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PTDConsulta-veWorkshopon
UniversalServiceStrategy,EstablishingtheUniversalServiceFund,Design&Implementa-onofpilotprojects
SonjaOestmann&AndrewDymond
NOVOTELHOTELYANGON
16February2017
2
Content
PART1
• BriefintroducJontoUniversalService• Marketupdate
• Unservedtownships:GISanalysisandresultsPART2
• OpJonsforUSFestablishment
• Universalservicestrategy:IniJalideasforUSFprograms
3
WhatisaUniversalService?
UniversalServiceisapolicygoalthatintendstoensurethat
allpeopleinacountryhaveaccess
andareabletousetelecommunicaJonsservices,
inparJcularforpeoplelivinginruralandremotepartsofthecountryandpoorerhouseholds
4
5
Generallydigitalskillsusingsmartphonesarelow,forexampleonly22%cansearchforinformaJonorothercontentontheInternet(LirneAsia/MIDO2016)
Access Usage Benefits
Infrastructure Capacity Content&applicaJons
6
SpecificscopeofUniversalService
• ChapterXVoftheTelecommunicaJonsLaw
• ProvidingbasictelecommunicaJonsnecessiJesanywhereforpublicinterest
• EnablingavailabilityandwideruseoftelecommunicaJonsservices
• UniversalServicedefinitonandbasictelecom§ Mobilevoiceservices§ WirelessbroadbandInternetserviceswithmin.speed(e.g.,3-5MBps)§ Enablingwiderusethroughawarenessraising&capacitybuilding
7
WhyisaUniversalServicestrategyneeded?
• Commercialtelecomoperatorscannotreachallpeopleinacountry–typicallybetween5-10%willbeleewithoutservice
• AUniversalServicepolicyensuresthesepeoplegetserved,bothwithvoiceandbroadbandInternet
8
Increasing&acceleraJngVoiceandInternetbroadbandprovision
Morepeoplehaveaccesstoservices&applicaJons,aswellasthecapacitytousethem
CreaJngopportuniJesforbotheconomic&socialgrowth
UniversalServiceStrategyoutcomes
9
KeyObjecJvesofassignment
1. DesigningMyanmar’sUniversalServiceStrategy
2. DevelopingguidelinesforestablishingUniversalServiceFund(USF)anditsgovernanceandoperaJngprocedures
3. ImplemenJngthestrategyinanumberofpilotareas
4. Monitoring&evaluaJon
10
Universalserviceproject–expectedJmeline
UniversalServiceStrategy
GuidetoestablishUSFUSFOperaJngManual
• DraeApril2017• ConsultaJoninMay• FinalJune2017
Pilotprojects
• DraeDesignAugust2017• FinalDesignSeptember2017• BiddingperiodOct&Nov2017• BidEvaluaJonDecember2017• ContractnegoJaJonJan2018• Startofimplementa-onFeb2018
ImplementaJonMonitoringEvaluaJon
• ApproximatelyunJlJune2019
MARKETOVERVIEW&RESULTSFROMGISANALYSIS
12
Thetelecommarket• Threemainmobileoperators
• MPT,Telenor,Ooredoo• 4thentrantMNTC(Mytel)expectedsoon
• TotalsubscriberSIMs49.7millioninNov2016• Around95%penetraJonbutuniquesubscribers61%+• 53%+amongstruralusers• 83%householdswithatleastonephone
• FastgrowthconJnuedfrom2015to2017• Majorrolebythetowercompanies–almost13,000
towersnowinexistence• Fibrecompaniesbuildingmajornetworks-currently
over18,000Kms*• Highpercentageofsmartphones(78%)
• CurrentpopulaJoncoverageover80%andwillreacharound94%+byMarch2019
Combinedoperator900MHzcoveragecommiXedbyQ12019
13
CurrenttrendsinpenetraJon
• CurrentrapidgrowthtakingplaceinNorthern,EasternandWesternstates/regions
• LeastcoveredChinandShanstateswillhave75%coverageat900MHzbyMarch2019
• Mostareaswillbeservedbybothvoiceand3Gbroadbandservice - 50 100 150 200
NaypyitawYangon
MonMandalay
BagoKachin
Magway(Magwe)Sagaing
Tanintharyi(Tenasserim)Kayah
Ayeyarwady[Irrawaddy]Shan
Kayin(Karen)Rakhine(Arakan)
Chin
Totalpenetra-onper100JulycomparedtoDec2016
Dec-17 Jul-16
14
Thetowermarket• Towerco'sareasignificantfactorinmarketgrowthtodateandexpectedtoextendtheirpresence
asoperatorsfulfilltheirexpansioncommitments
• NeedformulJ-tenancywillbeanissueasthenetworksreachdeeperintorural,smallercommuniJesandlessdenselypopulatedareas
§ Greaterlevelofplannedpassiveand/oracJveRANsharingispredicted
• SatelliteVSATtrunkedmicro-cellsandsmalllow-costtowerswillincreaseinnumberforremotemountainousareas
2500
1800
1250 1250300 100 [VALUE] 200 200 1000
3600
05001000150020002500300035004000
Towerownership2017
15
TheGISAnalysisandUSFprojectplanning
1. SuperimposecombinedoperatorcoverageoveraccuratepopulaJonmapthataccountsforallvillagetracts
2. Calculateoperatorcoverage,GapareasandunservedpopulaJons
3. CreateGeo-referencedExcelbasedbusinessplanningtoolforeachTownship
4. ResultisahighlevelcalculaJonofpercentagepopulaJoncoveredineachtownship
Combined900MHzCoverage
16
GIScoveragecalculaJonresultsState %Geog.Area
CoveredTotal
Popula-onPopula-oncovered
%Popula-oncovered
TotalTownships
Townshipswith<50%Popula-on
CoverageChin 40.1% 469,010 274,552 58.5% 9 4Shan(North) 54.7% 2,534,984 1,742,998 68.8% 24 7Shan(East) 46.5% 825,297 573,740 69.5% 10 2Shan(South) 52.7% 2,392,218 2,044,219 85.5% 21 4Kachin 39.4% 1,624,896 1,359,311 83.7% 18 6Kayah 52.2% 287,555 262,134 91.2% 7 2Kayin 56.9% 1,599,517 1,357,124 84.8% 7 0Rakhine 63.3% 3,153,958 2,956,615 93.7% 17 0Sagaing 68.2% 5,195,173 4,908,427 94.5% 37 4Taninthanyi 43.8% 1,455,338 1,194,078 82.0% 10 0BagoEast 72.8% 2,920,445 2,824,462 96.7% 14 0BagoWest 86.8% 1,985,575 1,963,547 98.9% 14 0Magway 91.0% 3,885,893 3,852,800 99.1% 25 0Mandalay 95.2% 6,098,506 6,070,438 99.5% 28 0Yangon 94.3% 7,562,429 7,535,160 99.6% 45 1NayPyiTaw 91.1% 1,155,749 1,151,699 99.6% 8 0Ayeyarwady 92.7% 6,254,480 6,238,964 99.8% 26 0Total 62.1% 51,491,407 48,377,144 94.0% 330 30
17
TheIntegratedGIS–ExcelModellingprocessfrominputdatatoprojectsandesJmatedsubsidies• PopulaJonsbasedon2014Censuscanbeup-scaledto2017atperannumgrowthrate
• PopulaJondistribuJonwithinallTownshipsviaWorldPopdataset
• MobilecoveragemapsrequestedfromtheoperatorsforQ2/32016andforQ12019
GISSogware
Integratesalldataand
providesoutputtotheGapModel
Thendisplaysthe
results
ExcelSpreadsheet
TheAccess
GapFeasibilityModel
InputsfromCensusdata,ICTDemandSurvey,
OperatorsandPTD
ProjectStrategy
GapprojectsandesJmatedMaximum
SubsidiesforeachTownship
18
Thegeo-referencedsubsidyesJmaJonModel
DemandSide • UnservedPopulaJonsfromtheGISanalysis
• Affordability&Revenues• BasedonCensusandICTdemanddata
Costside • Distancesfromnearest
accesspointsandexisJngcoverage
• Backbone&accesssystemunitcosts
• Terrainfactorstoreflectlevelsofdifficulty
Financial/BusinessViability • Commercialviabilityor
losspertownship• Financialgap&subsidy
requirementtoachieveviability
• Cost/benefitindicatorsperarea
Strategicanalysis • Totalsubsidycosts• PrioriJzehighneedand
“smartsubsidy”areas• Targetareasbasedon
knownvillageclusters• Developprogram&
project(s)• RecommendfirstPilot
projectandsequencedprogram
19
TheSubsidy5yearBusinessModelsimplifiedUSFclosesthegapbetweenuseraffordabilityandoperator5yearrecoveryneed
5YearOPEX
5YearRevenuesì
CAPEX
Subsidy
Operator
USF
User
O&M,Fibre&Towercos
20
Marketgapsmodel:TheoreJcalframeworkforUniversalService
Hig
h in
com
e
hous
ehol
ds
Lo
w in
com
e
hous
ehol
ds
Current network reach
& access
100%
Geographical reach
USF Smart subsidy zone
True access gap
80%+
Commercialviable
95% Efficientmarket&licenceobliga-on
gap
85-90%
99%
62% 70%
RequiresongoingOPEXsupport
Viableaeersmartsubsidy
To2019
USFTarget
21
ModelassumpJonsFactor Assump-on
Revenueside
Na-onalGDPPercapita(WorldBank2016) US$1,300%ofGDPinhouseholdincomeinfinaldemand(householdexpenditure) 67%
%ofna-onalincomelevelassumedinremoteruralareasrural 50%%ofhouseholdincomespentontelecomsservices 2.5%Ruralhouseholdpenetra-on 83%ImpliedExpendperruralhousehold(slightlybelowICTbaselinestudy) MKK4,707ARPUassuming1.3SIMsperruralhousehold MKK3,621
Costside
CAPEXperBTS(electronicsandantennas,includeonemicrowavehop) $80,000OPEX(perannum)forPassiveinfrastructure(assumehighestcost) $2,400/monthBTScellcoverageradius(assumingflatterrain–seeterraincoefficient) 12KmTerrainCoefficient(reducesidealradiocoverage) 0.5–1.0%geog.landareatobecoveredtoreach90%+ofunservedpopula-ons 60-75%Operatorcostsforopera-ons,marke-ngandmaintenanceas%ofsales 35%
ViabilityCalcula-on
YearsforrecoveryofCAPEX 5%Viability=percentageofrevenuerequiredforCAPEXrecovery 0–100%
22
TerrainconsideraJonsonBTSrangeandtechnology
• BTStypicalrange12Kmonflatterrain
• Terraincoefficientreducesassumedcoverageradiusbyupto50%forhillyandmountainousareas
• Increasesthecostofexpandingcoverageinmountainoustownships
• Butmayalsoleadtouniquedesign,towerandnetworkdesignorsharingarrangements
• InteleconesJmatesalsotookpopulaJonpocketsintoconsideraJon
23
ViabilityandsubsidyconsideraJonsCategory Viabil ity
FactorProjectDescrip-onandPriorityImplica-on
Category1 >100% • Commerciallyviable.WillbeservedbyexisJngserviceproviderssoon.• Nosubsidyneeded
Category2 75-100% • Close to viable. Targeted commercially by operators soon without financialincenJve.
• Maxsubsidylessthan25%ofCapex.• USFProgramcouldaccelerateinvestment
Category3 50-75% • Commerciallyunviablewithoutasubsidyintherangeof25-50%.• GoodtargetforUSFProgram.
Category4 25-50% • Unviable.Unlikelytobeservedwithoutsubsidyintherange50-75%.• ShouldbetargetedforUSAFProgramsubsidy
Category5 0-25% • Typically unviable without major subsidy, requiring more than 75% ofinvestment(Absolutecut-offforUSF15%).
• MayalsorequireongoingoperaJngcostsubsidy.
24
SummaryofUSFProgramCost• “Firstpass”costofexpandingnetworkto90%+populaJoninallTownships
§ Finalcoverageover99%ofcountrypopulaJon
• Primarilyassumesrevenuesandcostsbasedonterrestrial§ SJllconsideringtheimpactofsatellitetrunkingtothemostremotesites
• SpecialconsideraJongiventocostof3G§ Frequencies&bandwidthofthecorenetworkand“lasthop”microwavetonewBTSs§ ConcernaboutthecostofsitesthatwillneedtobeservedbysatelliteVSATtrunking
• EsJmateofmax.expectedsubsidycostsassumingnositesbelow15%viability
Pop’ncoverage NoofTownships No.oftowers Totalsubsidiesprojected
Lessthan50% 30 33150to75% 27 18375to90% 41 205Above90% 93 131100% 139 -Total 330 850 US$25.4M
25
PilotAreas-interim
• 44areasbeyondQ12019commitments
• PrioritytotownshipswithsubstanJaluncoveredpopulaJons
• Mustalsobeviablewithsmartsubsidytocreateoperatorinterest§ Mostincategories3and4
• RangeofsituaJons:testassumpJons§ Someoflowercoverageareasarenot
viableforanearlywin-win§ FurtherconsideraJonofassumpJons
and%subsidypriortofinalisaJon§ ReviewforpracJcality
• ExpectreducJoninnumber
26
Detailedcase–ChinState• 9Townships• 40%area,58.5%populaJoncovered
• 4townshipswithlessthan50%populaJoncoverage
• Virtuallyallmountainous
• 6townshipsselectedaspotenJalpilotareas§ 76newtowersorVSATlocaJons§ AtleastUS$4.1Msubsidies
27
Detailedcase:ShanState
• 55townships• Approx.50%area
covered• PopulaJoncovered
§ 68-69%inE&N§ 85%inSouth
• 13townshipswithlessthan50%coverage
• 22PotenJalpilotareas§ Newtowers§ US$4.5Msubsidies§ Expecttoreducethenumberconsiderably
28
Detailedcase–KachinState• 18Townships• 39.5%Areacovered• 83.7%populaJoncoverage• 6townshipswithlessthan50%coverage
• 4potenJalsmallpilotareas§ 31newtowers§ US$1.3Msubsidies
29
Detailedcase–TaninthanyiRegion
• 10townships• Nonewithlessthan50%populaJoncoverage§ Butsomeveryremoteareas
• 43.8%areacovered• 82%populaJoncovered• 3potenJalpilotareas
§ 88newtowers§ AlmostUS$3.0M§ Verychallengingaccess–noroads
OPTIONSFORUSFESTABLISHMENT
31
WhatisaUniversalServiceFund(USF)?
• Thereareover90countrieswithUSFs• TheUSFprovidesthefinanceforprovidingservicetouncovered
areasandpeople
• AUSFgetsmostlyfinancedfromasmallpercentageoftherevenueoftheoperatorsonanannualbasis.Butfundscanalsobereceivedfrom• Government• Donors• SpectrumaucJons
• AUSFisalsoaninsJtuJonalstructure–aspecialunitthatimplementstheuniversalservicestrategy
32
USFfunding• MostUSFsarefunded
bylevyfromoperators
• Over40%ofUSFscollectlessthan1%
• AnaddiJonalthirdcollects1.5%orless
• Soalmost75%ofUSF’scollect1.5%orless
• ReasonwhysomeUSF’shavelowdisbursementrateisthattheycollecttoomuch
4
7
59
16
0 10 20 30 40 50 60 70
Gov't only
Partly by gov't (subsidized)
Operators
Other
How is the UASF funded? (Multiple answers allowed)
16
13
5 5
0
2
4
6
8
10
12
14
16
18
Levieslessthan1% Leviesbetween1%and1.5%
Leviesgreaterthan2% Variable
IfoperatorspayintoaUSF,whatisthepercentagelevy/year?
33
SpecificobjecJvesofUSF
USF
Collectfunds
Designprograms&projects
Financethoseprojects/disburse
MonitorimplementaJonEvaluateimpact
Consultstakeholdersthroughout
Publishresults
34
KeyUSFprinciples&Successfactors
• PracJcal,feasiblestep-by-stepapproach
• Focussingonprojectswithhighimpact
• Goodgovernance&poliJcalsupport
• IndustryparJcipaJon
• UsingmostlycompeJJvetendering-open/transparentdistribuJonmechanisms
• Providingsmartsubsidies
• Ifpossible,avoidongoingsubsidies
• DecisionsregardingUSFprogramsneedtobebasedondataanalysis&transparentmethodology
• Designingprojectsinatechnologyneutralmanner
• Transparency:Publishedannualaccounts&reports
• ConsulJngwithstakeholders
• SeparatespecificUSFbankaccount
35
CompeJJvebidding
• InternaJonalbestpracJceisviacompeJJvetender
• LargemajorityofUSFsusethismethod
• RecentexamplesadvisedbyInteleconinclude:§ Uganda(since2001topresent)§ Malawi,Mozambique,BurkinaFaso§ Zambia§ Kenya(currently)§ Mongolia§ SaudiArabia§ Pakistan(broadbandmonitoring)
61%
26%
13%
0%
10%
20%
30%
40%
50%
60%
70%
Competitive tender NO competitive tender Combination
Mechanism of disbursing USF funds
[Usuallyadvancedcountrieswithhighlypenetratedmarket]
36
TypicalchallengesofUSFs&programs
• Capacity&stafftodesignUSFprojectsandmonitorimplementaJon
• Disbursementoffunds–risksofcollecJngtoomuchandnotdisbursingit
• Properplanning&JmelyimplementaJon–telecommarketmovesfast
• Transparency–publishingannualreports,biddingresults,spendingandprojectoutcomes
37
USFGovernanceModels
Ministry
SingleDecision-maker
USFrisksbeingpoliJcized
Examples:India,Colombia
Inter-ministerialCouncil
Presidentappointed;includingRegulator&experts
“Topheavy”,possiblyslow
Examples:Chile,Morocco
Newagencyoroutsourced/Separatefund
manager
AlsohasBoard,incl.industry
representaJves
Highercost/efforttoestablish
Examples:Ghana,Canada,Pakistan
Regulatoryauthority
UsuallycombinedwithBoard
Usedmostoeen&canworkwell
Examples:Uganda,Peru,Kenya
38
Governance,accountability&transparency
USF’saremostoeengovernedundertheregulator
ü Boardwithrepresenta7vesofgovernment,industry,consumerassociaJons,financialsector,development/non-Governmentinterests
ü SpecialUnitinRegulator’sorganizaJon
ü Separateaccoun-ng,bankaccount,repor-ng,transparency,etc.
8
15
41
0
5
10
15
20
25
30
35
40
45
Privatecompany&Othercombined
Gov'tdepartment&ind.Gov'tagencycombined
Departmentoftheregulator?
39
USFgovernancestructure
Of49responsesinthebenchmarksurvey:• 35(73%)countrieshavetheir
USFsgovernedbyeitheraBoardoraCommi}ee/groupofMemberswiththepowertomakedecisions
• 14countries(27%)havetheirdecisionsmadethroughasinglepersononly,commonlyaDirector,ExecuJveOfficerorMinister
35
14
0
20
40
Board Director
Num
ber
of c
ount
ries
Mechanism
Mechanism to govern the USF
40
VarioustypesofUSFBoards
USF
ExecuJveBoards–focusonstrategicvision&approvalpowers
AdvisoryBoards-increasingstakeholder
input
Oversight&MonitoringBoards–increasing
accountability
41
ProposedUSFBoardinMyanmarfordiscussion
USFEXECUTIVEBoard
PTDDG/ChairmanMCRC
MOTCRepresentaJve NTLNominee Consumer
associaJon ??????
42
PrecedentselsewhereforindustryrepresentaJon
• Pakistan:OperatorsareontheUSFCompany’sBoard
• Mongolia:SeveraloperatorsrepresentedontheMonitoringCommi}ee
• Ghana:USFBoardofTrusteesincludesarepresentaJvefromeachmajortelecomoperator
• Canada:USFoversightcommi}eeincludesrepresentaJonfromoperators
43
Financialmanagement
• USFmoniesseparatedfromMOTCorregulatoryauthorityfinances
• USFtohaveownbankaccountwithreputablebank• SeparateUSFaccountsandindependentaudits• AdministraJve&operaJonalexpensesshallrequireUSFBoard
approval–throughannualbudgetplans
• USFfinances(payments,withdrawals&othertransacJons)shallsaJsfycountry’sfinancialpoliciesandregulaJons
44
Summary–whatisneededfromagoodinsJtuJonalUSFstructure??
ü Ensuringunbiaseddecisionsbasedonapproveddataanalysisandmethodology,andapprovedUSFscopeandstrategy
ü Ensuringpublictransparency–audiJng&annualreporJngü AccountabilityoffundcollecJon,disbursementsandprojects
ü EnsuringstakeholderconsultaJon(industry,government,civilssociety)andsupport
ü Ensuringthatfundsarewell-spentandhaveposiJveimpact
45
Lessonslearnedregardingroles
Ministry:Policy&supervision• High-levelUniversalServicepolicyse~ng• ApprovalofoperaJngmethodologyandhigh-levelstrategy,inconsultaJonwithPTD/regulator
• ApprovalofauditedannualUSFaccounts• Reviewandupdateofuniversalservicepolicy
USFmanagementunit:Freetoexecute• ExecuJonofapprovedstrategy,designdetailsofprogramsandprojects
• MonitoringofimplementaJon
INITIALUSFPROGRAMS/STRATEGY
47
PotenJalUniversalServicestrategy
47
Basedon• DataandGISanalysis• StakeholdersmeeJngs(industry,government,CSOs/NGOs)andconsultaJon
• ReviewingexisJngICTiniJaJves• InternaJonalexperience• RuralfieldvisitsandinterviewsinChinandKachin
48
ElementsofpotenJalUniversalServicestrategy
69%
15%
10%
3%
1%
2%
Mobilevoice&broadbandservice
AssistschoolswithInternetconnecJvity
Internettraininge.g.,incommunitylibraries
Connectruralhospitals
SupportsoluJonsredisabiliJes
RelevantruralcontentpromoJon
49
KeyreasonsforschoolconnecJvityprogram
Ø ICTcapacitybuildinginschools–starJngyoung–hasthebiggestlong-termimpactoncountry’seconomy
Ø Intoday’sdigitalage&knowledgesociety,schoolconnecJvity&integraJngICTintoeducaJoncannotwaitanylonger
Ø AssistwithdemandsJmulaJonamongfutureusersofICT
50
Insights/examplefromfieldvisitinChinstate• UShingHa:HeadmasterHighschoolMindat• 300high-schoolstudentsoutof1,300total
students• Computerlabwith72computers,receivedin
2013,only30sJllfuncJoning• Onlyoneteacheriscomputerliterateoutof18
highschoolteachers• Schoolhas24helectricitybutnotenoughto
powercomputerlab,needtousetheirgenerator
• Highfuelprices,tooexpensivetopowerthecomputerlab(K7,000for2hclass)
• WeregivenInternetaccesstoo,neverworked• Hedoesnotusecomputer,butusesmobile
Internet• Onlyofficeadminusescomputer• SchoolcouldpayK10,000-K15,000formonthly
Internet
51
FocusonInternet-readyhighschools
• Sufficientpower
• Computerlabortabletsforstudents/teachers
• Trainedteachers• Ongoingsupport• ICTTeachingmaterial&plan
Internetbandwidth
Educa-onportal
Computerlab&
upgrades
ICTTeachertraining
ITHelpdesk
Lastmileconnec-vity
Keyelementsforsuccess• Ecosystemfor
schoolconnecJvity
• PartnershipwithMinistryofEducaJon
USF
Educa-onMinistry&thirdpar-es
53
ReasonforICTcapacitybuilding:Only23%ofdatausersreallyusetheInternetforinformaJonsearches(LirneAsia/MIDO)
54
• TownshiphospitalinMatupi• 1doctorand1denJst,27healthcarestaff,
50beds• Have2donateddesktopcomputers,both
notworking• 1laptopthatworks,thedoctorusesit• HospitalhasnoInternet• Have2landlinephonesbuttheydon’twork
forcallsoutsideofMatupi–hegoestotheWiFiInternetcaféintown
• UsesVibertocommunicatewithChinstateadministraJonandMinistryofHealth
• Sendstextandaphotooftypedreport• Heuseshisownmoneyforthese
communicaJons,nobudget• DepartmentofHealthInformaJonSystem
–2personsa}endedatraining,butcan’tuse
55
Nextsteps
ByApril:
• DraeUniversalServiceStrategy• DraeGuideforestablishingUSF• DraeOperaJngManualforUSF
InMay:
• NextconsultaJonInJune:
• Finalizeallthreedocuments
