1. Wireless & development in the Asia Pacific: Institutions matter Rohan Samarajiva, with contributions from LIRNEasia team High-level workshop, Annenberg Research Network on International Communication, Oct 7-8, 2005

2. www.lirneasia.net www.lirneasia.net Agenda  Wireless and development  Wireless in the Asia Pacific Backbone Mobile & “fixed” Mobile data WiFi  The strange case of Indonesia  Regulatory environment Spectrum management incl. refarming  Importance of investment

3. www.lirneasia.net www.lirneasia.net How do South Asians on less than USD 100/mo. communicate? Fixed (49%) Mobile (19%) ‘Public’ access (66%) 21% 2% 11% 3% 23% 3% 37% Base: 3199

4. www.lirneasia.net www.lirneasia.net Survey (3200 sample, 6 languages, 11 locations)  Surveys in India (2099) & Sri Lanka (1100)  Not representative of India and Sri Lanka as wholes  ‘Users’  those who have used a phone in the last three months  ‘Financially constrained’ users:  Monthly household income < USD100  Socio-Economic Classification (SEC) groups B,C,D & E  Mix of urban (37.5%) and rural (62.5%) respondents

5. www.lirneasia.net www.lirneasia.net Tech Development: Not by communication (wireless) alone Development Enabling/complementary conditions Communication Coordination Knowledge Other communication inputs ICTs/ Tech enabling sync interaction/ Info seeking/publ’n Capital Wireless Other inputs

6. www.lirneasia.net www.lirneasia.net Asia Pacific: Wireless in the network  Wireless in the backbone (digital microwave & satellites)  Mobile telephony is most visible manifestation of wireless in the access network A-P is now the largest mobile market in the world, overtaking N. America in 2003  Growth rate of 31% (v. 13% in N. America) But mobile/100 was only 16 compared to 52 in Europe & 35 in the Americas  Signifying potential for more growth  Mobile > fixed in many A-P countries (Afghanistan to Taiwan) More than ITU data shows, e.g., India

7. www.lirneasia.net www.lirneasia.net Mobile/100 & CAGRs high-mobile Asia Pacific (end 2003)

8. www.lirneasia.net www.lirneasia.net India, fixed & mobile growth, 1991- 2005

9. www.lirneasia.net www.lirneasia.net Mobile/100 & mobile as % of total in high-mobile Asia Pacific, end 2003

10. www.lirneasia.net www.lirneasia.net Wireless in the access network  Much of current “fixed” growth driven by wireless CDMA 800/1900 for voice CDMA 450 & other standards for data overlay networks  Claim that 77% of world’s mobile data users are in AP (may be more with recent 3G launches in Taiwan, etc.)  Claim of 21,000+ WiFi hotspots in AP in 2003  Strange case of WiFi in Indonesia

11. www.lirneasia.net www.lirneasia.net Typical ISP Network Infrastructure Network Access Network Twisted copper pair ADSL Dialup Fiber optic Link to higher tier ISP ISP A ISP B ISP C Coax cable Cable modem

12. www.lirneasia.net www.lirneasia.net Network Reality-Indonesia Infrastructure Network Access Network Neighbourhood Network $35/pm Corporate Customer $200/pm UTP Cable ISP A WiFi 2.4 IIX Ethernet Ring Microwave ISP B ISP C Ethernet School B School C Wifi 5.8 WiFi 5.8 House School A $4000/pm (Internet link+ international bandwidth) ADSL UTP Cable

13. www.lirneasia.net www.lirneasia.net Strange case of Indonesian WiFi  WiFi deployment Not inside home; not available for free Blurring of access and infrastructure network; used as backbone; up to the curb WiFi, last mile aerial cable Many tiered retailing of Internet service…. WHY? To recover high input costs  In addition to “last mile,” need to recover domestic & int’l leased line and interconnection costs

14. www.lirneasia.net www.lirneasia.net What gave rise to strange network configuration in Indonesia? Regulatory environment Non-independent regulator  Two regulatory bodies: DG POSTEL & BRTI  DG POSTEL is unit of Ministry of Communication & IT  BRTI under-staffed, powers under transition, chairman is DG of DG POSTEL Exclusivity clauses extending historical monopolies  Indonesian govt owns 51% share in PT Telkom & 15% in Indosat plus “golden share” Licenses prevent ISPs from deploying infrastructure No local loop unbundling  Exclusivity until 2015 No regulation of leased lines  Few suppliers, refusal to deal, high prices, quality

15. www.lirneasia.net www.lirneasia.net Market environment Lack of competition in infrastructure sector Resulting in high leased line prices High international backbone prices Proliferation of unlicensed “reseller- ISPs” Telecom services Telecom operations Fixed wireline local Exclusive right 1996-2010 PT Telkom Fixed domestic LD Exclusive right 1996-2005 PT Telkom Fixed wireless local Limited competition (Satelindo) Fixed international Duopoly 1995-2004 (Indosat, Satelindo) Mobile Competitive (Satelindo, Excelkomindo, Telkomsel etc.) Internet service provision Competitive Currently 124 ISPs official, 54 unlicensed No competition Limited competition Competitive

16. www.lirneasia.net www.lirneasia.net Annual leased line prices: 2Mbps link Data compiled from Lokanathan, lirneasia.net, EU 10 th report, interview with Indonesian ISP & Network Service Provider Ratios India EU 1:47.9 1:3.8 Ratios India EU 1:5.9 1:4.9 2Mbps link2km200km IndonesiaUS$ 18,000US$ 45,000 IndiaUS$ 376US$ 7,603 EU Benchmark (Denmark) US$ 4,802US$ 9,219

17. www.lirneasia.net www.lirneasia.net Institutional aspects of wireless  Current quasi-property rights regime Bundle of rights, less right to alienate  Except by selling the licensee firm Use highly constrained (e.g., specific standards, power, polarity) Therefore significant role for effective spectrum management by government  Government responsible for refarming of frequencies Quasi-property rights require consent of/compensation for displaced users

18. www.lirneasia.net www.lirneasia.net Hypothetical refarming process StepMain policy actionsParallel policy actions 1Government sets overall policy and authorizes negotiations with seven operators (O 1 – O 7 ) 2System and frequency license modifications negotiated (Modifications include removal of technology restrictions from O 1, O 2, etc.; and may include extending license term of O 4 (which will gain no benefits but has to yield frequencies 3 & 3AO 4 and O 5 release GSM 900 frequencies; O 1, O 2, and O 3 will also be requested to agree to phased release of frequencies to enable overall ordering of the bands 1800 MHz Tender Board releases funds for band clearing (some 1800 MHz frequencies have been auctioned to GSM operators) 4 & 4AO 6 assigned GSM 900 frequencies & releases CDMA 800 frequencies 1800 GSM and 1900 CDMA bands fully cleared 5 & 5AO 1, O 2, and O 3 assigned CDMA 800 frequencies Auction frequency slots that may be used for CDMA 1900 or GSM 1800 to current operators but possibly also to newcomers

19. www.lirneasia.net www.lirneasia.net Difficulties with refarming for unlicensing  In many countries, 2.4 GHz and 5 GHz bands have occupants who require coordination/relocation In India, EESS (active) and SRS (active) services in 5250–5570 MHz band In Sri Lanka, high-powered MMDS broadcasts on either side of 2.4MHz band which is also used by data licensees for 10+ years  How to find the money to pay off users who are to be moved? Beneficiaries of unlicensing cannot be asked to pay

20. www.lirneasia.net www.lirneasia.net Spectrum management is not enough...  For WiFi to be effective in the access network, backbone must exist & be offered on non- discriminatory basis at reasonable prices  Data or voice communication is a chain As fast as the speed of the weakest link; if link is broken, no communication In these markets, sustainable prices determined by input costs  ISPs require access to backbone In some countries only access regime needs improving In others, need to create incentives for building as well

21. www.lirneasia.net www.lirneasia.net Spectrum management is not enough...  In addition Market entry Interconnection and access Effective regulation of competition  Investment is what connects people

22. www.lirneasia.net www.lirneasia.net Investment is necessary condition for improved access Wireless

23. www.lirneasia.net www.lirneasia.net Investment is necessary condition for improved access Wireless Access + Backbone Fiber + fixed access

24. www.lirneasia.net www.lirneasia.net Wireless investment

25. www.lirneasia.net www.lirneasia.net Without effective policy/regulation, inadequate/skewed investment...

26. www.lirneasia.net www.lirneasia.net Where the money has gone... Private investment in telecom 1990-2003

27. www.lirneasia.net www.lirneasia.net What is needed...  Market entry permitted Case of Bhutan  Environment for investment created Regulatory risk reduced  Participation by multiple suppliers enabled Level playing field

28. www.lirneasia.net www.lirneasia.net In sum...  WiFi vision of developed countries is possible only because of fully developed backbone and access network Enabled by environment conducive to investment, including effective regulation  Without institutional conditions, little/no WiFi outside developed enclaves  Technology matters; but not without appropriate institutional conditions