www.terabitconsulting.com www.terabitconsulting.com Broadband Infrastructure in Broadband Infrastructure in North Asia and Central Asia North Asia and Central Asia Markets, Infrastructure, and Policy Options for Markets, Infrastructure, and Policy Options for Enhancing Cross Enhancing Cross ‐ ‐ Border Connectivity Border Connectivity Michael Ruddy Director of International Research Terabit Consulting
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Broadband Infrastructure in North Asia and Central Asia · • Terabit Consulting’s published reports include: – The Undersea Cable Report (1,500+ pages) – International Telecommunications
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Broadband Infrastructure in Broadband Infrastructure in North Asia and Central AsiaNorth Asia and Central Asia
Markets, Infrastructure, and Policy Options for Markets, Infrastructure, and Policy Options for Enhancing CrossEnhancing Cross‐‐Border ConnectivityBorder Connectivity
Between June and November 2013, Terabit Consulting performed a detailed analysis of broadband infrastructure and markets in 7 strategic markets in No. & Central Asia:
Scope (contScope (cont’’d.)d.)• The data and analysis for each country included: Telecommunications market overview and analysis of
competitiveness Regulation and government intervention Fixed‐line telephony marketMobile telephony market Internet and broadband market Consumer broadband pricing Evaluation of domestic network connectivity International Internet bandwidth International capacity pricing Historical and forecasted total international bandwidth Evaluation of international network connectivity including
terrestrial fiber, undersea fiber, and satellite Evaluation of trans‐border network development and
identification of missing links Identification of key highway and rail projects
Sources of DataSources of Data• Terabit Consulting has completed dozens of demand studies for submarine and terrestrial fiber networks worldwide– Constant contact with operators, ISPs, and other stakeholders
• Terabit Consulting’s published reports include:– The Undersea Cable Report(1,500+ pages)
– International Telecommunications Infrastructure Analysis (1,000+ pages)
• Terabit Consulting’s data and intelligence covers infrastructure, demand, traffic flows, pricing, and market share
International Fiber ConnectivityInternational Fiber Connectivity• The Study identified and analyzed 30 trans‐border fiber optic links in the region– Across borders within the region and at the edge of the region (e.g. to China, Iran, and Afghanistan)
• Some transborder links form segments of multinational networks– Trans Asia‐Europe (TAE)– Proprietary limited‐participation networks such as
• Transit Europe Asia (Rostelecom), TTK Eurasia Highway• Europe‐Kazakhstan‐Asia• Europe‐Russia‐Mongolia‐China (via Mongolia Railway)
– Europe‐Persia Express Gateway (EPEG)• Only one border without connectivity
Part 3: Why a Coherent, Part 3: Why a Coherent, OpenOpen‐‐Access, CostAccess, Cost‐‐Effective Effective PanPan‐‐Asian Fiber Infrastructure Asian Fiber Infrastructure Would Benefit the RegionWould Benefit the Region
In Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan, the development of telecommunications and Internet services, as well as each country’s overall economy, has greatly suffered as a result of weak international infrastructure.
Reason #1Reason #1
Why a Coherent PanWhy a Coherent Pan‐‐Asian Infrastructure Would Benefit the RegionAsian Infrastructure Would Benefit the Region
The Impact of Low International Bandwidth & The Impact of Low International Bandwidth & Weak International InfrastructureWeak International Infrastructure
• At the macro level: a major obstacle to economic and human development– Detachment from digital economy– Continued economic inefficiencies and restrained growth– Lack of access to critical social development tools including telemedicine, distance learning, scientific/research networks
• More specifically within the telecom environment: higher wholesale and consumer prices, and lower broadband adoption rates– Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan:IP Transit >$100 per Mbps per month
• Compared to Singapore: $10 per Mbps• Compared to Russia: $4 per Mbps• Compared to USA: $1 per Mbps
Despite their developed international connectivity, the three wealthiest markets in the study (Azerbaijan, Kazakhstan, and Russia) would greatly benefit from improved pan‐regional terrestrial fiber.
Reason #2Reason #2
Why a Coherent PanWhy a Coherent Pan‐‐Asian Infrastructure Would Benefit the RegionAsian Infrastructure Would Benefit the Region
PanPan‐‐Regional Fiber Would Also Benefit Wealthy Markets Regional Fiber Would Also Benefit Wealthy Markets
• Pan‐regional fiber would compensate for existing shortcomings of the countries’ international networks and help to place them on a par more connected markets in Western Europe, Southeast Asia, and North America– Russia’s submarine connectivity is limited to adjoining regions
– Existing Europe‐to‐Asia transit infrastructure can’t compete• Stimulating demand in Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan would benefit entire region– By creating larger addressable opportunities for neighboring markets, in telecom as well as other sectors of the economy
– Increased demand for Russian content• 96% of Uzbek users visit Russian‐language websites• 90% of downloaded content in Kyrgyz Republic is Russian language
Coherent pan‐Asian terrestrial fiber optic infrastructure would benefit markets across the continent and beyond, and help address one of the international bandwidth industry’s most pressing concerns, namely the lack of reliable, cost‐effective Europe‐to‐Asia bandwidth.
In financial terms, the viability of constructing coherent pan‐Asian terrestrial fiber optic connectivity can likely be guaranteed by capturing even a small portion of bandwidth demand between East Asia and Western Europe.
Reason #3Reason #3
Why a Coherent PanWhy a Coherent Pan‐‐Asian Infrastructure Would Benefit the RegionAsian Infrastructure Would Benefit the Region
A PanA Pan‐‐Asian Terrestrial Network Would Be More Asian Terrestrial Network Would Be More Competitive than EuropeCompetitive than Europe‐‐Asia SubmarineAsia Submarine
Submarine Terrestrial
Connectivity Cable station to cable station, with expensive backhaul
POP‐to‐POP
Repair Faults take weeks to repair; ships running costs $50,000+ per day
Networks accessible by highway can be quickly repaired at low cost
Capacity and Upgrades
Long‐haul limited to 8 fiber pairs; submerged electronics poses limitation
Unlimited capacity with proper duct installation and maintenance
Costs Unrepeatered 3‐fiber pair cable: $12,500 per km, marine services $20k‐$40k / km
$1,250 per km with marginal fiber costs of as low as $60 per km
Risk and Reliability
No viable alternative to Egyptian bottleneck
Mesh configuration could offer “five nines” if properly designed
Part 4: The Case for Installing a Terrestrial Part 4: The Case for Installing a Terrestrial PanPan‐‐Asian Fiber Optic Network Asian Fiber Optic Network Along Highway RightsAlong Highway Rights‐‐ofof‐‐WayWay
Major Investments in Transport InfrastructureMajor Investments in Transport InfrastructureCountry Major Upcoming Transport Investments
Azerbaijan ‐ Modernization of all major highways by 2015.‐ Baku‐Tbilisi‐Kars railway (with access to Europe).
Kazakhstan ‐ USD$19 billion in new highways by 2014, focusing on China‐to‐Asia. ‐ New China‐Europe rail link.
Kyrgyz Republic
‐ Bishkek‐Osh‐Sary Tash North‐South highway will undergo a USD$800 million reconstruction over the next five years.
Russian Federation
‐ By 2020, Russian Federation expects to build or reconstruct 7,400 kilometers of federal highways and 6,700 kilometers of regional and municipal roads.
Tajikistan ‐ Construction and improvement of several hundred kilometers of roads, especially linkages with China, has been undertaken with funding from the ADB and the Chinese government.
Turkmen‐istan
‐ Improvement of highway links to Turkmenbashi is anticipated as part of EU’s TRACECA program.
Uzbekistan ‐ May, 2013: Uzbekistan and the ADB signed a loan agreement for USD$220 in financing for the country’s national highway project.
‐ Nov., 2013: Uzbekistan and China signed an agreement for a USD$400 million loan to include construction of rail linkages to China.
Installing Fiber within a Road ProjectInstalling Fiber within a Road Project• In the US (high labor‐cost market), conduit+fiber installation during open road construction costs between USD$6,000 and USD$18,000 per kilometer
• Road installation costs at least USD$1.8 million per lane, per kilometer
• Cost of fiber network installation during open road construction: much less than 1% of project total
Market Failure: Broadband DivideMarket Failure: Broadband Divide• The analysis showed that the growing chasm between the broadband “have” and “have‐not”markets results in vast differences in:– international fiber connectivity– domestic connectivity– the pricing of IP transit capacity– the competitiveness of telecommunications and Internet market
– fixed and mobile broadband infrastructure– the affordability of consumer broadband services
• This impacts overall economic growth and development.
• Landlocked markets can’t compete using the existing trans‐border (bilateral) infrastructure.
The Need for InterventionThe Need for Intervention
Intervention (by government or int’l. organizations) is required to ensure the implementation of a pan‐Asian terrestrial fiber optic network for 5 reasons:1.To overcome the region’s vast broadband inequality and assist landlocked nations.2.To ensure that the region receives broadband services on a par with more developed markets.3.To finance or assist in financing a major capital project that is unlikely to be fully financed by the private sector.4.To pool and leverage private‐sector resources which are disparately insufficient.5.To stimulate and facilitate future private investment through market development and maturation.
Available PublicAvailable Public‐‐Private Partnership OptionsPrivate Partnership OptionsSpecial Purpose Vehicle (SPV) Model with Government/Organizational Shareholding
•Network operators form a special purpose vehicle to assume full responsibility for the development, operation, and maintenance of the pan‐Asian terrestrial network. •Government, organizational, and/or developmental entities make capital contributions to the SPV and receive equity stakes and/orcapacity on the network. •The contributor(s) receive a seat on the board of the SPV, thereby ensuring that policy goals are achieved.•A regulatory framework is adapted to ensure that the SPV’s outcome fulfills policy goals and improves the overall welfare of the region. •The contributor’s equity stake may be divested once certain milestones are achieved, or alternatively may be held until the winding‐down of the SPV.
Special Purpose Vehicle (SPV) Model with Government/Organizational Contribution•Network operators form a special purpose vehicle with full responsibility for the pan‐Asian terrestrial fiber optic network.•The government, organizational, and/or developmental entities make capital contributions to the SPV.•The contributor(s) do not receive equity or capacity on the network.•However, the contributor(s) do participate in the creation of the SPV’s governance framework, and receive a seat on the board of the SPV.•Mechanisms are instituted to ensure that policy goals are met.
Build‐Operate‐Transfer (BOT)•Following an open tender process, a concession is granted to one or more network operators for a fixed long‐term duration (typically 20 years).•The network operators are assigned full responsibility for financing, operating, and maintaining the cable.•Certain market privileges may be accorded to the network operators.•The operators are allowed to retain all revenues during the period of its concession.•Once the concession agreement expires, ownership of the network is assigned to the government(s) at no cost.
Awarding of Project Management Contract•A tender is issued to select one or more network operators responsible for the construction, operation, maintenance, and commercialization of the pan‐Asian terrestrial fiber optic network.•The contract recipient is paid to manage the cable and assume these responsibilities, including the sales of capacity to operators. The contract recipient’s management fees may be fixed or based on a percentage of revenue.•The network remains the property of the Government(s), which collect all profits (less management fees).
Stakeholder Participation is KeyStakeholder Participation is Key
• The Study (pp. 34‐38) identifies more than 100 potential stakeholders in North and Central Asia that should be involved in the project, including:– National Regulatory Authorities
– Incumbent Operators and Major International Gateway Operators
– Competitive Telecommunications Operators and ISPs
– Road and Railway Authorities/Operators
• Suppliers and contractors should also be consulted in the development stage.