Transcript NBN - GMANews.TV

NATIONAL
BROADBAND NETWORK
PROJECT
Department of Transportation and
Communications
Issues
NBN will be a white elephant as it is unnecessary, overly
expensive and will be unutilized.
DOTC did not follow proper procedures and violated the
law on procurement.
NBN Supply Contract with ZTE is the most expensive of
the three proposals and is overpriced.
Policy and Legal Considerations
Two of the major principles underlying the NBN Project – intra and inter government connectivity
-- reduction of communication expenses
– have been in the statute books since 2000.
Policy and Legal Considerations
Required by the E-commerce Law
Sec. 40 of IRR, RA 8792
… install an electronic online network … to facilitate the
open, speedy and efficient electronic online transmission,
conveyance and use of electronic data messages or
documents amongst all government departments,
agencies, bureaus, offices down to the division level
and to the regional and provincial offices as
practicable as possible, government-owned and
controlled corporations, local government unit, other
public instrumentalities…
Policy and Legal Considerations
Required by the E-commerce Law
Sec. 41 of IRR, RA 8792
… lead to substantial reduction of cost, including, but
not limited to, leased lines, land, satellite and dial-up
telephone access, cheap broadband and wireless
accessibility by government departments, agencies,
bureaus, offices, government-owned and controlled
corporations, local government units, other public
instrumentalities and the general public, to include the
establishment of a government website portal and
domestic internet exchange system to facilitate strategic
access to government and amongst agencies thereof and
the general public and for the speedier flow of locally
generated internet traffic within the Philippines.
Policy and Legal Considerations
Mandated by EO 269, series of 2004
Sec. 4 Powers and Functions
(c) Establish and administer comprehensive and
integrated programs for ICT at the national, regional and
local levels
(d) Design and implement an integrated government
information and communications infrastructure
development program that will coordinate all existing
government entities, taking into account all their existing
plans, programs, proposals, software, hardware
inventory, and the installed systems and programs.
Policy and Legal Considerations
Under the RA 9184. Section 8.3.3
All central and regional offices of NGAs, GFIs, GOCCs,
SUCs, and city governments are mandated to use the GEPS and its available facilities by the end of 2003; all
district offices of NGAs and provincial governments, by
the end of 2004; all municipal offices of NGAs and all
municipal governments, by the end of 2005; and
barangays, by the end of 2006: Provided, however, that
baangays may produce through the municipal
governments.
Note: NGA –National Government Agencies
GFI – Government Financial Institutions
GOCC-Government Owned and Controlled Corporation
SUC-State Universities and Colleges
G-EPS – Government
Policy and Legal Considerations
It is It is consistent with MTPDP (2004-2020):
Developing digital infra to provide public access points for
delivery of e-Govt services.
Adoption of VoIP that could reduce cost of connectivity.
Rationalization of existing govt network infra to enable
sharing & interconnection of network resources.
It is included in the MTPIP & CIIP
Note : MTPDP – Medium Term Philippine Development Plan
MTPIP – Medium Term Public Investment Program
CIIP – Comprehensive and Integrated Infrastructure Program
VoIP – Voice Over Internet Protocol
Government Communications Expenditures
Approximately P4B in annual communications
expenses(2004 figures)
NGA = 1.9B; GOCC=1.1B; LGUs=.7
Projected to increase annually as more agencies get
connectivity and implement e-government initiatives
TYPICAL NETWORK FOR
GOVERNMENT AGENCIES BASED ON
INDIVIDUAL SUBSCRIPTION
Agency 2
Regional Office 2
Agency 2
Agency 2
Regional Office 1
Agency 1
Regional Office 16
TELCO 1
TELCO 2
TELCO 3
Provincial LGU 81
MUN. LGU Agency 2
1510Regional Office 16
MUN. LGU 1
Government Communications Set-up
Government communications consist of:
Voice only landlines
Mobile phones
Dial-up internet access
DSL lines
Leased lines
PABX and various LANs
Retail NDD and IDD
No data network
Each agency sources its own communication requirements
including its data center capacity.
None of the government agencies have (Virtual Private
Network) (VPN) except some GOCCs
Email and file transfers usually done through Yahoo or
Google mail.
SOLUTION
Given the foregoing, a more cost effective and
efficient solution is required where:
-
demand aggregation;
-
economies of scale; and,
-
policy and legal mandate can be complied with
NBN as the SOLUTION
The solution is to build and finance a fully integrated single IPbased platform nationwide broadband network to allow seamless
voice, data and video connectivity within and among national,
regional and local government agencies, including GOCCs and
CeCs.
Project Components
The NBN project has two (2) main components:
NBN Infrastructure
Network Transmission Backbone
WiMAX Network Cluster (last mile distribution)
IP Core Network
Integrated Data Center
Network Support & Management Subsystems
Network Application Systems/Services
VoIP System
Intranet capacity
Internet access
Video Conferencing System
Project Deliverables
•
•
•
•
•
•
•
•
Integrated Data Center-Network Operation Center with
Mirror/Back-up Site
300 Microwave Backbone Stations
30 IP MPLS VPN Network Nodes
300 base stations
25,844 CPEs and IAD/VoIP Phone
VOIP Application
Video Conferencing Application
Managed Services for Operation/Maintenance
and Training
IP – Internet Protocol
MPLS – Multi Protocol Layer Switching
VPN – Virtual Private Network
IAD – Integrated Access Device
CPE – Customer Premise Equipment
TELOF Network (After Upgrading)
Network
• SDH / Microwave Transmission
• Better bandwidth, capacity and
performance
• 622M/155M transmission
• More service interfaces
• STM-1, POS, Fast Ethernet, E3, T3,
E1, T1, etc.
• Better broadband IP network support
• Centralized network management
• Higher availability and reliability
• 1+1 and N+1 redundancy
protection
• State of art IP backbone
• Broadband services support
• Data, voice, video
• MPLS VPN support
• easy expand to NGAs, LGUs,
communities, SMEs, schools
• IPv6 support
• Easy interconnection with commercial
IP network / Internet
• Support DSL/broadband wireless
access
• Advanced WiMAX wireless network
• Compared with Wi-Fi, 3G, DSL, dial-up
• better coverage, better
performance, better security, lower
TCO
Project Cost and Financing
Item
Loan Proceeds from the PROC
GOP Counterpart
TOTAL
Cost (USD M )
329
0
329
Loan Terms:
20-year repayment inclusive of 5-year grace period
Loan interest is at a maximum of 3% p.a.
Why Government?
Primarily for Costs Reasons
Whether government pays its communications
expenses annually or capitalizes it thru NBN, it will still
be government who will pay. The challenge is to
determine which is more cost effective.
Capacity of NBN if sourced from private providers will
be a multiple of the 4B present expenditures.
Why Government? Primarily for Costs Reasons
•
990 M in annual amortization vs. 4B in annual
expenditures (consider as well interest cost of 3%
for NBN as opposed to Tbond rates for GAA
sourced annual expenditures)
•
The benefits are even greater considering the 5
year grace period when no amortization is required
•
The difference will be more pronounced in the
future as government will have to spend more for
additional capacity.
•
Projected O&M of 1B is offset by present
government expenditure for TELOF
Why Government? For other reasons as well
1.
Internal communications should be a core
competence of government considering its size
and the role communications play in the delivery
of services.
2.
Internal government communications should
remain under the control of accountable
government entities.
3.
Internal government information and data should
remain under the control and possession of
accountable government agencies.
Other Unquantifiable Project Benefits
It will minimize paper transactions.
As an organization, government will become more
efficient.
Government communications will become more secure.
Adoption of technology tends to have a positive effect
on work attitude and productivity.
Other Unquantifiable Project Benefits
It is a necessary first step to the implementation of
government’s enterprise architecture because:
It will serve a common information pipeline for
government.
It will marshal the IT resources of the government.
It will avoid duplication of systems and host all egovernment applications.
It will optimize and rationalize use of existing
government legacy telecom infrastructure.
Why not the private telecom sector
In the first place, NBN will be a pure government network
and for government’s use only as allowed by Republic
Act 7925.
The issues of costs, communications and data security
as earlier discussed.
More importantly, NBN will allow the private carriers to
focus on their universal access obligations considering
the underserved and unserved areas in the country.
NBN will partner with the Private Telecom
Sector
•
As the NBN is a fixed network and has no mobile
component by design, government will continue to
source its mobile telephone requirements from the
private mobile carriers.
•
Internet access will still be sourced from the private
sector but with NBN, the sourcing will be on a
wholesale basis as opposed to the existing retail
pricing.
•
IDD services will still be sourced from the private
sector but with NBN, the sourcing will be on a
wholesale IDD VOIP basis instead of retail circuit
pricing.
•
Redundancy and back-up requirements will be
sourced from the private sector.
Why not Arescom?
Consortium is composed of Arescom, PTNet and
Hangcom.
Proposal was a government to government transaction
to set up a satellite based broadband network for DILG.
Consortium proposed to charge USD 135M for 21 WiMax
base stations and 83 CPEs and a satellite hub station.
Transaction to be financed supposedly by a US Ex-Im
Bank loan for a 10 year term at 6% interest.
Why not Arescom?
Consortium has no experience in telecom system
integration nor does it have experience in the
deployment of broadband networks.
It will use an outdated and expensive to maintain
backbone technology – satellite and its last-mile
coverage is limited to 21 locations.
It has no managed services component nor provision for
extensive training and technology transfer.
Loan terms are neither concessional not beneficial. As a
supposed g2g transaction, it does not have the
endorsement of the US government.
Why not Arescom?
So, other than reasons of the absence of a track record
in telecoms integration experience, use of inappropriate
and expensive to maintain technology, single user
design, a very limited geographical coverage, a more
limited last mile provision, no significant training or
technology transfer aspect, near commercial loan terms
and lack of US government endorsement, there is still
the issue of cost --If the costing and specifications of the Arescom
proposal are extrapolated to national coverage with
national last mile connectivity to all govt offices, the
NBN if undertaken by Arescom would cost about USD
1B.
Why not Amsterdam Holdings Inc.?
AHI submitted an unsolicited BOO proposal to set up a
broadband network with government as its anchor
tenant.
At a total project cost of USD 240M, AHI proposes a
predominantly mobile network consisting of 87 fixed
base stations and 500 mobile stations.
In exchange for an Executive Performance Undertaking,
AHI will give government 25% discount on telecom
services it will get from AHI.
Why not Amsterdam Holdings Inc.?
Under BOT Law, unsolicited proposal not allowed for
this project as it is a priority project under MTPDP.
Assuming that the project can be done under BOT, the
issues that has to be address are:
• Proponent is a holding company with paid-up capital
of PhP 625,000.00 increased (reportedly) to PhP 11M.
• Proponent has no firm commitments from equity or
debt investors.
• Proponent has no telecom experience and does not
have verifiable technology partners.
• As it intends to provide services to the public, it does
not have a telecom franchise nor a franchised partner.
Why not Amsterdam Holdings Inc.?
Proposed network coverage is not national in scope but
only up to 3rd class municipalities. Network configuration
is geared more towards commercial operations thus
concentration in urban areas instead of government
requirements where need is most pronounced in the 4th
to 6th class municipalities.
Constitutes unfair competition and undue advantage as
AHI will leverage its government contract to raise funds
and enter the private telecom market to the detriment of
existing private telecom carriers.
Commercial imperatives not always consistent with
government mission.
Why not Amsterdam Holdings Inc.?
The use of predominantly mobile technology ensures
less cost effective solutions for fixed applications.
Network design and specifications are not optimized for
government’s intranet with its fixed and bandwidth
requirements.
Risks abound that there will be no government
broadband network because of the following
contingencies:
AHI will not be able to raise funds.
AHI will not be able to build their network in time.
AHI will not be able to provide the services required.
AHI will not be able to afford the 25% discount.
As a start-up, if AHI fails, then what.
Why not Amsterdam Holdings Inc.?
While the promised 25% discount for services to
government is tantalizing, it is highly unrealistic.
Consider the following:
Its initial debt to equity ratio will be 11:1.
Debt will be on a commercial basis
Financials do not include O&M nor working capital.
In a competitive market, user acquisition costs and
investment returns are not factored in.
Given the above, where will AHI get the money to
subsidize government?
Thus, if AHI BOO proposal is approved, renegotiation on
pricing in the future is inevitable. If AHI, as a start-up
goes out of business, then What?
Why ZTE?
ZTE was nominated by the Chinese Government in
consideration of the concessional loan.
The network coverage is truly national in scope and the
technology and specifications appropriate for a
government broadband network.
Pricing is reasonable and within industry range. In fact,
considering network coverage and specifications, ZTE’s
proposal is the cheapest of the three proposals.
ZTE is a recognized player in telecoms and telecoms
system integration.
Comparative Evaluation of the NBN Proposals
Proponent
Amsterdam
Holdings
Incorporated
China Government
through ZTE
ARESCOM
Cost vs.
Deliverables
US $ 240 M
87 Base Stations
500 Cell Sites
US $ 329 M
300 Backbone
Stations
30 IPMLS VPN
Network Nodes
300 Base Stations
25,844 CPEs with
IAD/VOIP Terminals
1 IDC/NOC with back
up.
18 Months Managed
Services & Trainings
US $ 135 M
21 Base Stations
83 CPEs
Satellite Central
Hub Station
Note: Government will have
to buy or rent equipment
forward of the Wireless
Service Points of ORION.
Cost to Cover
the same
requirement
using the total
cost of each
proposal
US$ 562M
US$ 329M
US$1B
NBN Approval Process
ZTE Corporation, the NBN Project proponent,
submitted their proposal August 2006.
After the appropriate review and evaluation, the
CICT endorsed the NBN Project proposal to NEDA
for approval.
PROC thru Chinese Ambassador communicated
their offer to support NBN Project and nominated
ZTE as prime contractor.
After the appropriate review and evaluation, the
DOTC endorsed the NBN Project proposal to NEDA
for approval.
NBN Approval Process
The NEDA Investment Coordination Committee
reviewed and evaluated the NBN Project proposal
and endorsed it to the NEDA Board for approval.
The NEDA Board approved ZTE Corporation’s NBN
Project proposal.
NEDA Secretary Neri acting under authority of the
NEDA Board accepted the PROC Offer.
DOTC signed NBN Supply Agreement with ZTE
conditioned on favorable DOJ opinion and DOF
execution of Loan Agreement with China Ex-Im
Bank.
NBN Approval Process
DOJ issued favorable opinion last 26 July 2007.
RP-PROC NBN Loan Agreement in process.
Summary Responses to Issues Raised
NBN will NOT be a white elephant as it has been
declared necessary by law. Neither is it overly
expensive as cost savings will in fact be realized. Nor
will it be unutilized as it is a government operational
requirement.
DOTC strictly followed proper procedures and
complied with the law on procurement.
NBN Supply Contract with ZTE is the least expensive
of the three proposals and the most advantageous to
the government. It is reasonably priced.
Thank you!