3
2.2
3.5
4.9
2007
2008
2009
2010
2011
MEA
7.0
2012
12.7 0.1
Asia-Pacific 50%
1.4
47%
China-India 90%
43%
10.5
8.7
14.4
6.9
0.1
MEA
52%
3.8
Asia-Pacific
8%
3.5
China-India
28%
0.1
E. Europe
57%
5.0
W. Europe
26%
3.5
2.8
0.1
W. Europe
L. America
0.3
2.6
16.4
70%
E. Europe
CAGR
170%
4.3
0.2
L. America
51%
62%
3.7
N. America
17%
2012
N. America
CAGR
1.7
2.2
2.8
3.2
0.1
3.4
2007
2008
2009
2010
2011
Online Games
0.2
1.6
15.6
32%
Asia-Pacific 74%
0.1
0.8
China-India
0.5
87%
0.2
0.3
3.2
35%
E. Europe
2.7
0.2 W. Europe 89%
0.1
L. America
21%
3.2
2.7
N. America
CAGR
2012
89%
Broadband Music
Video-on-Demand
Total market of
65+ bn USD in 2012
(~40% CAGR)
CAGR
Source: Ovum
Booz & Company
November 2008
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90
There is a clear gap in connectivity between the strong economies
of Western Europe and Asia
Telecommunication Services Penetration (2007, %)
128.36
129.57
119.30
118.47
119.55
113.73
110.50
90.20
87.86
82.77
83.88
81.62
Digital Divide in
Eurasia
60.38
55.43
Fixed
50.78
43.13
Mobile
49.57
42.31
40.47
38.43
41.19
40.04
27.51
26.55
22.47
Internet
34.11
34.34
28.81
30.57
28.28
30.80
30.11
24.59
25.55
27.83
19.98
17.28
15.95
12.00
6.09
7.37
Sweden
Norway
U.K
Czech
Rep.
Bulgaria
13.85
2.30 6.74
6.41
6.26
Turkey
12.47
2.03
1.73
Russia
Ukraine
1.06
20.99
18.56
9.27
14.81
0.03
Georgia Azerbaija
n
0.15
0.03
Uzbek.
0.05
3.90
2.14
0.08
Pakistan
11.31
9.07 3.37
0.42
Kyrgyz.
0.27
1.15
India
2.43
Kazakh.
29.44
16.37
5.00
5.15
China
Malaysia
Broadband
Japan
S.Korea
Source: ITU
Booz & Company
November 2008
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In today’s fiber network deployments, DWDM appears as the most
advanced technology, virtually providing unlimited capacity
APPENDIX
Traditional Capacity Expansions
DWDM Technology
Adding More Fiber
600 Mbps
Time Division Multiplexing
2,5 Gbps
DWDM
STM-4
155 Mbps
STM-16
2,5 Gbps
10 Gbps
STM-64
10 Gbps
 Size of transport pipe dictated by bit rate
 Limited capacity growth potential
 Growth accomplished through infrastructure upgrades,
by adding fibers to the system
N x 100 Gbps




Size of transport pipe independent of bit rate
Virtually unlimited capacity growth potential
Growth accomplished within established infrastructure
Optimum solution to keep pace with business growth
Advantages of DWDM
 Further increase of a factor of an optical fiber’s frequency potential
 Excellent scalability — increase of a total network speed by means of adding new spectral channels with no need of all
main modules replacement
 Less costly in the long run because increased fiber capacity is automatically available; don't have to upgrade all the time
 Independence from data transfer protocol — technological “transparency” allowing to transfer via optical link the traffic of
any network type
 Compliance with the Ethernet, Gigabit Ethernet and 10 GE families of technologies
Booz & Company
November 2008
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Long distance connectivity (esp. in countries with little or no
infrastructure competition) is a fundamental factor for high prices
Estimated Price comparison long
distance connectivity [USD per GB]
5.0
Indicative comparison Marketing models are different
in free capacity world and
limited capacity world
■ Volume-based long distance pricing
limits flexibility for penetration driving
tariffs like flat pricing of broadband
access
0.1
Free Capacity World
Pricing models
Benchmark Restricted
Capacity World
■ Between USD 45 to USD 3 per km for 10 Gbps
wavelength lease per month
■ Corresponding transfer volume estimate of approx. 15
M. GB per annum
■ Corresponding cost of 0,1 USD per GB as upper
bound
■ Benchmark countries with no free capacity market
charged an estimated min of. 5 USD per GB(1)
■ Even at rather low usage levels of 1-2
GB download volume per month, a “flat
rate” would cost approx. 10 USD just for
long distance interconnection
■ Additional cost for local access,
customer premise equipment not even
yet considered
1)
10 cent peering cost not considered
Source: Booz & Company analysis
Booz & Company
November 2008
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4
How should it be managed?
Case Study: The operating model for INMARSAT was formed
based on thorough discussions and negotiations
Ownership and
Share/Cost Allocation
Legal Basis
Convention
Negotiation Experiences
Operating
Agreement
• Between
State
“Parties”
• Between
telecom
entities
public or
private (one
per Party)
called
“Signatories”
14.2
9.9
7.9
7.0
3.4
2.9
2.9
2.9
2.9
2.6
2.0
2.0
1.9
1.7
1.7
1.7
1.7
1.7
1.7
1.2
0.6
0.6
0.6
0.3
0.1
0.1
0.05
0.05
Governance & Decision
Mechanisms
23.5
• Initial investment shares
had to be determined
through negotiations at the
Conference, since
Signatories’ utilization of
the space segment could
Total:
not be known in advance
100%
• It was agreed that initial
shares should reflect
expected usage. The
delegations made bids
based on their own
estimates
Assembly
Council
Directorate
• Formed of “Parties”
• One state one vote
• General policy matters and
the long term objectives
• Formed of “Signatories”
• Voting rights linked to
investment shares
• Financial, operational,
technical and
administrative matters
• In the end, it was decided that States could transfer • Small investors were accommodated to a certain extent by the
all financial and operational functions, responsibilities adoption of a large Council (22 Representatives) and by
specifying that four of the 22 representatives be elected to
and liabilities in the organization to so-called
ensure just geographical representation, with due regard to the
“designated entities“
interests of the developing countries
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•Several decisions with relevance
to key processes taken during
conferences prior to establishment
i.e:
• Liability, arbitration, privileges
and immunities
• Procurement policy
• Financial principles
• The relation to other
(competing) space segments
• Official language to be used
• Executive body of the
organization
• US stated that it was impossible for its government • US point of view, supported by the large investors of the
European camp, was that the main power of the Organization
to participate in a commercial organization -it had to
should be vested in the Council and not in the Assembly
be through a private commercial company
• The US view was supported by some countries, but • Conversely, the small investors wanted the Assembly to have at
least some real power
the majority rejected the complicated arrangement
Booz & Company
November 2008
Key Processes
• Some delegations wanted to stress
that the only basis for INMARSAT’s
operations should be “accepted
commercial principles”
• Others disagreed with this being the
only basis. The resulting compromise
was that INMARSAT shall operate on
a sound economic and financial basis
“having regard to” accepted
commercial principles
94
2
How can economic viability be ensured?
The infrastructure investment can offer services ranging from dark
fiber through to VAS – PoP connectivity as most relevant service
End-Users
Key Customers
Supply/Service Models
 Provision of additional Value Added
Service such as VPN, Firewall
 Too “sophisticated” for a new
infrastructure investment, focus should
first be on providing connectivity, then
VAS
Additional
VAS
Customer
Demand
User Demand
Estimated Int’l Bandwidth
Demand in Selected Countries
(Gbps)
8,655
■ Telecom Operators
(Fixed and Mobile)
Focus of the Business Case
■ ISPs
■ Large Enterprises
4,014
Leasing Dark
Fiber
1,713
46
PoP
Connectivity
 Entity deploys equipment to provide services
e.g., DWDM
 Priced according to bandwidth and distance
 Entity manages and maintains the network
 Most feasible service for participating
countries
505
2008 2009 2010 2011 2012
 Customers deploy own equipment
 Usually least costly option for intense
bandwidths, however most complex
 Business model for highly
competitive markets where there is
over supply (not assumed
feasible/relevant for the new network)
Source: Booz & Company analysis
Booz & Company
November 2008
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2
How can economic viability be ensured?
Low Take Up
Base Case
High Take Up
The high level business case indicates a payback within 3 to 8 years,
dependent on the broadband take up in the region
Cumulative Revenues and Costs (mn USD)
1,500
Revenues
1,000
Capex and Opex
500
Payback: 3-4 years
125
0
2009
800
2010
2011
2012
2013
2014
2015
2016
2017Revenues
Base case:
600
Capex and Opex
Payback: 4-5 years
400
200
125
0
2009
800
2010
2011
2012
2013
2014
600
2015
2016
Payback: 7-8 years
400
200
High take up of broadband:
Subscriber penetration
reaching 6%-15% by 2012 in
the short-listed countries
(dependent on per capita GDP
levels)
2017
Revenues
Capex and Opex
125
0
2009
2010
2011
2012
2013
2014
2015
2016
Subscriber penetration
reaching 4%-9% by 2012 in the
short-listed countries
Low take up of broadband:
Subscriber penetration
reaching 2%-5% by 2012 in the
short-listed countries
2017
Note:
Does not include local access – Business Case will depend strongly on local access component for various participating countries
Source: Booz & Company Analysis
Booz & Company
November 2008
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96
2
How can economic viability be ensured?
Low Take Up
Base Case
High Take Up
The high level business case indicates a payback within 3 to 8 years,
dependent on the broadband take up in the region
Cumulative Revenues and Costs (mn USD)
1,500
Revenues
REVENUES
1,000
Capex and Opex
500
Payback: 3-4 years
125
0
2009
800
2010
2011
2012
2013
2014
2015
2016
2017Revenues
Capex and Opex
Payback: 4-5 years
400
2010
2011
2012
2013
2014
2015
2016
Payback: 7-8 years
400
2017
Revenues
Capex and Opex
125
0
2009
 Volume Business
– Pricing: 0.1 USD per GB
 O&M costs: 10% of capex
600
200
 Bandwidth Business
– Pricing: 45 USD /10GB /km
– Leasing: Avg. 3,000 km
COSTS
125
0
2009
800
 40% of the region’s total bandwidth
requirement will be supplied by the
consortium network
 90% of the business will be on
bandwidth provision
600
200
Common Assumptions
2010
2011
2012
2013
2014
2015
2016
 Other operating costs (Sales &
Marketing, Administrative,
Overhead costs): 10% of revenues
 Access to international
connectivity:
– 60% intra-regional traffic
– Pricing: 10 USD /10GB /km
– Leasing: Avg 10,000 km
2017
Note:
Does not include local access – Business Case will depend strongly on local access component for various participating countries
Source: Booz & Company Analysis
Booz & Company
November 2008
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97