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International Telecommunication Union The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU.

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Presentation on theme: "International Telecommunication Union The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU."— Presentation transcript:

1 International Telecommunication Union The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU or its Membership. The author can contacted by e-mail at 1 12 April 2002 International Telecommunication Union Improving IP Connectivity in the Least Developed Countries Background study Claudia Sarrocco Strategy and Policy Unit International Telecommunication Union

2 2 12 April 2002 Outline -Introduction -Background -Vicious circle -Conclusions: barriers -What can we do? Proposal -Virtuous circle

3 International Telecommunication Union 3 12 April 2002 Background Digital divide initiatives - DOT force - UN ICT task force “Improve connectivity, increase [ICT] access and lower cost”

4 International Telecommunication Union 4 12 April 2002 Objective To provide low cost Internet connectivity to LDCs through the utilization of flexible, less expensive and simple technology, like VSATs, engendering a “virtuous circle” which can help reducing the digital divide among countries.

5 International Telecommunication Union 5 12 April 2002 Scope: LDCs Forty-nine countries, with a total population of about 670 million inhabitants, are currently designated by the United Nations as “least developed countries" (LDCs). Cambodia, Gambia, Lao PDR, Mali, Mozambique, Nepal, Rwanda, Samoa and Uganda have been chosen as representative of the LDCs group and will be object of a deeper analysis.

6 International Telecommunication Union 6 12 April 2002 In LDCs problems are more extreme than those of developing countries, and deserve special attention Why Least Developed Countries? There is less than one Internet user per one thousand people, against one user per 36 people in developing countries In LDCs teledensity is 0.59%, compared to 10% in developing countries

7 International Telecommunication Union 7 12 April 2002 Why focus on connectivity? Connectivity is the possibility for a user of an electronic network to communicate with other networks Connectivity is fundamental, as it precedes access to and use of the Internet LDCs have very low levels of connectivity …

8 International Telecommunication Union 8 12 April 2002 International Internet Bandwidth… …is not equally distributed Source: TeleGeography Inc. Data valid for September 2001

9 International Telecommunication Union 9 12 April 2002 LDCs are falling behind… Estimated Internet Users Population Total: 6 billion LDCs: 680 million 10% World: 360 million LDCs: 0.58 million 0.13%

10 International Telecommunication Union 10 12 April 2002 …and failing to catch up Internet users growth rate (56%) in LDCs is only a few points above average growth worldwide (49%) 230% 444% 281% 167% 234% 56% 0 100 200 300 400 500 600 700 199519961997199819992000 Thousands 116% 64% 57% 49% LDCs % growth World % growth

11 International Telecommunication Union 11 12 April 2002 Low growth, high demand 0.2 0.1 0.5 0 10 20 30 40 50 60 70 80 Cambodia Gambia Lao P.D.R. Mali Mozambique Nepal Rwanda Uganda Western Samoa International Traffic International Internet capacity Bit-Minute Index Bit-minute Index: any amount under 1 indicates the existence of latent demand for the Internet (selected countries)

12 International Telecommunication Union 12 12 April 2002 Infrastructure: Limited CountryUplink/downlink capacity Population (million) Lao PDR1.644/ 1.244 Mbit/s5.23 Rwanda1.256/1.5 Mbit/s7.73 Mali2/3 Mbit/s11.23 Samoa512/2.256 Kbit/s0.18 Cambodia3.5/6 Mbit/s13.11 Mozambique1.6/2.2 Mbit/s19.68 Gambia5/5 Mbit/s1.30 Nepal5.5/10 Mbit/s23.04 Uganda4/12 Mbit/s23.30 Proportionate cost per 64 Kbit/s unit/month n.a. USD 1’500 USD 840 USD 625 n.a. USD 625/265 USD 625 n.a. and Expensive

13 International Telecommunication Union 13 12 April 2002 Result: High ISP costs for the end-user ISP charges (month) USD ISP charges (month) PPP

14 This translates into a “ vicious circle” Low international Internet connectivity High connectivity Charges for ISPs Low demand for Internet services Little investment in New infrastructures Low bargaining Power of ISPs Lack of competition No exploitation of Economies of scale No growth of infrastrctures International Telecommunication Union

15 15 12 April 2002 Conclusions: There are many barriers to Connectivity for LDCs Infrastructure:  High cost, low availability Restrictive regulation:  Monopoly of telecommunication sector  Only one provider imposing its tariffs  Limited competition on the end-user side (ISPs) Market Failure:  Small market  Operators cannot benefit from economies of scale  Operators do not have bargaining power to obtain more attractive prices  Latent demand is not satisfied

16 International Telecommunication Union 16 12 April 2002 What can we do?

17 International Telecommunication Union 17 12 April 2002 The proposal Internationally-funded project Objective: to provide VSAT bandwidth to LDCs at low cost This bandwidth would be provided to ISPs

18 International Telecommunication Union 18 12 April 2002 Why target ISPs? - Allows not to bypass local market and local network (less regulatory problems) - ISPs are the most appropriate target for the project, as they already have technical knowledge and equipment to provide services. - Computer services shops and cybercafés could also be targeted.

19 International Telecommunication Union 19 12 April 2002 - Increased bandwidth - Drop in costs - Increased number of users The effect of improved connectivity: Catching up…?

20 International Telecommunication Union 20 12 April 2002 The financing: VSAT costs are still too high for LDCs -Internationally-funded Project structured over 5-7 years, decreasing each year to support bandwidth provision -Financing allocated to ISPs through a competitive tendering process based on the reverse auction system (least cost subsidy): The winner will be the entity providing the service at given conditions with the smaller financing

21 International Telecommunication Union 21 12 April 2002 Summary: How will it work? Connectivity will be provided to ISPs in LDCs Partial funding: ISPs will participate in the financing In exchange for funding they will provide basic access at lower prices to private end-users, schools, etc. In addition, ISPs will be able to make commercial use of part of the bandwidth provided to offer enhanced services to business, foreign entities, etc. At the end of the 5-7 years, with the growth of the user base, ISPs should be able to be completely self-financed, and provide Internet services on a fully commercial basis, at affordable cost.

22 Higher international Internet connectivity Lower costs Higher Demand For Internet services New investment in infrastructures Market growth Bargaining power Economies of scale Market liberalization IP Connectivity Project: virtuous circle International Telecommunication Union

23 23 12 April 2002 Thank you !

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