The Economic Benefits to Indonesia of Early Harmonisation and Assignment of the Digital Dividend to Mobile Indonesia report
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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
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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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
First year impact: 10% Full effect: 20%
Business prod. gains
First year impact: 5% Full effect: 10%
Agricultural prod. increase
First year impact: 5% Full effect: 10%
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
Without 700 MHz band
With 700 MHz band
Taxes Jobs
Illustrative
Illustrative Illustrative
Spectrum limitation
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Government revenues up US$ 1.0B
(NPV US$ 0.7B)
Incremental GDP [US$ B]
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
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$ 2.8B 2014-2020 (NPV US$ 2.2B)
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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Government revenues up US$ 8.4B
(NPV US$ 6.5B)
Allocation of 700 MHz band to mobile will have significant incremental benefits over broadcasting in Indonesia
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$ 36.3B 2014-2020 (NPV US$ 27.7B)
283K additional jobs created by 2020
145K new business activities by 20201
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
Incremental GDP [US$ B]
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
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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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
First year impact: 5% Full effect: 10%
Increase in rural needs benefit
First year impact: 5% Full effect: 10%
Increase in rural wants benefit
First year impact: 10% Full effect: 20%
Business prod. gains
First year impact: 5% Full effect: 10%
Agricultural prod. increase
First year impact: 5% Full effect: 10%
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
Incremental GDP [US$ B]
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
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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
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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Implications of fragmentation assessed for both Indonesia and neighboring countries
Factor Assumption
Roll-out timeline
Start: 2014 Full effect: 2015
Service cost decrease
First year impact: 2,5% Full effect: 5%
Handset cost if non-harmonised Cost increase: +$4.5
Increase in rural needs benefit
First year impact: 4.5% Full effect: 9%
Increase in rural wants benefit
First year impact: 9% Full effect: 18%
Business prod. gains
First year impact: 5% Full effect: 10%
Agricultural prod. increase
First year impact: 5% Full effect: 10%
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
Service cost decrease
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
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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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
277967-03-Indonesia deck-12Feb13-EG-OSL-updated.pptx 35
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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
277967-03-Indonesia deck-12Feb13-EG-OSL-updated.pptx 39
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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
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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
Without 700 MHz band
Without 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$1.1B)
Incremental GDP [US$ B]
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)
50K additional jobs created by 2020
26K new business activities by 20201
60
Cumulative new jobs [000]
40
20
02020
49.8
2019
39.1
2018
28.1
2017
20.1
2016
13.3
2015
7.6
2014
2.5
50
Cumulative new business activities [000]
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$535M)
Incremental GDP [US$ B]
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
Cumulative new jobs [000]
6
4
2
02020
2.1
2019
2.1
2018
2.1
2017
2.1
2016
2.1
2015
2.1
2014
2.1
Cumulative new business activities [000]
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