Kenya's Broadband Plan

It is good to read that Kenya is creating a 30 billion shilling venture fund (through sale of bonds) for broadband roll out. It is reported that, "Under the broadband strategy, the government plans to double its fiber-optic network to 60,000 kilometers (37,282 miles) by 2017 and provide free and subsidized laptops and mobile phones." Apart from government's budgetary commitments, private investment is also expected to rise substantially over the next decade. Another interesting development is the proposed merger of  "three state agencies, Government Information Technology Services, the Directorate of e-Government and the Kenya ICT Board, into a single entity to be known as the Kenya ICT Authority, Information, Communications and Technology." 

They seem to be following a well thought out Broadband Plan which has recently been identified as an important  driver of broadband penetration. The importance and effectiveness of National Broadband Plans has been recently endorsed by the U.N. which has stated that, “There is a need to move from ‘silo thinking’ to a more comprehensive point of view encompassing different sectors, in recognition of the nature of broadband as a cross-sectoral enabler.”

In India better inter agency coordination or even merger would help realize the goals of the New Telecom Poilcy 2012 and National IT Policy 2012 which are at present being implemented by two separate government departments. 

Broadband Networks through the Infrastructure Sharing Route

I had mentioned earlier that we should perhaps be concerned about the current trend of state funding for broadband roll outs. It is often presumed that private sector will not roll out high capacity Optic Fibre Cable (OFC) networks at the speed or with the spread required for desired levels of broadband penetration.

It is true that private sector may need various incentives or even subsidies to venture into less lucrative markets or uneconomical areas. However, in my view, a variety of measures can be taken  that still fall short of state funding or state ownership.

The Universal Service Fund of India (USOF) had initiated two excellent schemes for the remote and relatively backward North Eastern states of Assam,  Meghalaya, Mizoram,  Tripura (N.E I Telecom Circle) and Nagaland, Manipur Arunachal Pradesh (N.E II Telecom Circle) that involve high capacity OFC backbone networks being laid out in rural areas (from district to block level) through Output Based Aid projects. These were bid out (reverse bidding) after a painstaking bench-marking exercise to arrive at the upper limit of subsidy, keeping in view possibility of renting out existing OFC from incumbent operators, apart from laying fresh cable. The resultant network is to be shared by the lowest bidder i.e. designated Universal Service Provider or Host Operator  on non-discriminatory, open access basis with other service providers. The tariff  offered by the USP has to be at a specified rate of discount vis-a-vis the Telecom Regulatory Authority's  (TRAI's) ceiling rates for leasing OFC. Discounts were worked out keeping in view capital cost subsidies, revenue projections and operating cost requirements. The bid for the states of Assam was won by the incumbent fixed line operator BSNL. However interestingly for the N.E states Railtel won the bid even without BSNL's  advantage of ownership of majority of OFC networks. There is a strong possibility that it has relied on back-end agreements for renting OFC from private operators rather than laying fresh cable to achieve its obligations in a cost effective manner. This is permitted by the USOF tender. 

The above Private Public Partnership model could have been successfully replicated for block to village level roll outs too. Given that OFC as a technology/broadband platform is here to stay, adeqaute subsidies on reverse bidding basis could have attracted private capital in many (if not all) bidding units (states/telecom circles). This model was rejected during decision making on the National Optic Fibre Network (NOFN) on the debatable grounds that bench-marking takes too long. Personal experience with the above mentioned schemes tells me that this is not correct and that the benefits of involving a large number of market players in laying of the nation's OFC backhaul far outweigh the effort involved in tendering individual bidding units.  I have mentioned earlier relying on public ownership or funding the incumbent is perhaps more attractive in the short run in terms of  relatively less time and effort required to commence roll outs. However the long term impact of monopoly ownership of even open access networks (on competition and accompanying aspects such as innovation/customer service/technological neutrality) and regulatory burden involved in ensuring open access on continuing basis, merit consideration.

It is interesting to note that Indian telecommunications players are looking at voluntary sharing of OFC networks and setting up joint ventures to invest and manage shared networks as the way forward. This may be happening only in cities and towns at present, but it is a moot point whether this trend would not have been replicated eventually in rural areas if the PPP approach to network roll out had been followed.

As of now 2.5 lakh village panchayats (local government centres) are to be connected through NOFN or the public sector SPV called Bharat Broadband Network Ltd. This roll out would take high speed broadband  to rural India and hopefully revolutionize rural telecommunications. It is hoped that the roll out is achieved on time and  that the resultant network is effectively regulated to ensure open access and a level playing field between participating Public Sector Units (PSUs) and various private entities involved in the broadband eco system. needless to say these supply side initiatives must be accompanied by measures to address other aspects of the rural broadband value chain.   

Another important, not entirely unrelated development is the forthcoming creation of a Telecom Finance Corporation to provide capital to telecom operators in India at internationally competitive rates. This should give a fillip to network and service expansion and will hopefully be used to fund not only infrastructure but also content and capacity building  related projects.