Introducing broadband: Investment conditions, regulatory challenges and quality issues Rohan Samarajiva Telecoms World South Asia Dhaka, 8-9 October 2008

Agenda  What is the scale of the challenge?  South Asia’s mobile voice success story: What worked? Implications for quality  Lessons for broadband? Implications for  Investment  Regulation  Quality

The challenge  Give the currently unconnected access to the many functionalities of the Internet, including Communication in multiple forms Information retrieval Publication Transaction  All problems can be solved if hardest problem can even be partially solved

PakistanIndiaSri LankaPhilippinesThailand Use the Internet 1.9%0.3%1.5%8.8%10.4% Large gender divide, even in South East Asia The hardest problem: Bottom of the Pyramid

…what Internet at the BOP??

South Asia’s success story: Mobile voice  Lowest prices in the world  Among the highest EBITDA margins ... suggesting, a different business model Budget telecom network model, analogous to budget airline model

Low prices and...  Four South Asian countries + Uzbekistan have the lowest Total Cost of Ownership (TCO), according to Nokia Four out of 5 with total cost of ownership < USD 5

high profits* (enabling continued investment & rapid rollout) Revenues (USD ‘000) EBITDA (USD ‘000) EBITDA margin (%) Banglade sh 655,900344,50053 Sri Lanka259,042124,83348 India26,723,6749,938,34137 * 2007

The business model  Driven by hostile external conditions, low purchasing power and pressure from disruptive competitors, South Asian operators have Discovered a new “budget-telecom- network” business model and Implemented service-process innovations that enable exploitation of long-tail markets  Revenue-yielding minutes not ARPUs  high minutes of use and high EBITDA margins

Increased network utilization  Driven by radical price reductions and effective service design and marketing yielding higher use by those at the top of the pyramid and increased minutes from those at the bottom of the pyramid

Long-tail markets and reduced transaction costs  Prepaid and the ability to buy in ways that fit earning patterns of daily/sporadic earners was key

One consequence  Because of high loading of networks quality of service is likely to be spotty  However, this being a necessary feature of the model, excessive quality regulation could have prevented/delayed its discovery/ implementation

Lessons for broadband

Recognize that not everyone has regular income  New prepaid voice model recognizes that income is irregular at the BOP and comes in small increments: “chota recharge”  Broadband pricing should follow; all- you-can-eat, flat-rate pricing models will not work at BOP Should it be based on time (easier to understand) or on volume of data?

Unbundle the mobile Internet  The Internet is a meta medium, which includes multiple functionalities  those who are starting may not require all the functionalities and may not be able to pay for all at first

165/5/2015 Some broadband services and significance of quality ThroughputDelay Service DownUpRTTJitterLoss Browse (text) Browse (media) Download file Transactions Streaming media VOIP+++++ Games highly relevant, ++ very relevant, + relevant, - not relevant

Keep costs (and prices) down  Low prices are key, but cannot be sustained unless costs are also lowered  This would, most likely, require economizing on links to the Internet cloud Domestic access network is not the problem now

2 Mbps Sri Lanka download speeds (Business Packages) within ISP domain… > 75%

Download speed Sri Lanka and Singapore (accessing International servers) > 75%

Where is the bottleneck (Sri Lanka)? NB: Upto 5 th hop IP addresses are within SL ( 65 ms 25 ms 170 ms 10 ms

RTT from Bangladesh- Submarine Cable vs Satellite (international sites)

Download Speed - Sirius Broadband (256 kbps Shared)

Upload Speed - Sirius Broadband (256 kbps Shared)

Options  Buy more international capacity, and/or  Do a lot of mirroring Can this be done within the region?  And, encourage locally hosted content Given nature of mobile broadband (possibly more P2P content), this may be a significant factor

Regional mirroring?  The route to (hosted in USA) from Colombo takes roughly milliseconds with 11 hops  To next-door India (ww.yahoo.co.in), takes roughly the same time and 17 hops to Mumbai via Singapore and Chennai  Unless these links are improved, not much benefit from regional mirroring

Quality adequate to purpose at affordable prices  If voice quality is atrocious and price is high, will people buy voice services?  But when service was offered at quality adequate for purpose and at low prices, the market flourished and enabled needed investment  This is the key to broadband success, though the quality problem is more complex than was with voice