Alternativas de Financiamiento para el Desarollo del Sector y el Cierre de la Brecha Digital

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Alternativas de Financiamiento para el Desarollo
del Sector y el Cierre de la Brecha Digital
III Foro Iberoamericano de AHCIET Movil 28 de
Septiembre, 2005 Mexico
Rob Stephens World Bank Group
() The views presented here are only
those of the author and do not represent, or
should be attributed to the World Bank Group
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Agenda

• The universal access problem
• Affordability and the access gap
• Market Efficiency Gap vs. Access Gap
• Closing the Access Gap
• Financing
• Output-Based Aid (OBA) mechanism
• Examples of Effective Universal Access Programs
• Conclusions and Recommendations

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The Rural Access Problem
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Telecommunications are a key element of economic
and social development ...
Education
Less isolation in poor and rural areas
Health
Financial Sector
Telecommunications Infrastructure
Public Services
Environmental and natural resouces management
Business Services
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Cellular Subscribers per 100 inhabitants, 1990 -
2003
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Main Lines per 100 inhabitants, 1990 - 2003
60.00
50.5
50.00
38.4
40.00
30.00
20.63
20.00
10.61
10.00
0.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
LAC
OECD
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Telecoms in Latin America
Fixed and Mobile lines per 100 Inhabitants
(1990 - 2004)
Source ITU Estimated
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The digital divide is widest between urban and
rural areas
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Rural Gap
Percentage of population with fixed telephone
lines, 2001
28.2
30.0
25.0
20.0
15.7
15.0
10.0
5.0
0.0
Urban
Non-main cities
In 2001, around 432 million Latin Americans did
not have a fixed telephone line, aprox. 359
million were in rural areas.
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there is a pending agenda access gap example
-- Guatemala
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Affordability
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People spend about 2 on phone service
30000
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including rural areas and poor customers
GDP

• Poor people in rural areas often have high
  willingness to pay for phone service (different
  opportunity costs and income measurements)
• Availability is a larger barrier than
  affordability

Source A. Dymond, Intelecon
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The Market Efficiency and Access Gap
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Access Divide the two gaps
Full Market Access Gap
Smart Subsidy Area
Market Efficiency Gap (MEG)
Commercially Feasible
Market Access Gap (MAP)
Current expansion plans
Poverty
Community access
Current individual user access
Geographic Isolation
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How to reduce the gaps?
Develop Universal Access Programs
Full Market Access Gap
Smart Subsidy Area
Market Efficiency Gap (MEG)
Market Access Gap (MAP)
Current expansion plans
Poverty
Remove Legal and Regulatory Barriers
Community access
Current individual user access
Geographic Isolation
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Results of Gap Assessment in Guatemala
Backbone Gap 288 out of 331 Municipalities do
not have backone access
Las Brechas de Eficiencia de Mercado se calculan
quitando a la población urbana y rural no pobre
la densidad total fija y móvil. La Brecha de
Acceso Real es la población rural pobre y pobre
extrema que requiere de subsidio para poder
accesar al servicio (y cuyo gasto en comunicación
sí cubre el costo de OM de TTPP).
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Closing the access gap Universal Access
Financing and Output based aid (OBA) and the
smart subsidy
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Financing options

• Universal access funds, financed by
• government budget
• operator revenue contributions (typically 1-2)
• cellular, basic service or radio frequency
  license fees
• interconnect levies and virtual fund transfers
• Low interest operator loans
• national sources (e.g. USAs REA loans)
• aid agency sources (not a good record)
• Micro loans for phoneshops or other retailers
• e.g. Grameen Bank phone ladies
• part financing by telecom operators

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OBA - Smart Subsidy Approach

• Problem
• Universal services are socially desirable (social
  NPV0) but not always commercially viable
  (private NPV
• Solution
• Provide a one-time investment subsidy for private
  operators willing to provide the universal access
  service.
• Bid the subsidy out competitively to ensure that
  costs are kept as low as possible. Paid over time
  as outputs are provided.
• This effectively leverages maximum private
  investment in achieving universal service goals

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Government defines objectives
Provide 200 public telephones in a certain rural
area, for a one-time subsidy and operate them
for a ten year period at specified minimum
quality standards.
RURAL AREA
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Private operators bid for subsidy
Concession is awarded to consortium requesting
lowest subsidy.
0.5 million
1.5 million
2 million
1 million
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Subsidy paid against investments
Output-Based Aid Subsidy paid as investment
targets are met.
RURAL AREA
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Key Features of OBA Projects in LAC

• Project design aimed at commercial viability of
  concessions
• Max subsidy to make private NPV0
• Tariff structure and adjustments,
  interconnection charges
• allowed at expected traffic levels
• Well-defined roll-out targets for operators
• E.g. Towns to be served/Services to be provided/
  Quality
• indicators/ Contract length
• No exclusivity rights or technology restrictions
• Freedom to provide additional services

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The spread of the model
level of interest
Guatemala
Peru
Colombia
Chile
Nepal
telecom
South Africa
Dom. Rep.
Uganda
(Nicaragua)
Cape Verde (Benin/Togo) (Uganda) (Senegal)
Argentina Chile
electricity
Bolivia (Mexico) (Ecuador)
transport
water
(Paraguay)
income level
upper middle income
lower middle income
low income
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Challenges facing the OBA model

• Government sets objectives instead of operators
  or users
• This problem can be addressed through public
  consultation mechanisms
• Initiatives aimed at enabling operators to
  present proposals
• Challenge is to how design OBA tender on
  competitive basis based on proposals from
  operators
• Slow roll-out of projects and use of universal
  access funds

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Examples of Effective Universal Access Programs
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Nicaragua Telcom reform

• With the assistance of the World Bank,through the
  Telecom Reform Project, Nicaragua privatized the
  incumbent, ENITEL and gave two new cellular
  licenses
• Cellular lines increased from 2 to 8 per 100
  population
• The Project supported the creation of a new
  regulatory framework and regulator, TELCOR.
• A new project to support Sector liberalization
  and rural access.

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Bolivia

• The ERTIC Project aims to deliver rural ICTs and
  electrification to rural areas. IDA Credit of
  20 million.
• The Project will give 1 million rural inhabitants
  access to cellular telephone service.
• Total investment in cellular access is 10
  million, of which the Government will subsidize
  5 million.
• Govt is bidding project areas to the minimum
  subsidy (Output Based Aid)

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COBERTURA DE TELEFONIA
Fija
Móvil actual
Proyecto ERTIC
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Internet Access

• Lower Access rates Example Bolivia
• Extension of Internet Access to rural areas.
  Example Chile

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Regulatel Universal Access Study

• Universal Access Study to assist the 19 members
  of Regulatel to develop and implement more
  effective, targeted and sustainable universal
  access programs, including out-put-based aid
  (OBA) programs.
• Aimed at increasing private sector investment in
  telecommunications and information infrastructure
  in rural and low-income areas in Latin America.

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Conclusions and Recommendations
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Evolucion de Proyectos TICs Rurales

• Segunda Generacion
• Tecnologia y servicios variados
• Telefonos publicos, infocentros, telefonia
  celular y servicios inalambricos (WAP, Wi-Fi,
  Wi-Max)
• Menos apoyo a infocentros y mas apoyo a reducir
  el costo de acceso a backbone (gran factor que
  afecta viabilidad de info-centros)
• Estimular/compaginar la oferta y demanda
  e-comercio, e-gobierno, e-educacion, etc.
• Eliminar barreras legales/regulatorios
• Variedad de subsidios y selección
• Multi-sectorial y integrados
• En algunos paises se esta empezando la transicion
  de aceso universal a servicio universal

• Primera Generacion
• Telefonos publicos y infocentros comunitarios
• VSATs
• Enfoque sobre la demanda
• Subsidio minimo
• Enfoque en expandir la oferta/infraestructura

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Recommendaciones Gobiernos

• 1. Develop e-development/universal access
  strategies Private-sector led-focus
• 2. Market universal access link to economic
  development
• 3. Reduce the market efficiency gap
• Improve and strengthen independent regulatory
  framework and institutions
• Reduce unreasonable taxes on the sector e.g.
  spectrum taxes
• Remove legacy voice-centric regulation simplify
  licensing, interconnection, allow VoIP, more
  unlicensed spectrum and more market-based
  spectrum manangement
• Foster competition

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Recommendaciones Gobiernos (contd)

• 4. Establish effective universal access funds and
  programs
• Clear yet flexible objectives foster dialogue
  with private sector, users and NGOs
• Finance from 1-2 tax on the sector collection
  of funds should be linked to use of funds
• Safeguard independence of universal access fund ?
  within regulatory agencies
• Allocate funds in transparent and competitive
  framework
• Target funds at first to the smart subsidy zone
  -- CAPEX
• Shorten timeline for implementation and execution
  of programs and use of funds
• Create programs aimed at fostering competition
  and emergence of smaller operators
• Consider creating other incentives/programs
  allow operators to prsent proposals, reduce tax
  burden on operators who implement programs
• Micro-loan programs for operators and resellers
  Grameen Phone model
• 5. Stimulate and aggregate ICT demand by
  government e-government, e-education, etc.

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Recommendations Private Sector

• 1. Become advocates for ICT strategies,
  e-government and universal access programs
• 2. Engage in dialogue with regulators and
  universal access funds make proposals and
  participate in universal access tenders
• 3. Mobile companies provide and/establish
  partnerships to provide backbone and internet
  services
• 4. Stimulate more rural users and extend/improve
  coverage of cellular networks in rural areas
• Grameen Phone use of cell-extenders and
  resellers.
• 5. Use a wide-range of spectrum and technologies
  better suited for rural areas
• 6. Large firms can participate directly in
  universal access programs or establish
  subsidiaries or partnerships with small companies
  to enter rural areas to reduce share-holder risk
• 7. Participate and support Regulatel-WB
  universal access project

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Thank you

• For more information
• www.worldbank.org/citpo
• rstephens_at_worldbank.org