Transcript Public Private Partnerships in Telecomunications

Public Private
Partnerships in
Telecomunications
Infrastructure
Mark Williams
Senior Economist
Global Information and Communications Technologies Group
World Bank
Why?
Where?
How?
Why?
45.0
40.0
35.0
US$bn
30.0
25.0
20.0
15.0
10.0
5.0
0.0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa
South Asia
Sub-Saharan Africa
*Excludes China
Investment into privately-owned
operators has driven network
expansion
100%
% population coverage
90%
99%
91%
86%
90%
80%
70%
60%
67%
56%
50%
40%
30%
20%
10%
21%
8%
0%
1999
2001
2003
LIC
LMC
2005
UMC
HIC
2007
Network coverage has expanded
dramatically
2009

Evolving policy objectives
◦ Voice coverage is growing and access is increasing
◦ 10 years ago, broadband was seen as a luxury –
increasingly seen as a necessity

Search for ubiquitous basic network coverage
◦ Even in optimum market and regulatory conditions, 10%
of Africa’s population will remain beyond networks
(AICD).
◦ Same likely in other regions
◦ Greater gap for broadband – upgrading rural exchanges
for broadband, upgrading backhaul

Limitations on broadband speeds – mainly in
access networks
◦ 2-50Mbs using xDSL/Cable modem
◦ Fiber to the customer premises
What’s the problem ?
More competition, better regulation
Access regime for incumbent networks
Rights-of-way
Public infrastructure (electricity, pipelines)
Common passive infrastructure
Public co-investment (PPPs)
Supply-side
Broadband
network
investment
Public demand aggregation
Training, education and computer literacy
Demand-side
PPPs – one policy among many
Where?

Urban vs Rural
◦ Sweden, France, USA, Australia – rural
connectivity
◦ Singapore - urban

Backbone vs Access vs bundled
◦ Backbone – Australia
◦ Access – Singapore
◦ Bundled - USA
Range of approaches
How?

Problem

Strategy
◦ Pre-1999, Ireland dependent on international fiber-optic
cable that passed via the UK (Cable and Wireless)
◦ Paying high prices for international connectivity – stifling
local IT industry
◦ Attract new cables through financial incentives from
government, guarantee access through public
intervention as reseller
◦ Industrial Development Authority (IDA) under the
Ministry of Public Enterprise entered into $80m
agreement with Global Crossing
◦ Global Crossing owns and operates cable
◦ IDA acts as anchor client and resells to domestic market
at non-discriminatory terms
Ireland – submarine fiber-optic
cable

Problem

Strategy
◦ High levels of broadband but no operator willing to invest
in fiber-to-the-home so top-speeds limited
◦ Government willing to invest but wanted to maintain
competition
◦ Public financial support for core infrastructure through
PPP
◦ Competition runs on top of government-financed
infrastructure
◦ Competitive tendering for PPP contracts. Owned and
operated by private sector
◦ Split into two layers – passive (ducting and dark-fiber)
and active (IP transport)
◦ Operators were required to form separate
companies/consortia to bid to ensure non-discrimination
Singapore – fiber-to-the-home
access network

Problem

Strategy
◦ Fully liberalized market but no competition to Telstra on
small-town/rural routes
◦ Limits to regulated access to Telstra’s network
◦ Create competition to Telstra on 6 priority up-country
routes (6000km, 100 locations) through subsidizing new
entrant (up to A$250).
◦ Routes selected by government and then contracts
tendered.
◦ Winner required to provide on a non-discriminatory basis
– enforced through PPP contract. Operation for 5 years
◦ Operator required to provide range of wholesale services
(Managed wavelength, Carrier managed leased line
services (SDH), Carrier managed Ethernet,
interconnection)
◦ Contract and awarded to Nextgen (mid 2009).
Australia – rural backbone
Australia – rural backbone
World Bank experience of PPPs in
telecoms infrastructure

Problem
◦ No submarine fiber along the east coast of Africa
◦ Desire to avoid cartel approach of SAT-3

Strategy
◦ DFIs finance new cable (EASSy).
◦ Total project cost = $263m. $70million DFI debt
financing
◦ Privately-owned (some SOEs). No direct government role
◦ Regulatory controls built into cable consortium contracts
◦ Internal competition between operators on EASSY
◦ Target subsidies at smaller operators to give them access
to cable at optimal prices
◦ Open-access and internal competition created through
WB role in negotiation of consortium agreement and DFI
loan covenants
EASSy
EASSy

Conclusions
◦ Successfully closed project and stimulated development
of other cables
◦ Role of WB and DFIs crucial in initial design and
agreements
◦ Role of DFIs essential in forcing open-access conditions opposed by all shareholders
◦ Opposition from governments after exclusion from
projects
◦ Regulators incapable of successfully regulating
submarine cables
◦ Regulation through contract is a feasible alternative
◦ Long-run driver of success will be competition within
EASSy and with other cables
◦ Private-ownership and strong sponsor essential
◦ DFIs cause delays…
EASSy

Problem

Strategy
◦ All domestic network infrastructure is wireless
◦ Limited broadband
◦ Government co-finances development of national
backbone network through WB project
◦ Government finance is through subsidy, no public
ownership
◦ Operators form company to develop and operate network
◦ WB project finances studies and designs
◦ Operators invest equity, government injects subsidy/prepayment
◦ Construction and operation governed by PPP contracts
and license/concession agreement
RCIP Burundi
RCIP
Burundi

Conclusions
◦ National fiber optic network would not be feasible
without government subsidy
◦ Negotiated (ie non-competitive) process creates
problems – financing, phasing
◦ Difficulties in getting cooperation between
competitors. However, cooperative solution in which
users are owners allows self-regulation
◦ Opportunities for corruption in procurement
◦ WB procurement process creates delays but helps
with transparency and provides neutral, commonly
acceptable process for management
◦ Requires high-calibre legal and financial advisory
support
RCIP Burundi

Problem
◦ Land-locked countries needing access to
coastal landing stations

Strategy
◦ Stimulate investment through aggregating
demand (anchor tenant)
◦ Competitive tender to supply fiber-based
connection to submarine cables
◦ Long-term supply contract to government.
Operator acts as wholesaler in the market
◦ No government ownership in project
RCIP Rwanda and Malawi
Alternative approaches
Nigeria –
infrastructure
competition between
backbone networks
Non profitable
routes
Competitive
private-sector
routes
Kenya – mix
of public and
private
Zambia – 2 national fiber
backbone networks
Zambia – 2 national fiber
backbone networks
Government recently
announced it is giving
control of ZESCO’s fiber
to Zamtel to create
monopoly in order to
raise privatization sale
value of Zamtel
Zambia – 2 national fiber
backbone networks
MTN – investing in fiber backbone for
domestic backhaul and for regional transit
 LAPGreen (ex incumbent) has metro fiber
and domestic backbone. Linked to
business in Uganda
 KDN/Altech – regional backbone network
connecting Rwanda to Mombasa

Rwanda – three private backbone
networks
Rwanda – government has built
fourth national backbone network
c. $100m total cost
Designed for government traffic
100% government-owned. Plans
to introduce private partner for
management/investment
Additional ducting included for
private operators
Rwanda – government has built
fourth national backbone network

Design/policy
◦ Target the PPP at the problem – rural ?
◦ PPPs only work if they are part of the correct
policy environment
◦ Government appetite for PPPs is very important –
can’t force a PPP on a government if they don’t
want to do it.
◦ Private-sector is very suspicious of governments
◦ Strong political-economy forces: “national
assets”, protecting SOEs, trophy projects, offbudget financing
◦ Public investment may be storing up problems
for the future – Zambia, Tanzania, Republic of
Congo, Kenya ?
What have we learned ?

PPP structure
◦ Strong private financial and operational interest
in the project is essential. Need private sector to
validate technical design.
◦ Ability of governments to regulate is very low so
any solution that depends on regulator is likely to
fail. Better to have structural solution (e.g.
competition on EASSy).
◦ Competitive tendering process have advantages
over negotiated arrangements but operation will
be more dependent on regulatory supervision.
◦ Government equity investment (e.g. Kenya
TEAMS)?
What have we learned ?

Implementation
◦ Involvement of WB/DFI systems provides
reassurance to private operators.
◦ WB procurement systems are not ideally suited
for PPPs.
◦ Need high-level advisory services for design,
running tenders and negotiating contracts.
◦ Governments and WB are slow. The market
moves very quickly.
◦ Corruption is a problem.
What have we learned ?