Transcript File - Palau Chamber of Commerce

Palau Chamber of Commerce
Fiber Optic Submarine Cable Project
MicroPal Presentation
Pramod Thummala
(Rhinehart Silas)
(Keobel Sakuma)
May 12, 2015
CORE IDEAS
• Cable Is Critical For Palau
(1) Effective Government
(2) E-commerce / Banking
(3) E-health
(4) Education
(5) Tourism
• Only Room For One Cable
• Access For All:
(1) No Monopoly Power
(2) Regulated Rates / Non-Discriminatory Treatment of Service Providers
Desirable characteristics
of cable options
Capacity
CAPEX
OPEX
• Enough capacity to accommodate Palau’s demand for next 20 years
• Lower capital expenditures than alternatives
• Lower operating expenses than alternatives
Execution
risk
• Low execution risk based on consortium members reputation and
solid finances
Regulatory
risk
• Low regulatory risk based on ease of FCC approval for Guam cable
landing
Desirable governance characteristics of
future cable company
• No one service provider or subset of service providers
shall control the board of directors
• Efficient operation and maintenance
• Sale of wholesale cable capacity based on open access
principles - non-discrimination, transparent and costbased
To prevent submarine cable abuse /
monopoly position
Modern Telecom
Law
• Mandate cable
to sell capacity
under open
access principles
• Nondiscrimination
• Transparency
• Cost-based
Effective
Regulation
• Independent
competent
regulator with
power to
enforce open
access
regulations
Governance in
Submarine cable
• No single
telecom service
provider should
control the
board
• Board with
incentive on
having a well
functioning
cable company
How are subsea cables in developing markets governed
to ensure that public interest is served?
• Competitive constraints through multiple subsea cables – ideal, but only
possible in large markets
• Multiple competing service providers as owners—none with majority
shareholding – not an effective option where number of service providers
are few
• Robust open access regulation – non-discrimination, quality assurance,
cost-based pricing. This requires:
• appropriate telecom law is implemented
• adequate enforcement regime
• adequately staffed regulator
• State ownership of entity - (See World Bank/ADB funded projects in
Liberia, the Gambia, Solomon Islands, Tonga, etc.). Idea is not to retain
state-ownership in perpetuity, but to ensure adequate governance in the
short to medium term while regulatory regime is strengthened.
Comparing Ownership Options
Ownership Type
100% State Ownership
Pros
•
•
Majority State
Ownership
(or Golden Share)
•
•
•
•
Majority /
100% Private
Ownership
•
•
Cons
Ensures public interest
incorporated for all
decisions on operation
Prevents control by one or
two service providers
•
•
Reduces beneficial decisionmaking input from private actors
Eliminates opportunity to attract
private capital
Could lead to bureaucracy
Ensures public interest
reflected in all decisions
Prevents control by one or
two service providers
Private sector to have
input in decision-making
Allows private
participation, less debt
•
Limits private sector control
Ensures all aspects of
operation are on a
commercial basis with a
view to maximizing profit
Minimizes need for state
involvement for financing
•
In a monopoly or duopoly
market, could lead to results that
are not beneficial to society as a
whole (e.g., higher prices, access)
Forces reliance on legislative and
regulatory regime, and requires
adequate enforcement to ensure
results are in public interest
•
•
Amendments - Suggested
Amendment 1:
- ADB Loan Ratification (clarification)
Amendment 2:
- Public-Private Option (minority private ownership)
Amendment 3:
- Enough revenue to pay ADB Loan / OPEX
Amendment 4:
- Protection of Cable in Marine Areas
Amendment 5:
- Good faith effort to pass telecom law in future
Debt Sustainability Assessment
• The planned borrowing for the Submarine Cable Project can generate
enough revenues for the Belau Submarine Cable Corporation (BSCC) to
fulfill its financial obligations. It is thus highly unlikely to impose any debt
repayment burden on the Government who provides sovereign guarantee.
Estimated financial and economic internal rate of returns indicate the
profitability of the project.
• Debt Sustainability Assessment (DSA) was updated by incorporating the
planned borrowing for the Submarine Cable Project as a part of publicly
guaranteed debts. If fiscal adjustments, in particular the tax and tax
administration reforms, are not implemented in the next five years, and
the Submarine Cable project is implemented, Palau’s debt to GDP ratio will
deteriorate. However, even in this case, the level of debt to GDP ratio
would remain below the threshold of debt distress. Once the fiscal
adjustments are made, the debt to GDP ratio could decline constantly even
with the borrowing for the Submarine Cable Project.