Is this what NOFN was Meant to Do?

Another article appeared today in the Economic Times about NOFN/BBNL  plans to acquire an ISP license to provide e-services based on Wi-Fi in rural areas.

I had written earlier about the proposal to provide Wi-Fi for India's rural local Government offices and my worries on this count. 

Firstly focusing energies on the Village Panchayat Telephone or Government sponsored Common Service Centres(for internet) has not met with notable success in the past. What has succeeded  is the creation of a conducive environment for services and applications to flourish on a commercial basis.

 Thus, in the pre-mobile revolution era, India's subsidised Village Public Telephones which were supposed to be the village life line were often found to be lying in disrepair or being used as private phones of rural elite but once wireless appeared on the scene, commercially run public phones did roaring business.

Secondly, I fail to understand why the Government must select the technology and service provider to deliver e-Government services to citizens. If this was bid out with desired specifications, the lease cost solution could be selected. This would be conistent with the regulations laid down for Universal Service Funding in India

Thirdly, public money (USOF) is being used to fund NOFN/BBNL's OFC roll out which was meant for areas that markets would not serve. Thus, the network was to provide high capacity backhaul from villages to blocks on a non discriminatory basis. NOFN was never meant to be a service provider. If the argument is that its viability is uncertain, well, that is exactly why it is being fully subsidised. If  USOF was to float another tender for broadband access in non viable areas, then the selected access providers would need  back haul and BBNL would get its business and revenues. Ignoring competitive neutrality today means a heavy cost in terms of poor telecommunications in the future. We have already seen this pan out in the case of fixed lines and rural broadband in India.Should we be repeating the same mistakes?

Please also see my posts on NBN and lessons for NOFN.

Limiting Public Funding to Access Gaps

It is reported that the fact Sing Tel Optus has plans to roll out fibre to the  "basements of apartment buildings and shopping complexes [ and use] [t]he existing copper wiring within the buildings .. to deliver faster, NBN-like broadband speeds is being seen as a threat to NBN's viability. There are apparently other operators with similar plans too.

My question is why should the Government sponsor/fund NBN like roll outs in cities where markets may (and will) serve customers? Why should NBN's business model have factored in markets where competition cannot be ruled out?

It has been stated that,

Breaking NBN Co’s business model could force it to be reclassified from a profitable investment to a multibillion-dollar expense on the federal budget... NBN Co’s entire business model ran on the assumption of a flat national price for all customers. Labor’s NBN was designed to act as a cross-subsidy system where the higher revenues generated by city users paid for broadband in the bush.

This business model was discarded with the onset of  competition in  erstwhile monopolistic and fixed line based telecoms markets across the world. I have written earlier about the flawed and "Back to the Future" feel of ambitious National Broadband Plans based on incumbent centric National Broadband Networks.

Again there are lessons for India's NOFN which is basing its arguments of veering way from its original mandate of strictly (actual access) gap filling based on similar fallacious business viability models.

The NBN Debate Continues-Lessons for India's NOFN?

It is reported that an independent review of NBN ordered by the new Coalition Government of Australia has found that NBN costs and time lines have been understated and revenues overstated.

The news report states that,

"'The  full cost of Labor's original National Broadband Network plans would blow out by $29 billion and be completed three years late, the strategic review has found.

Communications Minister Malcolm Turnbull released details of the review he started 60 days ago on Thursday.The review found the fibre-to-the-premises NBN under Labor would have cost $73 billion, $29 billion more than forecast, and not be completed until 2024.It also found the current NBN Co corporate plan had overestimated revenues from the network by $13 billion.While the review found the cost and timing of the original plans would blow out, Opposition communications spokesman Jason Clare challenged the review's findings.He released an internal government analysis of the Coalition's plans, which he said revealed the new government's plans were "the wrong approach", and would not achieve the promised speeds.

Mr Turnbull has pledged download speeds of 50mbps by 2019 under the Coalition's plan, which will rely on copper connecting to fibre nodes, rather than brining the higher-speed fibre direct to all homes.

But Mr Clare said the analysis should the two stage approach - with 25mbps promised by 2016, expanding to 50mbps by 2019 - was unworkable.

He said the government's fibre-to-the-node plan would lower revenues from the network by 30% and the actual cost of fixing the existing Telstra-owned copper network, and was "unknown".

But Mr Turnbull said the review found the Labor network was "never achievable", and the results of the review would be "a crucial input into government policy".

Clearly the debate can go on forever. Nevertheless a mid term policy/projectreview and corrective steps are a good idea for any ambitious national broadband network roll out. India's NOFN/BBNL is already in difficulties. Ironically though it is being heavily subsidized because it is supposed to be financially nonviable and the PSU SPV route was chosen to cut red tape in Right of Way and other such causes of delay; the three PSU implementation partners in charge of this project are now citing the very same reasons for their difficulties and delays. Time for a review of costs and revenue projections and last but not lease scheme design? 

USOF India-Problem of Plenty

My last post suggested that perhaps USOF India needs to consider a review of regulation to ensure a level playing field. It should not become a another channel for funding the incumbent operator. The idea of the Universal Service Levy was in the nature of pay or play i.e. it would go back to those operators who participated in rural roll out. However the exception of funding the PSU incumbent by nomination rather than designing schemes for tendering is becoming the norm and private operators continue to expand their rural market share at the cost of the incumbent at their own cost!

A news item titled "USO Fund: Higher levy, lower allocation" bemoans the rising collection of USL and quotes an operator association (GSMA) as follows:

“[The USOF} needs to align the funding demands made on operators with its funding needs and with the financial state of the operators, seeking alternative funding sources where appropriate. It also needs to develop clear, transparent policies that are aligned with defined short- and mid-term milestones. USO policies should also focus on needs not met by markets,” 

Of course the NOFN project shall take up the lion's share of accumulation of USL and this project given on nomination basis to a SPV of three PSUs is already showing the typical signs of time and cost overruns. 

NOFN Veering Away from its Core Objective?

In a post titled BBNL and Competition Neutral Broadband Funding I had mentioned the proposal to make India's USF funded rural broadband back haul provider into a service provider.

In an article from the Economic Times it is now learned that BBNL is likely to acquire only an Internet Service Provider license. While this is better than it trying to become a unified service provider it is not what a state funded broadband back haul network is supposed to do. It would become difficult to regulate BBNL's wholesale bandwidth and ensure a level playing field vis-a-vis its own service provider arm. 

As regards the lack of interest among ISPs to venture into rural areas to provide internet, I would not agree with the justification provided in the article. The whole idea of NOFN/BBNL was to eliminate the high speed and bandwidth back haul issue and to allow private and public players to provide last mile access (with this problem taken care off). If the Government was to provide the latter too, the funding may as well have gone to the incumbent BSNL by way of budgetary support instead of creating another PSU monopoly.

A proper study and public consultation process would be in order before assuming a lack of interest  in tapping the rural market among India's multiple  ISP's. (392 as per Department of Telecom's website). There are competition issues here which invariably mean issues realting to long term health of the sector.

BBNL and Competition Neutral Broadband Funding

The Economic Time reports that BBNL(NOFN) which is at present an infrastructure provider may acquire a unified license and become a service provider. This broadband network funded by USOF India was to provide OFC connectivity to 2.5 lakh village panchayats (local self government offices) up to block level as private operators were not likely to cater to this market segment.

It is reported that,

"The government is looking to "revise BBNL's mandate" as it wants it to directly deliver high-speed broadband services down to the district level to maximise utilisation of NOFN infrastructure, which is the communications ministry's biggest telecom venture.

The immediate plan is use the NOFN resources to build a "government-user overlay network" — akin to a virtual private network — for delivering a host of citizen-centric e-services to bridge the digital divide across rural India.

The DoT has proposed joint funding of the "proposed overlay network" by the Universal Services Obligation Fund (USOF) and the ministry of rural development. It wants USOF to handle the entire upfront capex payout — pegged at Rs 3,750 crore — and the rural development ministry to handle opex over a 10-year span - estimated at about .`1,860 crore a year - putting the total cost at Rs crore, excluding taxes."

In my previous posts on National Broadband Plans and incumbent centric, public funded Broadband Networks I have highlighted the importance of competition and avoidance of market distortions or recreation of monopolies. I believe that if BBNL were to complete roll out and the government was to focus on            e-government services (applications), a host of private and public sector telecom service providers would step in to provide last mile connectivity for broadband enabled services on commercial considerations.

In fact it has recently been reported that India has croseed the billion mark as far as e governance transactions go. Also that, "[w]ith more parts of the country getting connected through the National Optic Fibre Network, industry watchers expect more citizens to be accessing government services over the internet. ... The network has been launched in pockets of Rajasthan, Andhra Pradesh and Tripura, with some 80,500 transactions already recorded."

Basic Broadband Now Universally Available Across Europe

As per an EC press release, Europe has achieved 100% coverage as far as basic broadband goes.

"Vice President of the European Commission, Neelie Kroes, today welcomed the milestone achievement of one of the main goals of the Digital Agenda for Europe:

“My motto is Every European Digital – now every European genuinely has the opportunity. We have more to do to improve networks and equalise the opportunity, but the opportunity is there.”

"Thanks to the extra coverage provided by satellite broadband, we have achieved our 2013 target of broadband for all. That's a great result for European citizens.

How we got to 100 % coverage?
Fixed (ADSL, VDSL, cable, fibre, copper) 96.1%
Mobile (2G, 3G, 4G) 99.4%
Satellite 100%

By the end of 2012, 99.4% of EU household had access to basic fixed or mobile broadband coverage; including 96.1% of households in rural areas. But the final 0.6% (or roughly 3 million citizens) included many families and businesses in isolated or rural areas where fixed or mobile broadband rollout is more cumbersome and expensive."

Going further,

"The Digital Agenda for Europe (DAE), has set a goal to make every European digital and ensure Europe's competitiveness in the 21st century. Essential to this goal is fast connectivity and the DAE broadband targets:

basic broadband for all by 2013;[achieved]
Next Generation Networks (NGN) (30 Mbps or more) for all by 2020;

50% of households having 100 Mbps subscriptions or higher"

 It is true that public funding has played a major role in these achievements but it is noteworthy that the same is subject to careful ex ante scrutiny to avoid market distortions that can harm the sector in the long run. I am of the opinion that India has a lot to learn from the EU's regulations in this regard.

Broadband Market in India

It is reported that,

"BSNL [with 9.97 million broadband subscriber[s] with continues to lead the table of top five internet service providers followed by Bharti Airtel (1.43 million), MTNL (1.10 million), Hathway (0.37 million) and You Broadband (0.32 million) till the month of July.

According to the data released by  the Telecom Regulatory Authority of India (TRAI), total broadband subscriber base in the country has increased from 15.19 million at the end of June 2013 to 15.24 million at the end of July 2013.

“This is a monthly growth of 0.33%. Yearly growth in broadband subscribers is 3.79% during the last one year (July 2012 to July 2013)”, it said. "

That for a country of 1.2 billion this broadband penetration is negligible and that the market is far from competitive is evident. Please see my previous posts on this issue such as,

-There is More to Broadband than Physical Infrastructure,

-Avoiding the Recreation of Monopolies in the Age of Superfast Broadband,

-Continuously Declining Wire Lines in India,

-Access Regulation as Important as nationwide Backhaul

and many others under the labels USOF India and Broadband Networks

Relevant Markets of the Future

It is interesting to think of broadband which people like me have already likened to a bridge across infrastructural gaps as being treated as a substitute to transportation, not for purposes of competition  law jurisdiction as my title may suggest, but at least as a competitor for public funding. 

Thus, a post titled "Building railways not broadband is a ‘strategic mistake" quotes a Microsoft personnel as saying that "The UK government is making “a strategic mistake” investing billions of pounds into railways rather than broadband." The said executive has criticized  "the government for not investing into the technologies needed to make mobile working a reality for more, instead sticking with the traditional investments for the commute to work. “The one negative fact about the future is the current and previous governments think we need to build railways instead of broadband infrastructure and networks,” 

I am not sure that the two investments are mutually exclusive for a country like U.K, but certainly one can envisage that the future would be one where mobile work or tele-commuting predominates. One can quite easily stretch one's imagination to a scenario where the broadband becomes more important than the railways when it comes to interacting with co-workers.

In developing countries broadband already compensates for lack of roads, hospitals, schools, work opportunities, social services etc.  My articles on the subject can be seen here.

National Broadband Plans-The Largely Un-examined Competition Debate

I recently came across a very interesting post on the subject of competition in OFC roll outs. This well written post by Paul Budde argues that (in the Australian context but extrapolating through examples to the international context) either we do not really need infrastructure competition in OFC infrastructure or at least it is not a very practical possibility. He cites USA and Europe as examples of lack of nation-wide fixed line competition.

It would take much more than a blog post to analyse his arguments but I would like to make one simple counter argument. Why must we have a nation wide network? In vast countries like India, USA and Australia even regional or sub regional fixed networks would be a feasible option. In non viable areas, competitive service provision may be seeded by Universal service funding. Please see my post on the Indian USOF model at Broadband Networks through the Infrastructure Sharing Route. This model did succeed in creating potential competition to the incumbent with USOF subsidy even in a remote region of the country. Other posts on infrastructure sharing could also be viewed. 

Perhaps the inability to fathom such a model comes from historical reasons wherein in almost every country the incumbent managed to protect its monopoly by harping on the economies of scale issue and the best option with the state was to regulate prices etc. Regulating monopolies cannot solve inefficiency and lack of drive to innovate that plagues all monopoly service provision. Readers are invited to read my previous posts on NBN and NOFN. Today both networks are delayed and mired in roll out problems. There is a news item about NOFN planning to impose heavy penalties on its vendors who are delaying roll out. Need I say more. I have written earlier cautioning against the faddish nature of national broadband plans and the fact that they are likely to recreate monopolies with the usual set of associated problems.

Also, unlike Mr Budde, I am not so sure that mobile networks can ever be considered perfect substitutes for fixed lines. European regulators seem to agree with me.  

I do agree that service level competition is very critical, but as far as competition in broadband goes, if it is there at every level-all the better. 

Access Regulation as Important as Nationwide Backhaul

I have been repeatedly stressing on the importance of competition as a means to ensure not only universal service and access to telecommunications but also sustained growth of the telecommunications sector.  Even in situations where there is  platform competition, due attention needs to be paid to competition is copper line access networks. 

As reported in a news item from Telecomputer.com 

"Access regulation remains a necessity in the Netherlands to ensure effective competition between fixed networks, according to a report from Ecorys for Tele2. Most EU countries have just one national access network, based on copper. Regulation is aimed at creating a 'ladder of investment', providing alternative operators various ways to deliver services. The tariffs and conditions should be structured in such a way to encourage alternative operators to invest in their own networks and equipment, allowing them to differentiate their offering, according to the report. The last step on the ladder is deploying a competitive local loop. 

In the Netherlands, the country benefits from DSL, cable and FTTH infrastructure for broadband. The roll-out of fibre will mean an eventual end to the use of the copper network. The telecom regulator has always found that "two is not enough" with the copper and cable networks and supported third-party providers with wholesale access regulation. The report concludes that access regulation will remain necessary to support this in future and during the transition to fibre. "

For the market to remain competitive, competition on copper must continue, and the position of alternative DSL providers such as Tele2 and Online must be protected. This should include access to a regulated virtual local access service and a continuation of subloop unbundling.

Competition in  last mile connectivity is particularly important in developing countries like India where platform competition is very limited. The Indian situation is that unbundling is not mandated and has not taken place and 3G wireless services are largely unavailable in rural and remote areas. USOF  India's wireless broadband scheme that would have introduced competitive provision of the same in rural areas was criticized by the regulator as being premature and in conflict with 3G roll out obligations and never took off. This is one of the major reasons for the minimal wire line broadband penetration in India. 

Please also see my previous posts on Wire Lines in India, Broadband Networks, National Broadband Plans and Competition

Public Funding of Incumbent-Centric Broadband Networks

In a post titled, "Incumbents and national Broadband Networks-Broadband Deliver U.K Project" under the label "Broadband Deliver U.K Project" I had written about U.K's Public Accounts Committee's criticism about lack of competition in choice of implementing agency for this project. Another recent news item  talks about PAC's doubts about misuse of public funding. There are allegations of predatory pricing and misguiding/ intimidating customers in local markets.

Fears have been expressed about recreation of BT's monopoly in fixed line broadband. A telling critique goes as follows, " There are many other providers around the country which are delivering future-proof networks today, both in the community sector and the private sector. All of those face the danger of being overbuilt – having their networks overbuilt by BT turning up with state funding. That seems to be entirely the wrong way round.”

This is the point I make in my posts about National Broadband Plans. I believe that public funding of incumbent-centric optic fibre roll outs is a classic case of repeating past mistakes. It goes against competition and will ultimately affect long term growth, innovation and customer service.

The Importance of Being Connected

I quote below from two studies.They highlightsthe importance of connectivity for political, social and economic development and underline how ICTs help bridge the lack of infrastructure in developing countries, thereby contributing to citizens' empowerment and growth.

The first is  "Measuring the Impact of Broadband on Income" by Ericsson. The second is a study by Vodafone Institute for Society & Communications titled "Mobile Technologies the Digital Fabric of our Lives."   The first study focuses on impact of broadband access and speed on income. It indicates inter alia that for Brazil, China & India(BIC), even a 0.5 Mb broadband connections increases household income by USD 800 per annum. Further, "[i]n  BIC countries, upgrading from 0.5 to 4 Mbps increases income by USD 46 per month." (Access to more sophisticated services " boosts personal productivity and teleworking and telecommuting allow for more flexible work arrangements."

A longer quote (below) from the second study reiterates the importance of mobile phones which continue to predominate in countries like India with very low fixed line penetration.

"In developing countries, mobile phones have changed everyday lives for many people. Often, mobile phones are the only accessible and functioning infrastructure. As a result, it is unsurprising that people have become inventive by using their mobile phones to replace or create other societal and economic institutions thatwere inefficient or sometimes non-existent. M-Pesa, for instance, has enabled millions of Kenyans to transfer money without having to travel. It is the most successful mobile banking service in the world, but by far not the only one: around the globe, more than 150 mobile banking systems have been introduced, mainly in developing countries. A similar pattern was found regarding the impact of mobile phone subscriptions on social development. 

• [M]odels show that more mobile phone subscriptions correlate with more democratic participation, less gender inequality and more time in education. Our results support this evidence on the macro-level across a sample of 202 countries. They show a significant relationship between the number of mobile phone subscriptions and the voice and accountability index, which is taken as a proxy for democratisation. This relationship is more pronounced in developing countries as there is naturally more scope for improvement in relation to political participation. 
• Women and girls are often the most vulnerable members of communities in developing countries. Their access to the outer world is often very limited and they have to cope with numerous hurdles. First and foremost, they have to ensure the health and well-being of their families and changing their traditionally assigned roles is often the only way forward. The connectedness and   communication without intervention by (male) others can facilitate such a change and reduce gender inequality. Our model across 148 countries supports this idea based on macro-economic data. It shows that with increasing mobile phone subscriptions gender inequality decreases. Again, the effect is most visible in developing countries.
• Mobile phones can have two major types of effects on education:the most direct impact is the use of education via SMS texts or mobile applications, which can reach children as well as adults tend to be larger in developing countries. 
•  In practice, mobile phones fill the gap that other poor or non-existent infrastructure in these countries leave wide open. It is therefore not surprising that many innovations related to mobile phones are adopted more quickly in developing countries than in developed countries. 
• Finally, mobile phones are often the first and only way of communication without having to travel under difficult circumstances. 

The Economist says it Best

I am an ardent fan of the Economist magazine and have been reading it for decades. I love it for its language and  variety. A recent article titled, "A World Turned Upside Down with a catch line" Giant state-owned firms have fallen back out of fashion" captures an important lesson in economics (which I hapr on frequently in this blog) in a most engaging fashion with pop music analogies and irreverent certainty of its line of argument.

It states that,

"These vast organisations are not going away; most still make huge profits, often boosted by cheap public funding. But governments must recognise that the slump in their valuations is a sign they are allocating capital badly. That is in no one’s interest. Petrobras has made a baby step by allowing outside shareholders to appoint a director, while China sometimes mutters about modest reforms of its industrial fiefs. But the hybrid model of a firm beholden to both investors and politicians is as full of contradictions as Karl Marx said capitalism was. Privatisation is the best way to resolve these tensions. Businesspeople, at least, can now be a little less dazzled by state firms. To outlast the average pop star’s career, companies need a culture of innovation, financial discipline and, increasingly, global reach. These are things only a few managers are able to deliver—and which no government can."

I have nothing against the public sector but I do feel that a level playing field is imperative for healthy growth of a liberalised sector/economy. I am against ill analysed public funding of PSUs and believe that they must compete (and be allowed to compete) on equal terms with private counterparts to create value for customers. This applies also to Broadband Networks and National Broadband Plans. 

There is more to Broadband Penetration than Physical Infrastructure

This is a theme that runs through by blog. In this case I am speaking not only about broadband enabled services and capacities of stakeholders but also the need for a vibrant market with multi-stakeholder participation and abundant competition at every level, infrastructure, services and content.

An article in the Economic Times titled "Why Broadband is Stuck"  by Mr Pradip Baijal, draws attention to the heavy reliance on PSU incumbents in India to the detriment of outcomes. An example cited by him is the present NOFN scheme which is still in the roll out phase. He speaks about the need for sharing available infrastructure including the aspect of unbundling available fixed line infrastructure. There is also a mention of spectrum sharing. 

What this boils down to is Telecom Regulation. I have argued time and again in  this blog about the need for regulation to keep customer interest in focus and that encouraging competition is one of the best ways of doing so. As regards, the regulatory issues in universal access to broadband services in the Indian context, my article titled "Universal Service Policy in India-Theory and Practice" pointed out the damage done to rural wire line and broadband penetration by regulation that favoured the incumbent at the cost of competition and growth  of services. This paper was written in 2010 but we perhaps have not progressed much in practice as is evident from USOF India's current activities.

Broadband for Sustainable Development

Sustainable development demands that economic growth is inclusive and balanced in terms of trade offs between short term gains and long term consequences.

Broadband Commission's new report,  “Transformational solutions for 2015 and Beyond"  explores the importance of broadband for sustainable growth. It states that,

" while national broadband plans increasingly recognize broadband’s role in socio-economic development, much more needs to be done to support this ‘invisible technology’ transforming our world. A regulatory environment that encourages widely accessible and affordable broadband deployment is the only way to realize its potential to advance sustainable development – for example through proactive policy on spectrum and the protection of inventions.

As far as comprehensiveness of National Broadband Plans goes, the figure below is telling

Inclusion of Socio-Economic Elements in National Broadband Plans 2013

Encouragingly more and more countries include education, employment and health as important elements in national broadband plans. However, the lack of emphasis on universalizing access is evident from the last 4-5 bars. Broadband cannot work its magic unless it is universally accessible, relevant and affordable.

The report makes 10 recommendations to fully leverage the potential of broadband in this regard:

1. Make ICT and high speed broadband universally available at affordable cost for all.

2. Ensure that ICT and broadband are embedded in all of the universal goals and national targets to be defined as part of the Post-2015 global development agenda to fully capture transformative, sustainable solutions.

3. Deploy national development policies and plans to actively drive cross-sector integration of economic and social outcomes deliverable and scalable through ICT and broadband.

4. Create a streamlined and enabling regulatory environment for the broadband era that accelerates removal of barriers to market entry for broadband ICT uptake.

5. Provide consumer incentives and harness government procurement to drive demand and stimulate private sector innovation and investment.

6. Twin broadband innovation and investment with sustainable multi-stakeholder business models to capitalize on the transformative potential of universal ICT

7. Drive the game-changing potential of mobile broadband through the optimized use of radioelectrical frequency spectrum for universal ICT for development penetration

8. Promote the utilization of global standards to enable the harmonization and interoperability of ICT and broadband-enabled services and applications, putting special emphasis on affordability and accessibility.

9. Establish a comprehensive monitoring framework for broadband deployment and robust accountability mechanisms to track development progress via industry-wide broadband ICT metrics and indicators.

10. Develop appropriate solutions to maximize resource mobilization, innovation and investment in broadband for both developed and developing countries.

The report also analyse broadband's actual and potential role in achieving sustainable development goals such as ending poverty, hunger and gender inequality and provides best practices from across the globe.  

Please also see previous posts on National Broadband Plans and Broadband Ecosystemhttp://ictsforall.blogspot.in/search/label/Broadband%20Ecosystem

NBN-Changes Ahead

Australia's Financial Review carries an article titled "Coalition mulls NBN Co split to speed construction"
The new government is considering creating two separate entities -one in charge of construction and the other,operations. This article stats that,

The proposal comes as the NBN rollout struggles to ramp up and meet its targets. Under Labor, the NBN rollout missed several key construction targets. NBN Co’s 2012 corporate plan forecast it would pass 359,000 homes and businesses with fibre by June 30, 2013, but it only reached 207,500 premises.

The delays were frequently blamed on labour shortages, planning issues and a range of other problems that resulted in dissatisfaction among unions, contractors and sub-contractors.

Leaked internal forecasts showed NBN Co was set to miss its target of connecting fibre-optic cabling to 1.13 million existing homes and businesses by June 30, 2014, by 273,065 premises.

Service Stream, one of the key companies building the NBN, reported a 672 per cent fall in net profit as it pulled out of the project.


My views on massive  incumbent-centric state sponsored broadband roll outs can be seen under the labels National Broadband Plans, Broadband Networks. I believe lack of competition is a major concern in such initiatives. 

Mapping Broadband Availability-CAF

Detailed mapping to establish market failure before universal service/state funding is resorted to is a wise step which is economical and would also create less market distortions. Indian USOF does this for many schemes but the results are not available in the public domain. They should be.

A news item reports that, In USA, a  "[t]]he FCC has released an interactive map of the 600,000 or so homes and businesses getting broadband thanks to the second round of funding in phase I of its Connect America Fund (CAF) broadband subsidies.That will give independent telcoms information with which to challenge those funds if they believe they are going to areas already served by broadband. The FCC points out that the map could change due to those challenges.The Connect America fund [CAF] is part of the commission's effort to transition Universal Service Fund monies from traditional phone subsidies to broadband. The FCC last month announced that over $385 million had been requested by providers in 44 states. Now it is identifying where they will provide service down to the census block level as part of an effort to insure the money is not used to overbuild existing service.Phase I money goes to incumbent telcos in the best position to get expand quickly to unversed areas."

The mapping is a great idea, but favouring the incumbent is one I am not so much in favour of.

South Africa's Plans for a National Broadband Plan

It has been reported that at a recent industry event with the theme of "Broadband – A Catalyst for Sustainable Economic Development and Promoting Digital Inclusion" the need for better policies, "collaboration between stakeholders," vertical separation and demand side measures like "ICT Skills Development, digital literacy programs for students and adults, IT resources and training"  and the" need to move to impact and creating an ecosystem … and mesh together supply side and demand,” have been emphasized by participants from government and industry.

This echoes much of what has been agreed internationally as posted earlier under National Broadband Plans and Broadband Networks. 

An earlier report about the Government's plans for broadband expansion and reactions of the industry may be see here.

http://www.zdnet.com/can-south-africas-grand-broadband-plan-succeed-7000007165/

An extract as below indicates that the 3 options being considered are similar to those which may have been considered by many a nation and certainly same as those considered in India. (Please see post titled "Broadband Networks through the Infrastructure Sharing Route"

"The government currently owns a number of assets in the telecoms market – including long-distance infrastructure provider Broadband Infraco and a 39.8-percent share in South Africa's fixed-line incumbent Telkom. The state now wants to work with the private sector to build a wholesale national broadband network along open-access principles. With around 3.5 million PC broadband connections and 10 million smartphones between South Africa's population of more than 51 million, the country is far from achieving its goal of universal access by 2020.

Though there are many broadband expansion projects underway, they are fragmented, and a comprehensive, centrally planned strategy is essential to boosting broadband in South Africa .., three funding options for the national network [are]:

• Financing a state-owned enterprise.
• Incentives for operators to offer services in economically unattractive rural areas.
• Equity and incentives provided by government could be ring-fenced in a special purpose vehicle."

The public consultation paper on National Broadband Policy suggests that for OFC backbone the incumbent (Telekom) will play the lead role in providing whole sale access even though service competition will be encouraged in service provision to customers . The document lays a welcome emphasis  on developing the broadband ecosystem.

Responsible Policy Making Needs Sound Regulation

I was impressed by an article published in the Times of India today- "Muddling through Food Security" by Ashok Gulati, Chairman of Commission for Agricultural costs and Prices. Writing about the recently passed food security bill, this economist has succinctly explained the pitfalls of the food subsidy programme proposed to cost Rs 1,30,000 crore at current prices. He has stated that it will probably not achieve its objective of better nutrition, but will drive up our fiscal deficit while diverting precious funds from other critical areas such as sanitation, drinking water and female education needed to address malnutrition and health in our country.  Commenting that, "the art of policy making lies in achieving desired ends with minimal costs" he has pointed out that instruments like conditional cash transfers can achieve desired ends much more efficiently without distorting agri-markets.

I draw attention to this contentious issue as an example of India's desperate need to mandate a full fledged, transparent economic analysis of state funded schemes. Tax payers have a right to know that we are achieving short term growth and equity in efficient ways that will not cause long term harm to our economy. We do have a lot of debate in the media and in the parliament, but it should be based on a structured analysis of the proposed regulation backed by hard facts and figures that policy makers own up responsibility for. Decision makers may not then find it so easy to ignore rationality in favour of other considerations. Placing hard facts and figures in the public domain would empower citizens.

My blog concerns ICTs penetration. This issue is relevant for that as well. In a developing country like India, we have less than satisfactory institutional capabilities, leading at times to less than efficient policy making even when we have sound inputs from within and outside policy making bodies.Regulation that mandates transparent economic analysis and placement of the full justification for policy measures in the public domain can in my view counter regulatory capture and rent seeking.

Take the example of subsidising Universal service.  I have written earlier about USOF India's proposed scheme to subsidise mobile devices.  If regulation mandated a transparent socio-economic cost benefit analysis of this measure necessitating justification that this is the only/best way of increasing mobile penetration among the rural poor, it would help policy makers make better decisions. 

Another  area where much improvement is required in Indian policy making, is that economic analysis of a policy has to capture a much larger canvas as.  has been painted for us by Mr Gulati in his article. We have to  examine the impact of policy making on the sector and economy as a whole rather than conveniently bury our heads in the sand. This reminds me of my concerns about state funded broadband roll outs. Previous posts can be seen under the labels Competition , National Broadband Plans and Broadband Networks.