Rohan Samarajiva Telecoms World South Asia Dhaka 8

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

Agenda n Implications for quality ¨Lessons for broadband? n Implications for § Investment § Regulation § Quality www. lirneasia. net ¨What is the scale of the challenge? ¨South Asia’s mobile voice success story: What worked?

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

The hardest problem: Bottom of the Pyramid Use the Internet India 1. 9% 0. 3% Sri Lanka Philippines Thailand 1. 5% 8. 8% 10. 4% Large gender divide, even in South East Asia www. lirneasia. net Pakistan

www. lirneasia. net …what Internet at the BOP? ?

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

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

. . . high profits* (enabling continued investment & rapid rollout) Revenues (USD ‘ 000) EBITDA margin (%) 655, 900 344, 500 53 Sri Lanka 259, 042 124, 833 48 26, 723, 674 9, 938, 341 37 India * 2007 www. lirneasia. net Banglades h

The business model n Discovered a new “budget-telecomnetwork” business model and n Implemented service-process innovations that enable exploitation of long-tail markets § Revenue-yielding minutes not ARPUs high minutes of use and high EBITDA margins www. lirneasia. net ¨Driven by hostile external conditions, low purchasing power and pressure from disruptive competitors, South Asian operators have

Increased network utilization 180. 00 166. 00 NTP-99 16 Lowering of ADC from 30% to 10% of sector revenue Telecom Tariff Order 14 160. 00 140. 00 CPP introduced 12 120. 00 10 100. 00 3 rd & 4 th cellular operator 8 90. 00 WLL Introduced 80. 00 6 60. 00 52. 17 4 40. 00 33. 60 2 20. 00 13. 00 0 0. 88 Mar-98 1. 20 Mar-99 1. 88 Mar-00 3. 58 `Mar-01 Fixed Tariff 6. 50 0. 00 `Mar-02 `Mar-03 Cellular Tariff `Mar-04 `Mar-05 Mobile Subs `Mar-06 `Mar-07 www. lirneasia. net Effective tariff (Rs. /min) 18 Mobile Subscriber base (mn) ¨ 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 www. lirneasia. net ¨Prepaid and the ability to buy in ways that fit earning patterns of daily/sporadic earners was key

¨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 www. lirneasia. net One consequence

www. lirneasia. net Lessons for broadband

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

Unbundle the mobile Internet n those who are starting may not require all the functionalities and may not be able to pay for all at first www. lirneasia. net ¨The Internet is a meta medium, which includes multiple functionalities

Some broadband services and significance of quality Throughput Delay Down Up RTT Jitter Loss Browse (text) Browse (media) Download file Transactions Streaming media ++ +++ - ++ + +++ + - ++ + + +++ ++ +++ ++ VOIP Games 16 3/19/2018 +++ highly relevant, ++ very relevant, + relevant, - not relevant www. lirneasia. net Service

¨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 n Domestic access network is not the problem now www. lirneasia. net Keep costs (and prices) down

Sri Lanka download speeds (Business Packages) within ISP domain… 2, 000 2 Mbps 1, 800 1, 600 > 75% 1, 400 1, 000 800 600 400 200 0 08: 00 11: 30 15: 00 SLT (2 M/512 k) 18: 00 Dialog (2 M/512 k) 20: 30 22: 30 www. lirneasia. net 1, 200

Download speed Sri Lanka and Singapore (accessing International servers) 100% 90% 80% > 75% 70% 60% 40% SLT (2 M/512 k) 30% Dialog (2 M/512 k) 20% Starhub (1 M/256 k) 10% 23 : 00 20 : 30 /2 0 : 00 18 17 : 30 15 : 00 /1 4 : 30 11 08 : 00 / 10 : 30 0% www. lirneasia. net 50%

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

www. lirneasia. net RTT from Bangladesh- Submarine Cable vs Satellite (international sites)

www. lirneasia. net Download Speed - Sirius Broadband (256 kbps Shared)

www. lirneasia. net Upload Speed - Sirius Broadband (256 kbps Shared)

Options n Can this be done within the region? ¨And, encourage locally hosted content n Given nature of mobile broadband (possibly more P 2 P content), this may be a significant factor www. lirneasia. net ¨Buy more international capacity, and/or ¨Do a lot of mirroring

¨ The route to www. yahoo. com (hosted in USA) from Colombo takes roughly 250300 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 www. lirneasia. net Regional mirroring?

¨ 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 www. lirneasia. net Quality adequate to purpose at affordable prices