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Introducing broadband: Investment conditions, regulatory challenges and quality issues
Rohan SamarajivaTelecoms World South Asia
Dhaka, 8-9 October 2008
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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
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The challenge
Give the currently unconnected access to the many functionalities of the Internet, includingCommunication in multiple formsInformation retrievalPublicationTransaction
All problems can be solved if hardest problem can even be partially solved
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Pakistan India Sri Lanka Philippines Thailand
Use the Internet
1.9% 0.3% 1.5% 8.8% 10.4%
Internet use
3%
0%
2%
12%
14%
1%0%
1%
6%
7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Pakistan India Sri Lanka Philiphines Thailand
% a
t B
OP
Male
Female
Large gender divide, even in South East Asia
The hardest problem: Bottom of the Pyramid
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Have not heard about the Internet before
36%
72%
29%
14%
36%
0%
20%
40%
60%
80%
Pakistan India Sri Lanka Philippines Thailand
% a
t th
e B
OP
…what Internet at the BOP??
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South Asia’s success story: Mobile voice
Lowest prices in the worldAmong the highest EBITDA margins
. . . suggesting, a different business modelBudget telecom network model,
analogous to budget airline model
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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
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. . . high profits* (enabling continued investment & rapid rollout)
Revenues (USD ‘000)
EBITDA (USD ‘000)
EBITDA margin
(%)
Bangladesh
655,900 344,500 53
Sri Lanka 259,042 124,833 48
India 26,723,674 9,938,341 37
* 2007
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The business model
Driven by hostile external conditions, low purchasing power and pressure from disruptive competitors, South Asian operators haveDiscovered a new “budget-telecom-
network” business model andImplemented service-process
innovations that enable exploitation of long-tail markets Revenue-yielding minutes not ARPUs high
minutes of use and high EBITDA margins
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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
0.88 1.20 1.88 3.58 6.5013.00
33.60
52.17
90.00
166.00
0
2
4
6
8
10
12
14
16
18
Mar-98 Mar-99 Mar-00 `Mar-01 `Mar-02 `Mar-03 `Mar-04 `Mar-05 `Mar-06 `Mar-07
Eff
ecti
ve t
ari
ff (
Rs
./min
)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
Mo
bil
e S
ub
scri
ber
ba
se (
mn
)
Fixed Tariff Cellular Tariff Mobile Subs
NTP-99
Telecom Tariff Order
3rd & 4th cellular
operator
WLL Introduced
CPP introduced
Lowering of ADC from 30%
to 10% of sector revenue
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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
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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
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Lessons for broadband
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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?
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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
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16 04/20/23
Some broadband services and significance of quality
Throughput Delay
Service Down Up RTT Jitter Loss
Browse (text) ++ - ++ - -
Browse (media)
+++ - + + +
Download file +++ - - - -
Transactions - - ++ + -
Streaming media
+ - + ++ ++
VOIP + + +++ +++ +++
Games + + +++ ++ +++++ highly relevant, ++ very relevant, + relevant, - not relevant
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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 cloudDomestic access network is not the
problem now
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2 Mbps
Sri Lanka download speeds (Business Packages) within ISP domain…
> 75%
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Download speed Sri Lanka and Singapore (accessing International servers)
> 75%
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Where is the bottleneck (Sri Lanka)?
NB: Upto 5th hop IP addresses are within SL (www.whois.net)
65 ms
25 ms
170 ms
10 ms
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RTT from Bangladesh- Submarine Cable vs Satellite (international sites)
0
100
200
300
400
500
600
700
800
900
8:15 11:30 15:00 17:30 20:00 22:30
Time
RT
T in
ms
SKYbd, Submarine Cable ADNSL, Satellite
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Download Speed - Sirius Broadband (256 kbps Shared)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
8:15 11:30 15:00 17:30 20:00 22:30
Time
Actu
al S
peed
as a
% o
f P
rom
ised
Local National Global
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Upload Speed - Sirius Broadband (256 kbps Shared)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
8:15 11:30 15:00 17:30 20:00 22:30
Time
Actu
al S
peed
as a
% o
f P
rom
ised
Local National Global
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Options
Buy more international capacity, and/or
Do a lot of mirroringCan this be done within the region?
And, encourage locally hosted contentGiven nature of mobile broadband
(possibly more P2P content), this may be a significant factor
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Regional mirroring?
The route to www.yahoo.com (hosted in USA) from Colombo takes roughly 250-300 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
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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