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1 Windhoek, Namibia 15 March 2010 Mandla Msimang ITU Expert Validation Workshop Session 4.1: International & Regional Best Practice Session 4.2: Selecting,

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Presentation on theme: "1 Windhoek, Namibia 15 March 2010 Mandla Msimang ITU Expert Validation Workshop Session 4.1: International & Regional Best Practice Session 4.2: Selecting,"— Presentation transcript:

1 1 Windhoek, Namibia 15 March 2010 Mandla Msimang ITU Expert Validation Workshop Session 4.1: International & Regional Best Practice Session 4.2: Selecting, Designing & Funding Projects

2 Fund Context Selecting Designing Funding 2

3 Remember…. Badly designed projects and programmes will result in ineffective project implementation, and in some cases a waste of human and financial resources. 3

4 Fund Horror Stories Examples exist of Funds that have: been established in law but are still not operational as many as 5 years later; determined levies, over-collected and under-spent; overspent, i.e. provided subsides for unsuccessful projects, or for inefficient use in projects; become involved in project implementation, through rolling out telecentres and in some cases networks; initiated projects but have not been able to coordinate them amongst different levels of government and different affected government departments (e.g. education, infrastructure, health not made their collections, and disbursements public on a periodic basis; 4

5 Fund Risks The most commonly identified risks facing publically funded projects include: Implementation of projects that distort the market; Creating dependence on ongoing funding; Potential abuse of funds; Favoritism; and Project failures which waste resources , only 26 percent of USAF funds collected globally had been redistributed to the ICT sector for use on universal access projects. Source: 5

6 Latin America Situation Regulatel (2007): in the 13 Latin American countries with Funds, the amounts collected ranged from $1 million in Ecuador to $1,8 billion in Brazil. of the 13 countries, 6 of them had not disbursed any of the monies in the Fund, of the 13 countries 4 had disbursed less than 45 percent, and 3 particularly effective funds in Chile, Mexico and Paraguay had spent over 95 percent of the money collected. 6

7 Today, 9 SADC countries have established Funds in law. 9 have money in the Fund received through either seed funding from donors or government, levies from operators, or surplus Funds from regulator. 7 have undergone processes (competitive bidding, tender processes, or other means) to identify projects and disburse monies to assist in the implementation of such projects. Disbursement levels are low, but exact figures over last 3 years unknown except some cases, e.g. Lesotho 7 SADC Situation

8 Types of US/UA Financing Ownership or Equity Participation, as seen in Brazil, Malaysia and South Africa; Public Private Partnerships, such as the infrastructure deployment projects in Australia, Thailand, Kenya and Tanzania Provision of financial incentives and subsidies as seen in many Latin American countries through the use of USAFs, Japan, the USA and EU through broadband stimulus packages. 8

9 Fund Management Process 9

10 Fund Context Selecting Designing Funding 10

11 Traditional US/UA Funding Framework 11 High Cost Areas Poverty

12 Impact of Broadband on USF 12 There are several developments and considerations influencing the thinking about the future of Universal Service and Access Funds (USAFs), asking the questions: If universal access and service to telephony will be achieved in the near future, how relevant is the USAF model for ICT and broadband?; and How will the move to Next-Generation Networks influence the funding model of USAFs? [1] Is Broadband included in Fund Mandates? Is there a Broadband Policy? What is the difference in approach between Broadband and Narrowband financing?

13 EC Criteria for Determining an Eligibility for State Aid for Broadband 13 0 or unlikely to exist 12 Do not distort the market

14 Objectives Provide a clear framework for state aid assessment, to facilitate investments from public funds in order to bring broadband connectivity to underserved areas Deploy broadband and especially NGA networks more rapidly and more widely, thus avoiding the creation of a new digital divide. due to the conditions laid down for the granting of state aid (such as open access, open tenders) will allow the maintenance of competition 14

15 Outcomes Based Aid 15 Output Based Aid PrinciplesBenefits of Output Based Aid Link payments to delivery Ensure that the subsidy is linked to specific measurable targets Contract services out to a third party which receives a subsidy to meet the stated objectives The Fund pre-finances the project (in tranches) until delivery Subsidies must be performance based – payment is made only after services are rendered and audited Transparency increases efficiency and effectiveness Performance risk is carried by the provider (recipient of funding) and accountability is increased the subsidy (and possibly subsidy award mechanism) incentivize the private sector results can be tracked through a focus on outputs/ results

16 Fund Context Selecting Designing Funding 16

17 Project Types 17 User needs : institutions (e.g. schools and clinics) & targeted population groups such as people with disabilities, low income users and the elderly. Projects addressing infrastructure gaps in high costs areas which typically include rural and remote areas.

18 Projects should be Targeted 18 Information that will assist in the establishment of targets: Baseline data indicating the situation at the beginning of project implementation. When such data is not available, the project should include an activity to collect it from the start. Historical trends in the indicator value over time. What pattern of change has been evident in the past? Is this pattern likely to continue? Stakeholders expectations of progress. Exploring the achievement expectations of all of the partners, as well as the beneficiaries will assist in providing a realistic idea of what can be achieved. Universal Access Expert judgments and research findings. Experts knowledgeable about the programme sector and local conditions as well as research findings are other useful sources of information for target setting. Accomplishments of similar programmes (and projects). Information on what is being done under similar conditions by other agencies and organizations who have a reputation for high performance. Adapted from USAID, TIPS Report, 1997

19 Start with an Exit Strategy Sustainability is frequently linked to the challenge of financing a project Any form of OBA, including the Fund, will seek to make a meaningful, preferably once off intervention to stimulate ICT sector development (infrastructure). When you start a project, it should at the same time have "an exit strategy" or a means to wind down the financial support after a certain period of time. From the beginning there should be clarity on: What the targets are (financial and developmental) When the funder intends to exit/pull out of the project What mechanisms are in place to ensure sustainability? How will the project fund itself in the long term? 19

20 Different Projects, Different Costs Different projects will have different costs and cost structures and thus different financing mechanisms… E.g. infrastructure vs. e-rate vs. computer labs Some dependencies for cost assumptions: Country Project Technology deployment choices Revenue estimates 20

21 Fund Context Selecting Designing Funding 21

22 Infrastructure Projects Funder:Private funding, Public Funding Models including Ownership, Financing Incentives (including USAF), and PPPs (national, local, municipal) Funding: Subsidies, grants, loans, guarantees Last Mile Access - Municipal and Local Authority Networks Funder:Private funding, Public Funding Models including Ownership, Financing Incentives (including USAF), and PPPs (local, municipal) Funding: Subsidies, grants, loans, guarantees, users/community access 22 India – Infrastructure sharing incentives for US/UA projects

23 India – Infrastructure Sharing (1) TRAI - market analysis, est. capital cost of BTS at $120,000, inclusive of building and power equipment. Noted that commercial sharing in urban areas already existed; need to encourage in rural areas to lower costs Incumbent reluctant (owned most rural infrastructure, first mover advantage), smaller operators agreed Proposed (2005) that operators provide coverage commercially in 5,161 towns/cities on their own, using infrastructure sharing. Those in rural/remote areas would receive a one time subsidy from USOF, in 2 installments (maximum USD 30 thousand) per BTS, provided the installed infrastructure is shared with at least one other operator. Subsidies to up to 3 requesting operators to share, 4+ in that area may negotiate other inter-operator settlements. 23

24 India – Infrastructure Sharing (2) 7,871 BTS in 500 districts (27 states) were identified as eligible USOF financial assistance. Serving 212,304 villages and over 48 million households competition was intense with final awards amounting to USD 23 million/year for five years. Average of a total of approx $3,000 per site (1/10 recommended by TRAI and this minimum subsidy amount on offer). Separate competitions for the right to use the infrastructure were made to 3 mobile operators in each cluster. The required subsidy, after the competition, for use of the sites was negative (no need for subsidy, operators willing to pay for use) 24

25 Some Infrastructure Examples Equity Broadband Infraco (South Africa) PPP National ICT Backbone (Tanzania) SEACOM (Kenya) Subsidies India 25

26 School Connectivity Funder: Private funding, Public Funding Models including Financing Incentives (including USAF), and PPPs (national, local, municipal, NGO, donor,etc) Funding: Subsidies, in-kind contributions, grants and loans, community access/user revenues School Connectivity programmes developed in many countries including using a combination of license obligations USF financing, and PPPs, these countries include: Pakistan (linked to successful bidding/funding) Ireland (National Schools Plan) United States (e-rate, specific programme) Some of these funds include specific provisions for school connectivity in their mandates. 26

27 School Connectivity (2) 27 Source: Gesci

28 Driving Demand :Content and Applications In line with definitions of universal service and access that include advanced services, Internet, broadband Financing of content and applications can include funding: Local content production User friendly and graphics based interfaces Local content in local languages Shared content (e.g. tourism, education, e- government) that is locally relevant, where possible to a community level 28

29 29 Mandatory FunctionsBasicStandardAdvanced Number of PCsM>3M>7M>15 Internet AccessM (256 Kbps)M (512 kbps uncontended for all PCs) M (minimum 1Mbps) Collaboration softwareM Videoconferencing software M Web 2.0 access – webcam and microphone M M eSkills Training Services MM M Group training facilities M Pasha Portal accessible MMM Government information MMM Management Information MMM M= Mandatory Source: Cisco IBSG, 2010 Kenya: Pasha Centres/Digital Villages

30 Driving Demand Grants and subsidies for firms and software application developers; to support local content and software applications; laptops for university students (Wezesha) 30

31 Conclusion Make sure the Fund Context is correct in terms of Framework Project Selection Project Design Design relevant and targeted programmes and projects Make your Fund relevant in a converged environment and a broadband world 31

32 Thank You! Mandla Msimang Managing Director, Pygma Consulting Tel:

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