Broadband Infrastructure in the ASEAN Region: Markets, Missing Links, and Policy Options

 
Broadband Infrastructure
Broadband Infrastructure
in the ASEAN Region
in the ASEAN Region
Markets, Infrastructure, Missing Links,
Markets, Infrastructure, Missing Links,
and Policy Options for Enhancing Cross-Border
and Policy Options for Enhancing Cross-Border
Connectivity
Connectivity
 
Michael Ruddy
Director of International Research
Terabit Consulting
 
Part 1: Background and Methodology
Part 1: Background and Methodology
 
Project Scope
Project Scope
 
On behalf of UN ESCAP, Terabit Consulting performed
a 
detailed analysis of broadband infrastructure and
markets 
in the 
9 largest member countries of
ASEAN:
Cambodia
Indonesia
Lao PDR
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
 
Scope (cont’d.)
Scope (cont’d.)
 
The data and analysis for each country included:
Telecommunications market overview 
and 
analysis of
competitiveness
Regulation and government intervention
Fixed-line 
telephony market
Mobile
 telephony market
Internet and broadband 
market
Consumer 
broadband pricing
Evaluation of 
domestic network 
connectivity
International Internet bandwidth
International capacity pricing
Historical and forecasted 
total international bandwidth
Evaluation of 
international network connectivity 
including
terrestrial fiber, undersea fiber, and satellite
Evaluation of 
trans-border network development 
and
identification of missing links
 
Sources of Data
Sources of Data
 
Terabit Consulting has completed dozens of demand
studies for submarine and terrestrial fiber networks
worldwide
Constant contact with operators, ISPs, and other stakeholders
Terabit Consulting’s published
reports include:
The Undersea Cable Report
(1,500+ pages)
International Telecommunications
Infrastructure Analysis 
(1,000+ pages)
Terabit Consulting’s data and
intelligence regarding infrastructure,
demand, traffic flows, pricing, and market share is
unsurpassed
 
 
Part 2: State of the ASEAN-9
Part 2: State of the ASEAN-9
Bandwidth and Broadband Markets
Bandwidth and Broadband Markets
Int’l. Internet Bandwidth, Initial Research (2012)
Int’l. Internet Bandwidth, Initial Research (2012)
 
Singapore: 1,389 Gbps
Philippines: 560 Gbps
Malaysia: 400 Gbps
Thailand: 463 Gbps
Indonesia: 250 Gbps
Vietnam: 360 Gbps
Myanmar: 14 Gbps
Cambodia: 11 Gbps
Laos: 2.5 Gbps
Int’l. Internet Bandwidth, Preliminary YE14 Est.
Int’l. Internet Bandwidth, Preliminary YE14 Est.
 
Singapore: 3,000 Gbps
Philippines: 1,225 Gbps
Malaysia: 920 Gbps
Thailand: 1,215 Gbps
Indonesia: 600 Gbps
Vietnam: 875 Gbps
Myanmar: 32 Gbps
Cambodia: 22 Gbps
Laos: 13 Gbps
Int’l. Internet Bandwidth per Capita 
Int’l. Internet Bandwidth per Capita 
(Kbps, YE14)
(Kbps, YE14)
900 times difference between Myanmar and Singapore
Countries with 2.5 Kbps per Capita or Less:
SERIOUS OBSTACLE TO DEVELOPMENT
 
Int’l. Internet Bandwidth per Capita in Central Asia
Int’l. Internet Bandwidth per Capita in Central Asia
Difference between Turkmenistan and Azerbaijan: 180x
 
(Kbps)
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Int’l. Internet Bandwidth per Capita in W. and So. Asia
Int’l. Internet Bandwidth per Capita in W. and So. Asia
 
(Kbps)
 
ASEAN: Int’l. Bandwidth Infrastructure
ASEAN: Int’l. Bandwidth Infrastructure
 
Singapore: By far, the strongest in the region
10 interregional submarine cables in service as of 2015,
with 3 more under construction
7 additional regional systems (Malaysia/Indonesia)
Additional fiber via Causeway and Second Link
Philippines and Malaysia: Strong
PLDT has 3 cable stations, Globe has 2, Pacnet (Telstra) has 2
Malaysia served by FLAG, Sea-Me-We-3, SAFE,
Sea-Me-We-4, APCN-2, Asia Submarine-Cable Express, AAG
Time dotCom shareholder in Unity transpacific cable
Thailand: Average
FLAG, Sea-Me-We-3, Sea-Me-We-4, AAG
Vietnam: Below average, but improving
Sea-Me-We-3 was supplemented by TGN-IA (2009) and AAG
(2010)
 
ASEAN: Int’l. Bandwidth Infrastructure
ASEAN: Int’l. Bandwidth Infrastructure
 
Indonesia: Weak
Served by Sea-Me-We-3 but most other infrastructure
routes through Singapore
Myanmar: Weak
Served by Sea-Me-We-3 and limited terrestrial connectivity
Planned Sea-Me-We-4 link via Bangladesh and planned
Sea-Me-We-5 landing point; Mythic also under
consideration by Campana Group (Singapore)
Cambodia and Lao PDR: Very Weak, with no direct
interregional connectivity
Cambodian membership in AAG was too late, relies on
Ezecom backhaul via Thailand and Vietnam
Lao PDR served exclusively by low-capacity terrestrial trans-
border links
International Bandwidth Infrastructure
International Bandwidth Infrastructure
SG: VERY STRONG
MY: STRONG
PH: STRONG
TH: AVERAGE
VN: BELOW AVERAGE
MM: WEAK
ID: WEAK
LA, KH: VERY WEAK
 
The Impact of Low International Bandwidth &
The Impact of Low International Bandwidth &
Weak International Infrastructure
Weak International Infrastructure
 
At the macro level: a major obstacle to economic
and human development
Detachment from digital economy
Continued economic inefficiencies and restrained growth
Lack of access to critical social tools including
telemedicine, distance learning, scientific/research nets
More specifically within the telecom environment:
higher wholesale and consumer prices, and lower
broadband adoption rates
Cambodia, Lao PDR, Myanmar, and Vietnam: $50+ per
Mbps wholesale
Compared to Singapore: $5 to $10 per Mbps
Weak Int’l. Bandwidth Impacts Consumer Pricing
Weak Int’l. Bandwidth Impacts Consumer Pricing
1 Mbps Broadband Connection: Annual Subscription +
Installation as a % of Per-Capita GDP (2013)
Higher Int’l. Bandwidth and/or Better Int’l. Infrastructure
Yields Lower Consumer Broadband Prices
 
Overview of Broadband Status
Overview of Broadband Status
 
Part 3: Identification of Priority Cross-
Part 3: Identification of Priority Cross-
Border Terrestrial Links
Border Terrestrial Links
Priority Terrestrial Fiber Links
Priority Terrestrial Fiber Links
 
High Priority
Lao PDR to Yunnan
Indonesia to/from Malaysia
 
Medium Priority
Medium Priority
Cambodia to Thailand
Cambodia to Thailand
Lao PDR to Cambodia
Lao PDR to Cambodia
Lao PDR to Myanmar
Lao PDR to Myanmar
Myanmar to Thailand
Myanmar to Thailand
Myanmar to Yunnan
Myanmar to Yunnan
Vietnam to Yunnan
Vietnam to Yunnan
 
Envisioned Regional Fiber Network
Envisioned Regional Fiber Network
Based on Priority Trans-Border Links
Based on Priority Trans-Border Links
 
Part 4: The Case for a Holistic,
Part 4: The Case for a Holistic,
Pan-Asian Approach to Network
Pan-Asian Approach to Network
Development
Development
 
Understanding Int’l. Infrastructure in the Region
Understanding Int’l. Infrastructure in the Region
 
The vast majority of traffic is Internet Protocol
The majority of IP traffic is still destined for North
America and Europe (i.e., location of most content)
Intra-Asian demand mostly destined for hubs (e.g. HK)
Bilateral, trans-border IP demand is minimal
Therefore: trans-border terrestrial links should be
viewed holistically, as a means of
Accessing and supplementing interregional fiber networks
Increasing efficiency and equality and reducing prices
Providing redundancy and restoration paths to avoid
submarine cable ‘choke points’
Terrestrial networks should not be evaluated on the
merit of trans-border (bilateral) demand alone
Metcalfe’s Law: The Value of a Network is
Metcalfe’s Law: The Value of a Network is
Proportional to the Square of the Number of Nodes
Proportional to the Square of the Number of Nodes
 
Terrestrial as a Solution for Submarine
Terrestrial as a Solution for Submarine
 
Source: 
The Undersea Cable Report 2015
by Terabit Consulting
 
The global telecommunications industry is 
desperate
 for a
cost-effective solution that would avoid undersea choke points.
 
Overall Weakness of Existing Trans-Border Connectivity
Overall Weakness of Existing Trans-Border Connectivity
 
Limited Geographic Scope
Most terrestrial links are trans-border, point-to-point
The region’s few multi-national networks fail to function coherently
Little or No Network Redundancy
Point-to-point links can only be used by operators who own
alternative pathways; mesh network configuration is needed
Low Transmission Capacity
Typically 10 Gbps or less, preventing economies of scale and placing
existing terrestrial links at a significant disadvantage to submarine
Lack of Open Access and Prohibitive Pricing
Most terrestrial is operated for the benefit of incumbent operators,
and third parties are unable to access the networks cost-effectively
No Viable Intercontinental Terrestrial Bandwidth
Intercontinental traffic is aggregated over vulnerable subsea links
 
Part 5: The Case for Intervention to
Part 5: The Case for Intervention to
Ensure Network Development
Ensure Network Development
 
Market Failure: Broadband Divide
Market Failure: Broadband Divide
 
Terabit Consulting’s analysis clearly reveals that
low-cost, high-speed, and high-quality broadband
services are concentrated in markets that are
wealthy, urban, and/or coastal, while poor, rural,
and/or inland markets are often neglected.
The analysis showed that the divide between the
broadband “have” and “have-not” markets results
in vast differences in:
international fiber connectivity, domestic connectivity,
the pricing of IP transit capacity, the competitiveness of
telecommunications and Internet markets, fixed and
mobile broadband infrastructure, and the affordability
of consumer broadband services.
 
The Need for Intervention
The Need for Intervention
 
Intervention (by government or int’l. organizations)
is required to ensure the implementation of a pan-
Asian terrestrial fiber optic network for 5 reasons:
1.
To overcome the region’s vast broadband inequality.
2.
To ensure that the region receives broadband services on
a par with more developed markets.
3.
To finance or assist in financing a major capital project
that is unlikely to be fully financed by the private sector.
4.
To pool and leverage private-sector resources which are
disparately insufficient.
5.
To stimulate and facilitate future private investment
through market development and maturation.
 
Options for Government/UN/DFI Participation
Options for Government/UN/DFI Participation
 
Available Public-Private Partnership Options
Available Public-Private Partnership Options
 
Special Purpose Vehicle (SPV) Model with Government/Organizational Shareholding
Network operators form a special purpose vehicle to assume full responsibility for the development, operation, and maintenance
of the pan-Asian terrestrial network.
Government, organizational, and/or developmental entities make capital contributions to the SPV and receive equity stakes
and/or capacity on the network.
The contributor(s) receive a seat on the board of the SPV, thereby ensuring that policy goals are achieved.
A regulatory framework is adapted to ensure that the SPV’s outcome fulfills policy goals and improves the overall welfare of the
region.
The contributor’s equity stake may be divested once certain milestones are achieved, or alternatively may be held until the
winding-down of the SPV.
Special Purpose Vehicle (SPV) Model with Government/Organizational Contribution
Network operators form a special purpose vehicle with full responsibility for the pan-Asian terrestrial fiber optic network.
The government, organizational, and/or developmental entities make capital contributions to the SPV.
The contributor(s) do not receive equity or capacity on the network.
However, the contributor(s) do participate in the creation of the SPV’s governance framework, and receive a seat on the board of
the SPV.
Mechanisms are instituted to ensure that policy goals are met.
 
Build-Operate-Transfer (BOT)
Following an open tender process, a concession is granted to one or more network operators for a fixed long-term duration
(typically 20 years).
The network operators are assigned full responsibility for financing, operating, and maintaining the cable.
Certain market privileges may be accorded to the network operators.
The operators are allowed to retain all revenues during the period of its concession.
Once the concession agreement expires, ownership of the network is assigned to the government(s) at no cost.
 
Awarding of Project Management Contract
A tender is issued to select one or more network operators responsible for the construction, operation, maintenance, and
commercialization of the pan-Asian terrestrial fiber optic network.
The contract recipient is paid to manage the cable and assume these responsibilities, including the sales of capacity to operators.
The contract recipient’s management fees may be fixed or based on a percentage of revenue.
The network remains the property of the Government(s), which collect all profits (less management fees).
 
Part 6: Principles to Guide
Part 6: Principles to Guide
Network Development
Network Development
 
Principles to Guide Future Network Development
Principles to Guide Future Network Development
 
1.
Fully integrated and coherent
Mesh configuration to allow for in-network healing in the event of
physical cable outages or political instability affecting connectivity in
specific countries.
2.
Functioning and monitored as single, uniform network
Existing multi-national terrestrial networks cannot offer uniform quality-
of-service guarantees between endpoints (as good as “weakest link” or
“weakest operator”).
3.
Leveraging existing infrastructure
Right-of-way procurement and uniform construction techniques would be
enabled through the use of the Asian Highway network, Pan-Asian
Railway project, or power transmission networks.
 
Principles to Guide Future Network Development
Principles to Guide Future Network Development
(Continued)
(Continued)
 
4.
Cost-effective
With suitable transmission capacity and fiber count, a pan-regional
terrestrial fiber network could compete effectively with submarine cable
on both a regional and intercontinental basis.
5.
Open access and non-discriminatory pricing
In order to achieve development and policy goals, as well as to serve the
region’s consumers, all purchasers of capacity must be able to access the
network on an equal, non-discriminatory basis.
6.
Developed and managed by a Special Purpose Vehicle
(SPV)
SPV shareholding would ensure the neutrality and efficiency of the
network
Allows participation by all stakeholders while still maintaining arm’s-
length terms over all capacity sales and leases.
 
Part 7:
Part 7:
Gaining Support for the Project
Gaining Support for the Project
 
Stakeholder Participation is Key
Stakeholder Participation is Key
 
The study by Terabit Consulting identified 95
potential stakeholders in ASEAN-9 that should be
involved in the project, including:
National Regulatory Authorities
Incumbent Operators and Major International Gateway
Operators
Competitive Telecommunications Operators and ISPs
Road and Railway Authorities/Operators
Suppliers and contractors should also be consulted
in the development stage.
 
Convincing Governments of the Project’s Advantages
Convincing Governments of the Project’s Advantages
 
1.
Benefits to consumers
Myanmar, Cambodia, and Lao PDR: 1 Mbps of consumer
broadband costs 132.8%, 48.7%, and 27.4% of per-capita GDP
Only Singapore and Thailand offered broadband access that is
considered to be truly affordable.
Better, more cost-effective connectivity in the region will greatly
reduce consumer prices in less developed markets and improve
broadband reliability throughout the region.
2.
Economic growth
Improvement in ICT infrastructure yields:
Increased demand for the output of other industries (demand multiplier)
New opportunities for production in other industries (supply multiplier)
New goods and services for consumers (final demand)
It also increases firms’ innovation capabilities and increases the
probability of new products, innovations, and organizations
 
Convincing Governments of the Project’s Advantages
Convincing Governments of the Project’s Advantages
(Continued)
(Continued)
 
3.
Increased government revenue
Growth in economic output from ICT investment results in
greater tax revenue
Increased employment in the telecommunications sector
Greater collections from telecom licenses and excise
4.
Regional stability through better international
and intercultural relations
More efficient routing of trans-border traffic would encourage
trans-border initiatives in the education, healthcare, and research
sectors that would not otherwise be possible.
 
Convincing the Private Sector of the Project’s Advantages
Convincing the Private Sector of the Project’s Advantages
 
1.
The network would offer the private sector reliable,
high-capacity international fiber paths across all
borders
Compared to  low-capacity, less-reliable links currently in service
2.
The network would finally provide a cost-effective
alternative to undersea cable “choke points”
Of interest not only to operators, but communications-critical
industries (e.g. finance)
3.
Commercial arguments can be made on a case-by-
case basis to win support of incumbent operators
wary of competition.
 
Terabit Consulting’s Overall Thoughts
Terabit Consulting’s Overall Thoughts
 
Terabit Consulting has worked on dozens of key fiber
infrastructure projects in every region of the globe
The Pan-Asian network opportunity is among the strongest
it has seen
Commercially viable; initial evaluation of business case
inputs are very positive
The network would be critical to ensure greater broadband
equality, promote regional economic/social development
Urgently needed by global telecommunications operators
who must compensate for submarine cable choke-points
Urgently needed by governments and communications-
critical industries who are compromised by submarine cable
choke-points
However, the project can only be achieved with persuasive
intervention by UNESCAP and governments
 
Thank you!
Thank you!
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This report by Terabit Consulting delves into the broadband infrastructure landscape in the ASEAN region, focusing on nine member countries. It covers various aspects such as telecommunications markets, network connectivity, pricing, and international bandwidth, aiming to identify missing links and policy recommendations for enhancing cross-border connectivity. The study draws on extensive data analysis and consultations with industry stakeholders to provide insights into the state of broadband markets in the region.


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  1. Broadband Infrastructure in the ASEAN Region Markets, Infrastructure, Missing Links, and Policy Options for Enhancing Cross-Border Connectivity Michael Ruddy Director of International Research Terabit Consulting www.terabitconsulting.com www.terabitconsulting.com

  2. Part 1: Background and Methodology www.terabitconsulting.com www.terabitconsulting.com

  3. Project Scope On behalf of UN ESCAP, Terabit Consulting performed a detailed analysis of broadband infrastructure and markets in the 9 largest member countries of ASEAN: Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam www.terabitconsulting.com www.terabitconsulting.com

  4. Scope (contd.) The data and analysis for each country included: Telecommunications market overview and analysis of competitiveness Regulation and government intervention Fixed-line telephony market Mobile telephony market Internet and broadband market Consumer broadband pricing Evaluation of domestic network connectivity International Internet bandwidth International capacity pricing Historical and forecasted total international bandwidth Evaluation of international network connectivity including terrestrial fiber, undersea fiber, and satellite Evaluation of trans-border network development and identification of missing links www.terabitconsulting.com www.terabitconsulting.com

  5. Sources of Data Terabit Consulting has completed dozens of demand studies for submarine and terrestrial fiber networks worldwide Constant contact with operators, ISPs, and other stakeholders Terabit Consulting s published reports include: The Undersea Cable Report (1,500+ pages) International Telecommunications Infrastructure Analysis (1,000+ pages) Terabit Consulting s data and intelligence regarding infrastructure, demand, traffic flows, pricing, and market share is unsurpassed www.terabitconsulting.com www.terabitconsulting.com

  6. Part 2: State of the ASEAN-9 Bandwidth and Broadband Markets www.terabitconsulting.com www.terabitconsulting.com

  7. Intl. Internet Bandwidth, Initial Research (2012) Myanmar: 14 Gbps Vietnam: 360 Gbps Philippines: 560 Gbps Laos: 2.5 Gbps Thailand: 463 Gbps Cambodia: 11 Gbps Malaysia: 400 Gbps Singapore: 1,389 Gbps Indonesia: 250 Gbps www.terabitconsulting.com www.terabitconsulting.com

  8. Intl. Internet Bandwidth, Preliminary YE14 Est. Myanmar: 32 Gbps Vietnam: 875 Gbps Philippines: 1,225 Gbps Laos: 13 Gbps Thailand: 1,215 Gbps Cambodia: 22 Gbps Malaysia: 920 Gbps Singapore: 3,000 Gbps Indonesia: 600 Gbps www.terabitconsulting.com www.terabitconsulting.com

  9. Intl. Internet Bandwidth per Capita (Kbps, YE14) 600 555.6 500 400 300 200 Countries with 2.5 Kbps per Capita or Less: SERIOUS OBSTACLE TO DEVELOPMENT 100 31.0 18.1 12.4 9.8 1.5 0.6 2.4 1.9 0 Myanmar Cambodia Laos Indonesia Vietnam Philippines Thailand Malaysia Singapore www.terabitconsulting.com www.terabitconsulting.com

  10. Intl. Internet Bandwidth per Capita in Central Asia 25 22.4 20 17.4 16.5 15 (Kbps) 10 5 0.9 0.4 0.3 0.3 0.1 0 Turkmenistan Uzbekistan Tajikistan Afghanistan Kyrgyz Republic Kazakhstan Russian Federation Azerbaijan www.terabitconsulting.com www.terabitconsulting.com

  11. Intl. Internet Bandwidth per Capita in W. and So. Asia 35 30.7 30 24.0 25 20 (Kbps) 15 10 7.0 5 2.2 1.7 1.5 1.0 0.7 0.3 0 Bangladesh Nepal India Iran Pakistan Sri Lanka Bhutan Maldives Turkey www.terabitconsulting.com www.terabitconsulting.com

  12. ASEAN: Intl. Bandwidth Infrastructure Singapore: By far, the strongest in the region 10 interregional submarine cables in service as of 2015, with 3 more under construction 7 additional regional systems (Malaysia/Indonesia) Additional fiber via Causeway and Second Link Philippines and Malaysia: Strong PLDT has 3 cable stations, Globe has 2, Pacnet (Telstra) has 2 Malaysia served by FLAG, Sea-Me-We-3, SAFE, Sea-Me-We-4, APCN-2, Asia Submarine-Cable Express, AAG Time dotCom shareholder in Unity transpacific cable Thailand: Average FLAG, Sea-Me-We-3, Sea-Me-We-4, AAG Vietnam: Below average, but improving Sea-Me-We-3 was supplemented by TGN-IA (2009) and AAG (2010) www.terabitconsulting.com www.terabitconsulting.com

  13. ASEAN: Intl. Bandwidth Infrastructure Indonesia: Weak Served by Sea-Me-We-3 but most other infrastructure routes through Singapore Myanmar: Weak Served by Sea-Me-We-3 and limited terrestrial connectivity Planned Sea-Me-We-4 link via Bangladesh and planned Sea-Me-We-5 landing point; Mythic also under consideration by Campana Group (Singapore) Cambodia and Lao PDR: Very Weak, with no direct interregional connectivity Cambodian membership in AAG was too late, relies on Ezecom backhaul via Thailand and Vietnam Lao PDR served exclusively by low-capacity terrestrial trans- border links www.terabitconsulting.com www.terabitconsulting.com

  14. International Bandwidth Infrastructure VN: BELOW AVERAGE MM: WEAK PH: STRONG LA, KH: VERY WEAK TH: AVERAGE MY: STRONG SG: VERY STRONG ID: WEAK www.terabitconsulting.com www.terabitconsulting.com

  15. The Impact of Low International Bandwidth & Weak International Infrastructure At the macro level: a major obstacle to economic and human development Detachment from digital economy Continued economic inefficiencies and restrained growth Lack of access to critical social tools including telemedicine, distance learning, scientific/research nets More specifically within the telecom environment: higher wholesale and consumer prices, and lower broadband adoption rates Cambodia, Lao PDR, Myanmar, and Vietnam: $50+ per Mbps wholesale Compared to Singapore: $5 to $10 per Mbps www.terabitconsulting.com www.terabitconsulting.com

  16. Weak Intl. Bandwidth Impacts Consumer Pricing 1 Mbps Broadband Connection: Annual Subscription + Installation as a % of Per-Capita GDP (2013) 132.80% 140% 120% 100% 80% 48.70% 60% 40% 27.40% 11.20% 20% 7.90% 5.50% 4.40% 0.50% 0.10% 0% Myanmar Cambodia Lao PDR Philippines Vietnam Indonesia Malaysia Thailand Singapore www.terabitconsulting.com www.terabitconsulting.com

  17. Overview of Broadband Status Annual 1 Mbps Broadband Subscription + Installation as % of Nominal GDP per Capita (2013) GDP per Capita, YE 2014 (PPP, USD) Int l. Band- width per Capita (Kbps) Fixed and Mobile Broad-band Infra- structure Competitive- ness of Telecom Market Int l. Connect- ivity Domestic Connect- ivity IP Transit Price Very Reasonably Competitive Cambodia $3,200 1.5 Weak Adequate Very Limited 48.7% Expensive Indonesia $10,500 2.4 Weak Adequate Expensive Competitive Growing 5.5% Very Less Lao PDR $5,000 1.9 Weak Limited Very Limited 27.4% Expensive Competitive Reasonably Priced Reasonably Competitive Relatively Strong Malaysia $24,000 31.0 Excellent Adequate 4.4% Very Newly Competitive Myanmar $4,700 0.6 Weak Limited Limited 132.8% Expensive Relatively Strong Very Less Philippines $7,000 12.4 Excellent Growing 11.2% Expensive Competitive Reasonably Competitive Singapore $83,000 555.6 Excellent Very Strong Inexpensive Very Strong 0.1% Relatively Strong Very Reasonably Competitive Thailand $14,300 18.1 Average Average 0.5% Expensive Somewhat Weak Less Vietnam $5,600 9.8 Limited Expensive Limited 7.9% Competitive www.terabitconsulting.com www.terabitconsulting.com

  18. Part 3: Identification of Priority Cross- Border Terrestrial Links www.terabitconsulting.com www.terabitconsulting.com

  19. Priority Terrestrial Fiber Links High Priority Lao PDR to Yunnan Indonesia to/from Malaysia Medium Priority Cambodia to Thailand Lao PDR to Cambodia Lao PDR to Myanmar Myanmar to Thailand Myanmar to Yunnan Vietnam to Yunnan www.terabitconsulting.com www.terabitconsulting.com

  20. Envisioned Regional Fiber Network Based on Priority Trans-Border Links www.terabitconsulting.com www.terabitconsulting.com

  21. Part 4: The Case for a Holistic, Pan-Asian Approach to Network Development www.terabitconsulting.com www.terabitconsulting.com

  22. Understanding Intl. Infrastructure in the Region The vast majority of traffic is Internet Protocol The majority of IP traffic is still destined for North America and Europe (i.e., location of most content) Intra-Asian demand mostly destined for hubs (e.g. HK) Bilateral, trans-border IP demand is minimal Therefore: trans-border terrestrial links should be viewed holistically, as a means of Accessing and supplementing interregional fiber networks Increasing efficiency and equality and reducing prices Providing redundancy and restoration paths to avoid submarine cable choke points Terrestrial networks should not be evaluated on the merit of trans-border (bilateral) demand alone www.terabitconsulting.com www.terabitconsulting.com

  23. Metcalfes Law: The Value of a Network is Proportional to the Square of the Number of Nodes TERRESTRIAL EXPANSION TO EUROPE INTEGRATION WITH REGIONAL AND TRANSOCEANIC SUBMARINE CABLES www.terabitconsulting.com www.terabitconsulting.com

  24. Terrestrial as a Solution for Submarine Source: The Undersea Cable Report 2015 by Terabit Consulting The global telecommunications industry is desperate for a cost-effective solution that would avoid undersea choke points. www.terabitconsulting.com www.terabitconsulting.com

  25. Overall Weakness of Existing Trans-Border Connectivity Limited Geographic Scope Most terrestrial links are trans-border, point-to-point The region s few multi-national networks fail to function coherently Little or No Network Redundancy Point-to-point links can only be used by operators who own alternative pathways; mesh network configuration is needed Low Transmission Capacity Typically 10 Gbps or less, preventing economies of scale and placing existing terrestrial links at a significant disadvantage to submarine Lack of Open Access and Prohibitive Pricing Most terrestrial is operated for the benefit of incumbent operators, and third parties are unable to access the networks cost-effectively No Viable Intercontinental Terrestrial Bandwidth Intercontinental traffic is aggregated over vulnerable subsea links www.terabitconsulting.com www.terabitconsulting.com

  26. Part 5: The Case for Intervention to Ensure Network Development www.terabitconsulting.com www.terabitconsulting.com

  27. Market Failure: Broadband Divide Terabit Consulting s analysis clearly reveals that low-cost, high-speed, and high-quality broadband services are concentrated in markets that are wealthy, urban, and/or coastal, while poor, rural, and/or inland markets are often neglected. The analysis showed that the divide between the broadband have and have-not markets results in vast differences in: international fiber connectivity, domestic connectivity, the pricing of IP transit capacity, the competitiveness of telecommunications and Internet markets, fixed and mobile broadband infrastructure, and the affordability of consumer broadband services. www.terabitconsulting.com www.terabitconsulting.com

  28. The Need for Intervention Intervention (by government or int l. organizations) is required to ensure the implementation of a pan- Asian terrestrial fiber optic network for 5 reasons: 1. To overcome the region s vast broadband inequality. 2. To ensure that the region receives broadband services on a par with more developed markets. 3. To finance or assist in financing a major capital project that is unlikely to be fully financed by the private sector. 4. To pool and leverage private-sector resources which are disparately insufficient. 5. To stimulate and facilitate future private investment through market development and maturation. www.terabitconsulting.com www.terabitconsulting.com

  29. Options for Government/UN/DFI Participation Full Government / Int'l. Organization Ownership and Project Management Choice of Project Design and Engineering, Supplier, Maintenance Authority, Operational Plan Special Purpose Vehicle (SPV) with Government Shareholding (Investment) Intervention by Government / Int'l. Organization to Ensure Implementation Construction of Coherent, Pan- Asian Terrestrial Fiber Network Special Purpose Vehicle (SPV) with Government Contribution (Subsidy) Asian Terrestrial Fiber Optic Connectivity Marketplace Left to Implement Its Own Coherent Solution Public-Private Partnership (PPP) / Private Sector Project Management Continued Use of Fractured, Bilateral Terresrial Fiber Infrastructure Build-Operate-Transfer (BOT) Project Management Contract www.terabitconsulting.com www.terabitconsulting.com

  30. Available Public-Private Partnership Options Special Purpose Vehicle (SPV) Model with Government/Organizational Shareholding Network operators form a special purpose vehicle to assume full responsibility for the development, operation, and maintenance of the pan-Asian terrestrial network. Government, organizational, and/or developmental entities make capital contributions to the SPV and receive equity stakes and/or capacity on the network. The contributor(s) receive a seat on the board of the SPV, thereby ensuring that policy goals are achieved. A regulatory framework is adapted to ensure that the SPV s outcome fulfills policy goals and improves the overall welfare of the region. The contributor s equity stake may be divested once certain milestones are achieved, or alternatively may be held until the winding-down of the SPV. Special Purpose Vehicle (SPV) Model with Government/Organizational Contribution Network operators form a special purpose vehicle with full responsibility for the pan-Asian terrestrial fiber optic network. The government, organizational, and/or developmental entities make capital contributions to the SPV. The contributor(s) do not receive equity or capacity on the network. However, the contributor(s) do participate in the creation of the SPV s governance framework, and receive a seat on the board of the SPV. Mechanisms are instituted to ensure that policy goals are met. Build-Operate-Transfer (BOT) Following an open tender process, a concession is granted to one or more network operators for a fixed long-term duration (typically 20 years). The network operators are assigned full responsibility for financing, operating, and maintaining the cable. Certain market privileges may be accorded to the network operators. The operators are allowed to retain all revenues during the period of its concession. Once the concession agreement expires, ownership of the network is assigned to the government(s) at no cost. Awarding of Project Management Contract A tender is issued to select one or more network operators responsible for the construction, operation, maintenance, and commercialization of the pan-Asian terrestrial fiber optic network. The contract recipient is paid to manage the cable and assume these responsibilities, including the sales of capacity to operators. The contract recipient s management fees may be fixed or based on a percentage of revenue. The network remains the property of the Government(s), which collect all profits (less management fees). www.terabitconsulting.com www.terabitconsulting.com

  31. Part 6: Principles to Guide Network Development www.terabitconsulting.com www.terabitconsulting.com

  32. Principles to Guide Future Network Development 1. Fully integrated and coherent Mesh configuration to allow for in-network healing in the event of physical cable outages or political instability affecting connectivity in specific countries. 2. Functioning and monitored as single, uniform network Existing multi-national terrestrial networks cannot offer uniform quality- of-service guarantees between endpoints (as good as weakest link or weakest operator ). 3. Leveraging existing infrastructure Right-of-way procurement and uniform construction techniques would be enabled through the use of the Asian Highway network, Pan-Asian Railway project, or power transmission networks. www.terabitconsulting.com www.terabitconsulting.com

  33. Principles to Guide Future Network Development (Continued) 4. Cost-effective With suitable transmission capacity and fiber count, a pan-regional terrestrial fiber network could compete effectively with submarine cable on both a regional and intercontinental basis. 5. Open access and non-discriminatory pricing In order to achieve development and policy goals, as well as to serve the region s consumers, all purchasers of capacity must be able to access the network on an equal, non-discriminatory basis. 6. Developed and managed by a Special Purpose Vehicle (SPV) SPV shareholding would ensure the neutrality and efficiency of the network Allows participation by all stakeholders while still maintaining arm s- length terms over all capacity sales and leases. www.terabitconsulting.com www.terabitconsulting.com

  34. Part 7: Gaining Support for the Project www.terabitconsulting.com www.terabitconsulting.com

  35. Stakeholder Participation is Key The study by Terabit Consulting identified 95 potential stakeholders in ASEAN-9 that should be involved in the project, including: National Regulatory Authorities Incumbent Operators and Major International Gateway Operators Competitive Telecommunications Operators and ISPs Road and Railway Authorities/Operators Suppliers and contractors should also be consulted in the development stage. www.terabitconsulting.com www.terabitconsulting.com

  36. Convincing Governments of the Projects Advantages 1. Benefits to consumers Myanmar, Cambodia, and Lao PDR: 1 Mbps of consumer broadband costs 132.8%, 48.7%, and 27.4% of per-capita GDP Only Singapore and Thailand offered broadband access that is considered to be truly affordable. Better, more cost-effective connectivity in the region will greatly reduce consumer prices in less developed markets and improve broadband reliability throughout the region. 2. Economic growth Improvement in ICT infrastructure yields: Increased demand for the output of other industries (demand multiplier) New opportunities for production in other industries (supply multiplier) New goods and services for consumers (final demand) It also increases firms innovation capabilities and increases the probability of new products, innovations, and organizations www.terabitconsulting.com www.terabitconsulting.com

  37. Convincing Governments of the Projects Advantages (Continued) 3. Increased government revenue Growth in economic output from ICT investment results in greater tax revenue Increased employment in the telecommunications sector Greater collections from telecom licenses and excise 4. Regional stability through better international and intercultural relations More efficient routing of trans-border traffic would encourage trans-border initiatives in the education, healthcare, and research sectors that would not otherwise be possible. www.terabitconsulting.com www.terabitconsulting.com

  38. Convincing the Private Sector of the Projects Advantages 1. The network would offer the private sector reliable, high-capacity international fiber paths across all borders Compared to low-capacity, less-reliable links currently in service 2. The network would finally provide a cost-effective alternative to undersea cable choke points Of interest not only to operators, but communications-critical industries (e.g. finance) 3. Commercial arguments can be made on a case-by- case basis to win support of incumbent operators wary of competition. www.terabitconsulting.com www.terabitconsulting.com

  39. Terabit Consultings Overall Thoughts Terabit Consulting has worked on dozens of key fiber infrastructure projects in every region of the globe The Pan-Asian network opportunity is among the strongest it has seen Commercially viable; initial evaluation of business case inputs are very positive The network would be critical to ensure greater broadband equality, promote regional economic/social development Urgently needed by global telecommunications operators who must compensate for submarine cable choke-points Urgently needed by governments and communications- critical industries who are compromised by submarine cable choke-points However, the project can only be achieved with persuasive intervention by UNESCAP and governments www.terabitconsulting.com www.terabitconsulting.com

  40. Thank you! www.terabitconsulting.com www.terabitconsulting.com

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