1. 1 Monday 14 March 2011 Windhoek, Namibia Leona Mentz ITU Expert Validation Workshop Session 4.2: Presentation of the Toolkit

2. Introduction SADC nearing 50% mobile voice penetration rates BUT Most rural & high cost areas remain under served, Internet and broadband not addressed significantly The Toolkit discusses: Understanding & Setting up Universal Service Funds Alternative Funding for Projects Programme and Project Design Monitoring & Evaluation Regional Harmonization 2 How to - Guide

3. Understanding USAFs Why set up a Fund? only one of a number of methods of financing depends on the project and the country context depends on the definition of universal service & access Important to implement SADC Ministerial Decisions, and critical to ensure ongoing relevance Understanding and Analysis of Market is required What should be achieved (definitions)? Where and who are eligible (services, convergence)? Important considerations from an implementation perspective: What programmes and projects are to be pursued? How is the money disbursed? 3

4. Understanding USAFs Successful Funds embrace the following key principles: 4 OBA Good Governance Alignment with Regulatory & Policy framework Technology neutral Market orientation, sustainability & entrepreneurship Decentralized bottom up planning & project definition Innovation & localization of projects & processes Total Cost of Ownership approach

5. Setting up a USAF Best established in a liberalized market: Clear institutional framework for the Fund Clear, pro-competitive licensing regime Fair interconnection regime A framework for infrastructure sharing and facility leasing; Effective and efficient spectrum management regime; and Harmonization with regional and global approaches and standards 5 US/UA Guidelines and other CRASA Guidelines deal with this extensively

6. Fund Management The Ministry A division of the regulator A separate agency An independent third party Fund Must have (at a minimum): 6 Reporting Procedures.Full time Fund AdministratorSeparate Board of Trustees Own Bank Account

7. Fund Management Accountability: Transparency & Trust Efficiency 7 Toolkit provides some recommendations (with accompanying examples) Separate accounting Operating procedures Governance framework Annual report & auditing

8. USAF Funding Variety of sources: Government general budget, Levy imposed on industry, as a percentage of annual revenue Regulatory sources such as the proceeds of license competitions, frequency spectrum auctions and fees. Once-only contributions from government Consumers Level of funding : Range from 0.02% to 6% 8 Policy Driven Market Driven

9. USAF Funding Regulator Surpluses Seed funding from Donors Govt Funding 9 SADC mostly Levies on operators could be coupled with Approach has been primarily market driven Best Approach to determine level of contribution: -Consultative process -Put maximum/range in legislation not actual % - Review levies periodically

10. Financing of Projects: Utilization of Funds (Challenges) 1998-2006, only 26 percent of USAF funds collected globally had been redistributed to the ICT sector for use on universal access projects 10 Slow Funding: Fund is located with the regulator (not prioritised) Speed of the political process, governments fail to pass enabling legislation, or hold back approvals for funds to be spent Significant time needed to design, evaluate and assess and implement projects Projects often considered public investments & subject to lengthy approval processes Disbursements may be subject to additional constraints from third party organizations such as donors

11. Financing of Projects: Utilization of Funds (Opportunities) Best practice: Legal framework encourage efficiency & transparency & enable speedy Fund disbursement Fund should be given sufficient autonomy to disburse funds A clear Delegation of Authority Framework should exist across the organization Fund should have clear continuous and ex post reporting requirements Funds should have a maximum amount that can be rolled over from one year to another without eliciting a review of the USAF contributions Only collect money when structure in place to disburse 11

12. Designing Programmes & Developing Projects 12 Understand the Status Quo: Current policy and regulatory tools to meet defined targets and objectives; Short and medium term policy changes impact the ICT environment Current infrastructure and infrastructure requirements to meet the defined targets; Infrastructure roadmap of operators using all types of infrastructure and technologies; Market dynamics and demand analysis Impact of non-ICT factors such as electricity, roads and access

13. Designing Projects Well Designed projects : Targeted Measurable Sustainable Successful Projects: Commercially successful (i.e. successful from a market perspective) and Successful from a developmental perspective. 13 Focus on demand and needs as well as on supply and socio-economic impact.

14. Types of Projects Infrastructure Projects: the network should be open and provide universal coverage in the area concerned. the amount of the compensation for rolling out the network cannot go beyond what is necessary to cover the additional costs to deploy the network in non-profitable areas. Last Mile Access: Infrastructure sharing 14 Funder (Private, public, PPP etc.) Funding (Subsidies grants, loans etc.)

15. Types of Projects: School & Library Connectivity Projects Connecting Schools Connecting Communities 15 Funding Schools DIRECTLYFunding Schools INDIRECTLY -Well measured -Focused on areas -Focused on communities -E-rate -Infrastructure Sharing -License obligation

16. Types of Projects: Community Access Projects Cyber cafes, telecentres & information access points Sustainable Project is Demand Driven 16 Funder (Private, public, PPP etc.) Funding (Subsidies grants, loans etc.)

17. Types of Projects Content and Applications Projects 17 Funder (Private, public, PPP etc.) Funding (Subsidies grants, loans etc.) ICT sector strategies focus more on broadband uptake Becomes critical to focus on culturally and linguistically sensitive information

18. Type of Projects: Pilot Projects Objectives Document for a pilot project Objectives – what is the thesis being tested Project Team – who from the Fund and its partners is involved in the pilot? What are the roles and responsibilities? Sample and Sample size – what is the location/population/technology/etc being tested and why? Timeframe – provide a start and end date Budget – what is the budget? Who is paying for what portions (if a partnership) Monitoring and Evaluation Overlapping Projects 18 Funder (Private, USF, Other etc.) Funding (Subsidies grants, loans etc.)

19. Calculating Cost of Universal Service and Access Cost analysis will require: Market data which is below national level ICT access levels – which is more micro that national penetration levels Geographical information on the project area Population centres and population 19 Two of the more user friendly cost models: World Banks ICT voice Model Public Access Broadband Model Two of the more user friendly cost models: World Banks ICT voice Model Public Access Broadband Model

20. Calculating Costs: Recent Modeling Trends Most common approaches to arrive at cost: Use of cost information to approximate the maximum subsidy and Use of benchmarks derived from available local, regional and international information 20

21. Process Issues: Eligibility for Funding Eligible Bidders Cannot distort the market Eligible Areas competitive market interest 21

22. Process Issues: Eligibility for Funding State owned entities: No fundamental problem with government owned companies being awarded projects if the process followed has been transparent and fair New Entrants & Small Players: May be inadvertently excluded due to lack of experience i.e. requirement for 5 years experience in bid… Non-licenced Companies: Open to debate…. 22

23. Process Issues: Awarding Subsidies 23 Once off/encourage cost savings/optimal results/good governance Smart Subsidies incentivized to bid a cost that is as close to the actual cost of service provision Reverse Auctions award the funds to the operator that provides the most comprehensive service for that subsidy Fixed Subsidies

24. Process Issues: Bidding Documents Pre-bidding Documents In Process Documents Post Process Documents 24

25. Monitoring & Evaluation Monitoring & Evaluation defined Benefits of Monitoring & Evaluation Link between Monitoring and Project Design Examples such as World Bank 10 step Monitoring & Evaluation process Design Mistakes established through M & E 25

26. Regional Harmonization Role of CRASA: promoting the harmonization of universal service provide capacity building on Fund management compile annual statistics and indicators to assist the 14 members to measure the success or otherwise of the Funds 26

27. Conclusion Intended to be a practical guide Highlight important areas to consider from Fund establishment to Fund disbursement Provide case studies and examples as a reference 27

28. Thank You! Leona Mentz Director: Policy and Regulation Pygma Consulting lmentz@pygmaconsulting.com Tel: +2711 783 1210 www.pygmaconsulting.com 28