The Economic Benefits to Indonesia of Early Harmonisation ... · and Assignment of the Digital Dividend to Mobile Indonesia report . 277967-03-Indonesia deck-12Feb13-EG-OSL-updated.pptx

The Economic Benefits to Indonesia of Early Harmonisation and Assignment of the Digital Dividend to Mobile Indonesia report

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277967-03-Indonesia deck-12Feb13-EG-OSL-updated.pptx 2

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Agenda

Chapter 1: Key recent developments

Chapter 2: Benefits of allocation to mobile

Chapter 3: Benefits of early harmonisation

Chapter 4: Implications of commitment to non-harmonised band

Chapter 5: Recommendations


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Strong and growing commitment to the APT proposed band plan in the 698-806 MHz range in the region

Note: Countries only include those specified by ITU as Region 3 Source: EIU country data, Government regulatory bodies of the respective countries

Stated intention

Committed

Population (M) 2,000

1,500

1,000

500

0 Not yet

committed

Committed to the band plan/stated intention to do so Stated intention to commit to the band plan

Population of countries that have committed/stated intention

exceeds 2B

Not committed to the band plan


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Additional comments on major countries in Asia-Pacific Backup

Committed Non-committed 1. Singapore White Spaces Pilot Group (Microsoft-led) Source: GSMA

Country Status Comments

Australia Auction date announced for April 2013 in full alignment with APT band plan

China Agrees to use the 700Mhz band for mobile, but not committed to a frequency option

India Has shown intention to follow the APT band plan but Government yet to make a formal announcement on the 700MHz auction

Indonesia Looking into allocating the 700MHz band (694-806MHz) for mobile broadband

Japan Awarded 3 licences totaling 2x30 MHz on 27 June, in alignment with the APT band plan

Malaysia Considers broadcasting on parts of the band ; Companies submitted bids for DTT

New Zealand 700MHz band allocation to mobile in alignment with APT band plan proposed to Cabinet in Oct 2012; Band to be cleared and available nationwide from Dec 2013

Papua New Guinea 2x22.5 MHz (the lower block) allocated to Digicell PNG in April 2012

Singapore Plans to commit, but concerned about potential interference with Malaysia; Regulators allowed SWSPG1 to trial mobile broadband within 700 MHz band

South Korea Will allocate 700MHz after switch over in Dec 2012 to LTE services

Taiwan Will auction off 9 blocks of 700 MHz band for mobile broadband at end of 2013

Thailand Announced allocation of 700 MHz band to mobile in May 2012; Approved key draft regulations for digital TV management plan

Stated intention to commit


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Indonesia 700 MHz band plan switchover may be delayed due to slow digital transition

Spectrum allocation to mobile may be delayed until 2018

Spectrum allocation to mobile may be postponed due to delay in digital switchover

• TV broadcasters reluctant to switch citing potential decline in viewers who would have to purchase decoders to receive digital broadcasts

Digital TV migration to be completed by 2018 • MCIT1 acknowledged the need to migrate in

order to keep up with global digital trend

However, government is attempting to accelerate migration

Launched initiatives to speed up the migration process by providing free set-top boxes

• MCIT proposed USD ~11-30M3 budget; but the Parliament delayed this in Sep 2012

• All new digital TV providers are required to commit to provide 1M free top-set boxes in total

Planned cooperation with China to develop Indonesian digital TV network technology

• Followed up to agreement in 2010 that China will supply digital broadcasting devices

1. Ministry of Communication and Information Technology 2. The International Telecommunication Union 3. 109M to 300M Indonesian rupiah Source: Press search

2012 2017 2018 2015

Simulcast Period (digital and analog TV will be transmitted together)

ITU mandate for all nations to migrate to digital

Indonesia's announced deadline for migration

3-year delay

All future permissions for digital TV only

"[China] has distributed 1.4B sets of set-top box decoders and 1.6B transmitters...and the cooperation will improve investment partnership between Indonesia and China..." – China Ministry of Industry and IT

"The technology of digital broadcasting from China is extremely advanced, and it is perfect to meet Indonesia's needs..." – Indonesian TV station

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Experiences shows subsidies can accelerate digital transition

Many countries successfully use subsidies to drive digital transition...

• Household Assistance Program1 spent USD 15.7M to provide decoders to 38K+ households by May 2011

• Satellite subsidy for black spot areas with household co-payments of ~USD 200

• Established "eco-points" program for digital TV purchases. Points can be exchanged for other products1

• Free set-top boxes distributed to low-income households

• Set-top boxes subsidy to low-income households (~USD 948K budget for ~6K households)

• Offer subsidies of USD 90 to each consumer who purchase set-top boxes

• Digital Switchover Help Scheme secured funding of USD 970M to install equipment esp. for older and disabled people

...including emerging countries, such as Mexico

Analog to digital TV transition was main obstacle faced during band clearance in Mexico

• Planned national analog switch-off on 31 Oct 2016

Government financial support can facilitate the transition

• ~USD 200 M estimated for Northern Mexico2

– ~USD 33 M estimated for Tijuana • Proceeds of sale of the spectrum can compensate for

investment of public funds • Recognized need for strong leadership and

coordinated action between stakeholders in managing migration

Japan

Italy

Germany

Australia

UK

• Total subsidy: USD 33M • Cover decoders, antennas,

installation costs and citizen education programs

• Subsidy per home: USD 132 • ~45% for decoders and

antennas

E.g. Tijuana (pilot city)

1. Store coupons, beer & food coupons, travel coupons, and an array of environmentally-friendly products and regional goods. 2. Program launched in 2009 with total budget in 3 successive cycles of USD 390M Note: All currencies converted to USD as of 1 Nov 2012 Source: GSMA Case studies for the award of the 700MHz/800MHz band, Japan Ministry of Internal Affairs and Communications, Press search

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Agenda







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1. Extending number of channels beyond today's analogue which will be switched over 2. E.g. WiFi, WiMAX Source: Expert interviews; BCG analysis

Military and other public use

Low-power and indoor Evaluation criteria

Productivity increase

Econ

omic

be

nefit

s

GDP impact

New jobs

Total socio-economic impact

Mobile broadband

Entrepreneurship

Infrastructure investment

Tax effects

Digital broadcast1

Fixed wireless internet2

Most likely alternative uses

No incremental benefit compared to baseline High incremental benefit compared to baseline

Less applicable to individual- or group specific services, and induce lower penetration

Mobile and broadcast most likely uses of 700Mhz band based on socio-economic impact and regional observations

Indicated/suggested allocation


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Study builds on rigorous cost-benefit analysis to estimate incremental adoption uplift from mobile broadband

Cost-benefit analysis of businesses and households

Baseline estimate for Internet penetration

Internet penetration

Uplift

2020 2014 2012 Including 700 MHz band allocated to mobile broadband Internet baseline

Inco

me

Household segments

Business segments

Costs

• Device • Subscription/

access

Benefits • Increased profits

for businesses • Increased

income/welfare for households

$

Subscribers

Demand increases over time as benefits and incomes grow

Costs decline over time

2020

Internet penetration

2014 2012

Rural Urban Service Agri

Manufacturing

Note: Figures are illustrative

Incremental effect of mobile broadband in 700 MHz band

Mobile broadband in 700 MHz band will increase benefits and reduce costs

• Greater coverage and lower service costs will improve accessibility

• Economic benefits from increased productivity and rate of adoption

• Significant social and economic benefits in rural areas


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Benefits of early IMT harmonisation modeled against DTT usage

Factor Assumptions base case

Roll-out timeline

Start: 2014 Full effect: 2015

Service cost decrease1

Highly penetrated: 6% Other countries 10%

Increase in rural needs benefit

First year impact: 5% Full effect: 10%

Increase in rural wants benefit


Business prod. gains


Agricultural prod. increase


Description

Estimate the benefit of early harmonisation on the APT 700 band in two different scenarios

• Harmonisation of mobile services • Harmonisation of broadcasting services

Benefits are assessed along four economic dimensions

• GDP effects • Government income • Job creation • Business creation

Early harmonisation of IMT services will serve as baseline against which alternative scenarios are measured

1. First year effect is 50% of stated effect


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Increase in subscriptions mainly driven by the rural population Allocating to IMT will increase internet subs. by 9% in Indonesia, and by 30% among rural users

Active Internet subscriptions1 [M] 60

40

20

0

43.1

+30%

Baseline

Incl. 700 band

2020

33.2 4.4

2013

8.8 8.8

2012

5.6 5.6

9.9

2019

38.5

28.9

9.6

2018

34.1

26.6

7.6

2017

30.5

24.3

6.3

2016

27.9

21.4

6.5

2015

24.5

17.3

7.3

2014

17.6

13.2

137 168 194 213 224 230 237 Total Internet subscriptions2 [M]

Assumed roll-out start

Assumed full effect

Rural

Active internet subscriptions1 [M] 150

100

50

0

127.6 +9%

Baseline

Incl. 700 band

2020

117.1

10.5

2019

118.7

108.5

10.2

2018

109.7

101.6

8.1

2017

102.4

95.6

6.8

2016

94.0

87.1

7.0

2015

85.1

77.4

7.7

2014

71.2

66.6

4.5

2013

56.6

56.6

2012

47.3

47.3

Total

1. Baseline calculated as Active Subscriptions with actual economic impact. For fixed line Internet, generally Users>Subscriptions, whereas for mobile internet generally Users < Subscriptions 2. Ovum estimates until 2015 for 3G and LTE subscriptions, dial-up and fixed broadband . For 2015-2020, a flattening incremental uptake is assumed 3. EIU estimates Source:: EIU; ITU; Ovum; BCG analysis

108 50

105 103 100 99 96 93 91 Rural population3 [M] 107 109


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Government revenues up US$ 9.4B

(NPV US$ 7.2B)

5

10

Incremental GDP [US$ B]

0 2020

9.3

2019

8.0

2018

6.7

2017

5.7

2016

4.7

2015

3.7

2014

0.9

Allocation to mobile will bring significant benefits for Indonesia GDP increase of US$ 30B NPV, US$ 7B in taxes, and 145K new businesses and 286K new jobs

1. Incl. new independent businesses as well as new departments/units/business areas within existing firms Note: NPV discounted by 4% for Indonesia Source: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

GDP increased US$ 39.1B 2014-2020 (NPV US$ 29.8B)

286K additional jobs created by 2020

145K new business activities by 20201

200

300

Cumulative new jobs [000]

0 2020

285.5

2019

229.7

2018

174.1

2017

131.8

2016

98.6

2015

65.5

2014

25.6

100

Cumulative new business activities [000]

0 2020

144.8

2019

115.6

2018

87.5

2017

65.9

2016

48.2

2015

30.4

2014

10.9

200

Incremental tax [US$ B]

0 2020

2.4

2019

2.0

2018

1.6

2017

1.2

2016

1.0

2015

0.9

2014

0.4

1

2

3

Broadcasting Mobile broadband


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Broadcast impact calculated with best-case assumptions, to ensure conservative estimates of mobile benefit

700 MHz band allows more TV channels...

Generating revenue across supply chain...

As well as broadcast jobs and taxes

Few spinoff effects to general economy • Existing public service channels

already provide wide range of educational content

• Special interest groups well served by cable/satellite

Generous assumptions on additional channels

• 25-35 additional channels are technically possible in most countries

• Possibility that channels may not be commercially viable deliberately excluded

Optimistic revenue assumptions: overall industry effect may be lower

• Additional channels will cannibalize existing offerings

• Marginal channels likely to be niche

Revenue of broadcast channels

Incremental channels have average industry revenue

Number of TV Channels

250

200

150

100

50

0 IPTV

Cable

Satellite Broadcast

Digital Terrestrial TV

With 700 MHz band

Without 700 MHz band


With 700 MHz band

Taxes Jobs

Illustrative

Illustrative Illustrative

Spectrum limitation


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(NPV US$ 0.7B)


4

3

2

1

0 2020

0.5

2019

0.5

2018

0.4

2017

0.4

2016

0.4

2015

0.4

2014

0.2

Allocation to DTT will have a smaller economic impact GDP increase with US$2B NPV, taxes with US$ 1B, with 0.1K new businesses and 2.1K new jobs



2.1K additional jobs created by 2020

0.1K new business activities by 20201

Cumulative new jobs [K]

60

40

20

0 2020

2.1

2019

2.1

2018

2.1

2017

2.1

2016

2.1

2015

2.1

2014

2.1

Cumulative new business activities [K]

50

0 2020

0.1

2019

0.1

2018

0.1

2017

0.1

2016

0.1

2015

0.1

2014

0.1

0.2

2020 0.0

Incremental tax [US$ B

2019

0.2

2018

0.2

2017

0.1

2016

0.1

2015

0.1

2014

0.1

1.0

0.5

Broadcasting


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(NPV US$ 6.5B)

Allocation of 700 MHz band to mobile will have significant incremental benefits over broadcasting in Indonesia





Cumulative new jobs [K]

300

200

100

0

2020

2.1

283.4

2019

2.1

227.6

2018

2.1

171.9

2017

2.1

129.7

2016

2.1

96.5

2015

2.1 63.4

2014

2.1

23.5

Cumulative new business activities [K]

200

0

2020

144.8

2019

115.6

2018

87.5

2017

65.9

2016

48.2

2015

30.4

2014

10.9

Incremental tax [US$ B]

3

2

1

0

2020

0.2

2.2

2019

0.2

1.8

2018

0.2

1.4

2017

0.1

1.1

2016

0.1

0.9

2015

0.1

0.7

2014

0.1

0.3

Broadcasting Mobile broadband

2014

0.2

0.7


10

5

0

2020

0.5

8.9

2019

0.5

7.5

2018

0.4

6.3

2017

0.4

5.3

2016

0.4

4.3

2015

0.4

3.4


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Agenda







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Delaying the decision would affect rollout and hence impact total benefits

Factor Assumption

Roll-out timeline1

Baseline roll-out: 2014 Delayed roll-out: 2016/18

Service cost decrease










Description

Estimate the opportunity cost of delaying the decision about harmonisation in two scenarios:

• Roll-out in 2016 relative to the early harmonisation baseline

• Roll-out in 2018 relative to the early harmonisation baseline

Opportunity cost is estimated along main socio-economic effects

• New business creation from entrepreneurship and ISP value chain

• Job creation associated with new businesses

• Incremental GDP from productivity increase and new business creation

• Government revenues from income tax from new employees, corporate tax and VAT 1. First year impact assumed half of full effect


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Delays will have major implications in Indonesia

Delaying the decision will have major impact on GDP ...

...and reduce number of jobs created

Incremental GDP by 2020 [US$ B]1

30

20

10

0

-16.9

-7.5

2018 roll-out

12.9

2016 roll-out

22.3

2014 roll-out

29.8

1. 2012 Net Present Value of lost GDP due to delay, assuming spectrum will be used analog broadcasting, and hence not for digital broadcasting or mobile Source: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

Jobs created in 2020 [K]

300

200

100

0

-152.3

-74.9

2018 roll-out

133.3

2016 roll-out

210.6

2014 roll-out

285.5

2.5B tax1 and 39K businesses lost with 2016 roll-out 4.7B tax1 and 79K businesses lost with 2018 roll-out


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Delays will have major implications for income and employment in Indonesia

Delaying the decision have major impact on short term GDP effects...

...and leave more people unemployed

Baseline (2014)

2018

2016


10

5

0 2020

9.3

2019

8.0

2018

6.7

2017

5.7

2016

4.7

2015

3.7

2014

0.9

0

-5

-10 2020 2019 2018 2017 2016

-3.5

2015

-3.7

2014

-0.9 -0.2 -0.2 -0.2 -0.3

0

-5

-10 2020 2019 2018

-5.1

2017

-5.7

2016

-4.7

2015

-3.7

2014

-0.9 -0.5 -0.5

Total loss (NPV)1

-16.9B

- 7.5B

Incremental jobs [000]

300

200

100

0 2020

285.5

2019

229.7

2018

174.1

2017

131.8

2016

98.6

2015

65.5

2014

25.6

0

-100

-200

-300 2020

-74.9

2019

-74.9

2018

-74.9

2017

-74.9

2016

-77.6

2015

-65.5

2014

-25.6

0

-100

-200

-300 2020

-152.3

2019

-152.3

2018

-155.7

2017

-131.8

2016

-98.6

2015

-65.5

2014

-25.6

1. 2012 Net Present Value of lost GDP due to delay, assuming spectrum will be used analog broadcasting, and hence not for digital broadcasting or mobile. Includes both direct and indirect effects. Source: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

Harmonisation

Incremental GDP loss [US$ B]

Incremental GDP loss [US$ B]

Incremental job loss [000]

Incremental job loss [000]

75K fewer jobs

152K fewer jobs

Backup

NPV: 29.8B


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Delaying roll-out implies a significant reduction in job creation over a multi-year horizon

2016 roll-out implies 470K man-years lost

2018 roll-out implies 782K man-years lost

Cumulative new jobs [000] 300

200

100

0 2020

211

286

2019

155

230

2018

99

174

2017

57

132

2016

21

99

2015

0

65

2014

0

26

Jobs not created

"Man-years" lost1

Note: a "man-year" refers to a job opening that exists for an entire year 1. Cumulative sum of all jobs lost due to delayed roll-out Source: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

Delayed roll-out Baseline

26 65 78 75 75 75 75

~470K

Backup

Cumulative new jobs [000] 300

200

100

0 2020

133

286

2019

77

230

2018

18

174

2017

0

132

2016

0

99

2015

0

65

2014

0

26

Delayed roll-out Baseline

26 65 99 132 156 152 152

~782K


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If signals directly interfere which each other on the same frequency, the signals risk either cancelling each other out, or one signal over-powers the other in the following cases:

• Signal overload occurs when signal from interference source 1 will be swamped so the signal cannot be transmitted

• Receiver is not able to distinguish the wanted signal from the unwanted signal Such interference will cause a reduction

in quality of the desired signal

DTT base station

Mobile base station

Both delay and non-harmonization impact neighboring countries through interference

Delayed or non-harmonized allocation will reduce quality of service

Neighboring countries can be directly affected within a range of´~200 km

Source: Ægis "UHF Technical Compatibility Issues"; Expert calls

Decision on DTT allocation may undermine desired effect of harmonisation in the region

130 km 180 km 70 km

18 km 220 km 24 km

650 m 6 km 900 m

From DTT

From cellular (base station)

From cellular (mobile station)

To DTT To cellular (base station)

To cellular (mobile station)

Separation distance matrix


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Delay will have severe impact on neighbours

Illustrative

Singapore b

• Singapore will not be able to use the 700-MHz band for LTE due to interference

Brunei c

• Brunei will not be able to use the 700-MHz band for LTE due to interference

Impact

Note: An 200 km interference zone assumed from Indonesian territories Source: Expert interviews, BCG analysis

Malaysia a

• Malaysia will potentially have interference from both Sumatra and Borneo

• Large parts of country directly affected, hence is likely to inhibit efficient roll-out nationwide

Papua New Guinea

d • Papua New Guinea will potentially have

interference with the Indonesian side • Large parts of country directly affected, hence is

likely to inhibit efficient roll-out nationwide

b c

d

a a

http://upload.wikimedia.org/wikipedia/commons/4/48/Flag_of_Singapore.svg

http://upload.wikimedia.org/wikipedia/commons/6/66/Flag_of_Malaysia.svg


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US$ 8-15B GDP lost 26-43K jobs lost

-0.2

2016

-7.5 -0.2

-3.7

-3.4

Singapore2 b

Brunei c

Papua New Guinea

d

1. Total NPV 2014-2020. Loss assessed by running the BCG socio-economic analysis model with delay scenarios for each country cluster . Malaysia modeled independently, Singapore and Brunei extrapolated from South Korea cluster model, and Papua New Guinea from India cluster model 2. Singapore assumed to enjoy no business and job creation given 100% urban population Source: BCG analysis

Neighbouring countries could lose US$ 8-15B GDP and 26-43K jobs if Indonesia delays switchover1

Malaysia a

-7.9

2018

-15.3 -0.4

-6.5

-0.5

2016

-26.1

-0.1

-23.8

-2.2 0.0

2018

-43.2

-38.9

-0.2 -4.1

0.0




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Agenda







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Implications of fragmentation assessed for both Indonesia and neighboring countries

Factor Assumption

Roll-out timeline

Start: 2014 Full effect: 2015


First year impact: 2,5% Full effect: 5%

Handset cost if non-harmonised Cost increase: +$4.5


First year impact: 4.5% Full effect: 9%







Description

Estimate the impact of Indonesia adopting a non-harmonised DTT/IMT allocation in the 700MHz band Implications of non-harmonisation will be assessed among two main

• Effect on own country – Loss of mobile coverage – Interference mitigation costs – Increased handset costs

• Effect on neighboring countries – Cross-border interference

4.1

4.2

Base case

5% 10%

$0

5% 10%

2014 2015

10% 20%

5% 10%

5% 10%

Base case


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Non-harmonisation will reduce the socio-economic benefits Reduction in benefits caused by less scale effects and reduced quality of services due to interference


First year impact: 2,5% Full effect: 5%

Increase in handset cost

Cost increase: $4.5

Rationale Assumption

• We originally assumed that there will be a direct cost reduction by the 700 roll-out

• However, the benefit will be halved due to costs of interference mitigation and lack of scale effects in a non-harmonised scenario

• Estimates based on discussions with CTOs

• We originally assumed scale effects of handsets in case of harmonisation

• However, in a non-harmonisation scenario the cost of handsets will increase due to need for unique handsets

• Estimate based on RTT study and with discussions with Ericsson and Qualcomm

• We originally assumed that access to 700 band mobile services will move rural needs closer to urban

• However, direct interference will affect quality of services on both sides of the border even after applying mitigation techniques, and thereby reduce the benefits for 10% of the rural population

Source: Expert interviews, BCG analysis

Needs: First year impact: 4.5% Full effect: 9%

Wants: First year impact: 9% Full effect: 18%

Increase in rural needs/ want benefit


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Fragmentation will reduce benefits for Indonesia GDP uplift reduced by US$ 552M, taxes by US$ 54M, 68K fewer jobs, 35K fewer businesses

Benefits of the 700 band reduced by 2-24% for Indonesia...

...comprising US$ 552M in GDP, US$ 54M in taxes, 68K jobs and 35K businesses

%

0

-10

-20

-30 New

businesses

-24%

Jobs created

-24%

Tax revenues

-10%

GDP

-2%

Jobs

GDP

Businesses

Taxes

US$ [M]

0

-200

-400 -230.0 -171.0 -128.2 -85.5 -50.6 -44.3 -23.5

Biz [K]

0 -10 -20 -30

2020

-35.3

2019

-28.3

2018

-21.6

2017

-15.4

2016

-10.6

2015

-6.7

2014

-2.2

US$ [M]

0

-200

-400 -288.5 -216.1 -164.0 -111.0 -66.4 -62.9 -35.2

-29.6 -20.2 -13.3 -4.7

Jobs [K]

0 -20 -40 -60

-67.8 -54.2

-41.6

US$ -552M1

US$ -54M1

-68K

-35K

1. 2012 Net Present Value Source: BCG analysis

Sum 2014-20

GDP


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Malaysia3

a

Neighboring countries could lose US$ 23B in GDP, US$ 2B in taxes, 57K jobs and 30K businesses up to 2020

Singapore

b

Tax

-0.5

GDP

-12.0

Brunei

c

0

-5

-10

-15

-20

-25 Tax

(USD B)

-1.8

GDP (USD B)

-23.4

0

-20

-40

-60

Businesses (K)

-29.9

Jobs (K)

-57.4

Total impact on neighboring countries

1. NPV 2012-2020 discounted at 1.5% for Singapore and Brunei, 2.8% for Malaysia and 5% for Papua New Guinea according to local government bond rates 2. 0 due to 100% urban population 3. Assumes entire country is affected Source: BCG analysis

Papua New

Guinea3

d

Non-harmonization will have a perpetual effect on neighbors

Biz

-25.8

Jobs

-47.6

Tax

-1.0

GDP

-10.0 0.0

Jobs2 Biz2

0.0

Tax

0.0

GDP

-0.7

Biz

-0.2

Jobs

-0.5

Tax

-0.3

GDP

-0.7

Biz

-3.9

Jobs

-9.3




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Agenda







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Using 700Mhz band for mobile broadband will bring significant social benefits for Indonesia

Allocating Digital Dividend to mobile broadband will be highly beneficial for Indonesia, especially in rural areas

• Mobile penetration will increase by 30% in rural areas, hence more people have access to the internet and the services provided on it

• High bandwidth from broadband enables delivery of more powerful services

"Increasing quality of human resources, capacity building in science and

technology, strengthening economic competitiveness"

Source: Indonesia Medium Term Development Plan 2010-2015, BCG analysis

Food Security

v

Improved Healthcare

iii

Reduced Poverty

iv

Developed Infrastructure

vi

Bureaucracy Reform

i Favorable Business Climate

vii

Energy Security

viii

Sustainable Environment

ix

Peaceful Frontier Areas

x

Creativity & Cultural Diversity

xi

Accessible Education

ii

Direct benefits from mobile broadband

Benefits from higher penetration

Limited benefits from mobile broadband

Medium Term Development Plan 2010-2015: 11 National Priorities

Mobile broadband addresses most of National Priorities... ...with key benefits


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Mobile broadband can provide step change in education and healthcare in rural areas

Accessible & enhanced education

Mobile broadband enhances accessibility to education in rural areas

• Low cost high-speed internet access ideal for rural areas with poor infrastructure

– Fast set-up and expansion – Wide reach

Rich and dynamic classroom experience

• Virtual classrooms via webcams and electronic whiteboards

• Increase interaction and collaboration among schools

• E.g., Connect To Learn students in Africa can interact with classrooms in the United States via webcam

Improved & wider healthcare delivery

Mobile broadband facilitates remote diagnostics and increases healthcare coverage in rural areas

• Remote monitoring and video-consultations with specialists in hospitals

• Higher coverage esp. for emergency responses • E.g., Sana mobile app is used by health care workers

to record patient's data and transmit to medical specialists wirelessly

ii iii

Source: GSMA, Connect To Learn, Sana, Motorola, Press search

High bandwidth enables delivery of more powerful services, over and above the benefits of higher penetration


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Case study: Connect To Learn uses mobile broadband to bring e-learning to schools in Africa

Approach: E-learning Impact Background

Poor education for African children

• ~70% of African girls in some sub-Saharan countries do not get a secondary education

• Many are unable to afford to stay in school after age 12

Mobile broadband can be leveraged to bring high quality education to rural children

• Collaborative effort among organizations

Millennium cities and cloud-based ICT solution for schools

• Implement mobile broadband and cloud solutions in schools so students have access to internet resources

• Ericsson provides the fixed wireless terminal devices and Airtel mobile operator provides 3G SIM cards

School2School promotes cross-cultural learning by connecting classrooms from Millennium cities in Africa to classrooms in the United States

• Interactive, collaborative learning experience enhanced by real-time webcam in classrooms

Significant impact after first year and still expanding

• Reached a total of 5,000 students

• Raised more than USD 1M

• Started Millennium Villages in Ghana, Tanzania, Kenya, Uganda in 2011

First term report cards show high marks for Connect To Learn scholarship recipients

• Many students expressed their aspirations to become doctors, teachers, members of Parliament, etc.

Source: Connect2Learn website, GSMA

"[Schools are now] able to provide to educational services far more efficiently and effectively in places that would be nearly impossible to reach at least in

this decade without this type of mobile broadband." – VP of Sustainability Ericsson

5th Graders in the US connecting with students in Tanzania


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Case study: Sana uses mobile broadband to enable remote diagnostics and telemedicine in rural areas

Approach: Remote diagnostics Impact Background

Accessibility, affordability and availability of doctors are the main health care issues in rural areas

Mobile broadband can enable remote diagnostics & telemedicine to patients in rural areas

• Between 80-90% of the world's population live within range of a cell phone tower

• Shortage of health care specialists but abundant supply of local community workers

Community health workers capture patient images on

Sana mobile app

Doctors connect to OpenMRS platform to

provide live consultation

Sana connects rural patients with remote medical specialists through community health-workers equipped with mobile

phones

India • Oral cancer and cardiovascular

disease screening Brazil

• Ophthalmic screening Swaziland

• Post-surgical follow-up

Sana is expanding projects worldwide

• Screened ~6K people in Bangalore for diseases as of July 2011 with plan to scale to 1.5M people over the next year

Overall, telemedicine has many socio-economic benefits

• WHO reports doctors can double number of patients reached in rural areas through remote diagnostics and telemedicine

• Patients save time, personal costs and burden of travelling

• Enhance data collection for statistical purposes

Source: Sana website, GSMA


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Call to action

Digital switchover is a once-in-a-lifetime opportunity to allocate spectrum to its most productive use Mobile broadband will generate significantly more economic and social benefits for Indonesia than alternative uses like broadcasting International harmonization in line with the ITU guidelines is critical to reap the full benefits of the 'Digital Dividend' Prompt action is needed to maximize the benefits as delays in switchover will also have adverse effects on Indonesia and its neighbours Many countries have successfully accelerated digital switchover by setting up a coordinated process and focusing on public communications and subsidies

Significant opportunity for Indonesia to take leadership on an international issue with real, long-term impact


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Key success factors to accelerate digital switchover Analog Switch-Off (ASO) is required to clear the 700 MHz band for mobile use

• Adopt clear, timely analog switch-off goal • Coordination between government, regulators, public & private

broadcasters, telco operators e.g. setting up taskforce

• Clearly communicate analog switch-off "roadmap" • Develop media strategy and initiatives to raise public awareness

& collaboration

Timely & coordinated ASO process

Public communication & media campaigns

• Government subsidies and private sector funding (i.e. telco operators) in providing set-top boxes

• Cooperation with manufacturers to create economies of scale and reduce equipment prices

Subsidies to increase digital receivers

I

II

III

Source: ITU, Japan Ministry of Internal Affairs and Communications, Press Search


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Case study: Australia set up Digital Switchover Taskforce to oversee end-to-end ASO process

Taskforce to drive ASO process

"Digital Switchover Taskforce" set-up within Dep. of Communications

• ASO program to start in 2010 with completion in 2013

Clear roll-out plan for each region • Make use of "pilot" switch-offs to

create highly visible media stories

Taskforce coordinated key activities • Advise government on policy

settings, implementation & issues • Convene meetings between

stakeholders i.e. broadcasters, retailers, manufacturers, antenna technicians, housing agencies, etc.

Various consumer-orientated initiatives

Taskforce has a range of consumer-orientated initiatives

• Training retail advisors in electronic stores

• Labeling of goods in retail stores into 3 categories of "digital readiness"

• Training TV and antenna installers

• "Endorsed" installers

Created www.digitalready.gov.au to provide ASO info to public

Subsidies to provide digital TV equipment

Launched Household Assistance Scheme (HAS) in 2009

• Provided free decoders for eligible households

• Budget was allocated in 3 successive cycles

• As of May 2011, $15.1M assisted 38K+ households

Pilot ($3M)

Regional ($69M)

Remaining & state capitals ($309M)

Satellite Subsidy Scheme (SSS) for non-covered areas in 2010

• Satellite service to provide post-ASO coverage for viewers in "black-spot" areas

• Subsidy is $400 per household with co-payment of ~$200-$350

I II III

Map of areas in switchover plans

Interesting articles on ASO

Note: All currency in Australian dollars Source: GSMA : Case studies for the award of the 700MHz/800MHz band Australia, Digital Ready website


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Case Study: Japan rolled out comprehensive Master Plan and public campaigns to drive ASO

Concrete ASO Master Plan

Rolled out Master Plan with fixed deadline of 24 July 2011

• Started in 3 metropolitan areas1 by 2003, mid-sized cities by 2006 and the rest by 2011

• Issued Annual Plans with milestone targets corresponding to major int'l events e.g. World Cup in Germany, Beijing Olympics

Set up 51 "Digi-Suppo" support centers for ASO

• Cooperate with broadcasters, manufacturers and electricians in every prefecture to provide consultation for citizens

• Temporary Q&A booths • Volunteers called up elderly to

confirm digital switchover

Comprehensive public campaigns

"Digitalization of Terrestrial TV Broadcasting" media campaign Public announcements on digital spread rate & ASO notifications

• Publish surveys on digital spread rate and viewer's awareness of ASO to constantly show progress

• On-screen indications whether viewers were watching digital or analog programs

Incentives to boost digital TV purchase

Gov established "eco-points" to incentivize digital TV purchase

• Purchasing digital TVs during campaign will earn "eco-points", which can be exchanged for wide-range of other products3

Lowering prices of set-top boxes to increase uptake

• Standardizing minimum functional requirements and tech development efforts of manufacturers led to ~80% price reduction of flat panel TVs4

• 25M shipments of flat panel TVs in 2010 (vs. 10M in 2003)

Subsidies to ensure full coverage • Free set-top boxes have been

distributed to low income households since 2009

1. Tokyo, Nagoya and Osaka 2. "Chideji" means "Terrestrial Digital TV" 3. Store coupons, beer & food coupons, travel coupons, and an array of environmentally-friendly products and regional goods. 4. From ~USD 7,362 in 2003 to ~USD 1,207 in 2010 Source: Japan Ministry of Internal Affairs and Communications, Digital Broadcasting Expert Group (DiBEG), Press search

I II III

Mascot "Chidejika"2

Campaign advertisements on public transportation & sport events

Celebrity endorsements

Appendix


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We model the impact of mobile and broadcasting spectrum allocation in order to compare the benefits of the two solutions

Harmonisation of mobile services (IMT)

Harmonisation of broadcasting services (DTT)

277967-01-Asia Pacific Deck-09May12-KG-OSL-v4.pptx 49

Draft—for discussion only

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Broadcast impact calculated with best-case assumptions, to ensure conservative estimates of mobile benefit

700 MHz band allows more TV channels...

Generating revenue across supply chain...

As well as broadcast jobs and taxes

Few spinoff effects to general economy• Existing public service channels

already provide wide range of educational content

• Special interest groups well served by cable/satellite

Generous assumptions on additional channels

• 25-35 additional channels are technically possible in most countries

• Possibility that channels may not be commercially viable deliberately excluded

Optimistic revenue assumptions: overall industry effect may be lower

• Additional channels will cannibalize existing offerings

• Marginal channels likely to be niche

Revenue of broadcast channels

Incremental channels have average industry revenue

Number of TV Channels

50

250

200

150

100

0IPTV

Cable

Satellite Broadcast

Digital Terrestrial TV

With 700 MHz band



With 700 MHz band

TaxesJobs

Illustrative

IllustrativeIllustrative

Spectrum limitation

2.2

Incremental benefit of mobile services relative to broadcasting services

Incremental benefit

2020 2019 2018 2017 2016 2015 2014

Broadcasting Mobile

2.1

2.2

2.3

Illustrative 277967-01-Malaysia deck-14May12-KG-OSL-v3.pptx 38


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Incremental impact of allocating to mobile

Incremental impact of allocating to broadcasting

Baseline

... to assess incremental value of allocating 700 MHz band to mobile

Costs related to digital switchover assumed to be sunk costs, and are not factored in the estimates

Adoption of internet is translated into four economic factors

Four economic factors are modelled...

GDP

Tax revenues

Entrepreneurship

Employment

Business adoption

Household adoption

Economic impactBCG model

Output

Note: Graphs are illustrative

2.1

277967-01-Malaysia deck-14May12-KG-OSL-v3.pptx 38


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Government revenues up US$ 1.3B(NPV US$1.1B)


4

3

2

1

02020

3.8

2019

3.3

2018

2.8

2017

2.3

2016

2.0

2015

1.6

2014

0.7

Allocation to mobile will bring significant benefits for MalaysiaGDP increase with US$17B, taxes with US$1.3B in addition to 26K new businesses and 50K new jobs

1. Incl. new independent businesses as well as new departments/units/business areas within existing firmsNote: NPV discounted by 2.8% for MalaysiaSource: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

GDP increased US$ 17B 2014-2020(NPV US$ 14B)



60


40

20

02020

49.8

2019

39.1

2018

28.1

2017

20.1

2016

13.3

2015

7.6

2014

2.5

50


02020

25.8

2019

20.3

2018

14.6

2017

10.4

2016

6.9

2015

3.9

2014

1.3

Incremental tax [US$ M]

02020

330

2019

273

2018

215

2017

172

2016

138

2015

108

2014

44

400

300

200

100

BroadcastingMobile broadband

2.1

277967-01-Malaysia deck-14May12-KG-OSL-v3.pptx 38


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Government revenues up US$ 641M(NPV US$535M)


1.0

0.5

0.02020

0.4

2019

0.4

2018

0.3

2017

0.3

2016

0.3

2015

0.2

2014

0.1

Allocation to DTT will have a smaller economic impactGDP increase with US$2B, taxes with US$641M in addition to 0.1K new busn. and 2.1K new jobs

1. Incl. new independent businesses as well as new departments/units/business areas within existing firmsNote: NPV discounted by 2.8% for MalaysiaSource: Datamonitor; EIU; OECD; World Bank; National statistics units; BCG analysis

GDP increased US$ 2B 2014-2020(NPV US$ 1.7B)

2.1K additional jobs created by 2020

0.1K new business activities by 20201


6

4

2

02020

2.1

2019

2.1

2018

2.1

2017

2.1

2016

2.1

2015

2.1

2014

2.1


0.1

0.02020

0.1

2019

0.1

2018

0.1

2017

0.1

2016

0.1

2015

0.1

2014

0.1

Incremental tax [US$ M]

200

150

100

50

02020

125

2019

114

2018

104

2017

95

2016

87

2015

79

2014

38

Broadcasting

2.2


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Incremental impact of allocating to mobile

Incremental impact of allocating to broadcasting

Baseline

... to assess incremental value of allocating 700 MHz band to mobile

Costs related to digital switchover assumed to be sunk costs, and are not factored in the estimates

Adoption of internet is translated into four economic factors

Four economic factors are modeled...

GDP

Tax revenues

Entrepreneurship

Employment

Business adoption

Household adoption

Economic impact BCG model

Output

Note: Graphs are illustrative

Documents

The Economic Benefits to Indonesia of Early Harmonisation ... · and Assignment of the Digital Dividend to Mobile Indonesia report . 277967-03-Indonesia deck-12Feb13-EG-OSL-updated.pptx