Effective Approaches are Expected to Boost Broadband Development in Emerging Markets

ICT transformation has become a global trend. With broadband connectivity as the fundamental element, telcos are driving the ICT transformation of industries and themselves. However, in emerging markets (EM) there are huge digital divides between and within countries, particular in terms of broadband coverage. According to the research from ITU1, the penetration of broadband in emerging economies is 15%. Billions of people around the world remain unconnected, excluded from the opportunities of digital life.

When it comes to broadband network development, telecom operators face a variety of difficulties and challenges, especially in construction costs and deployment efficiency. In some countries, the right of way (RoW) approval can take more than nine months. These challenges extend time to market and investment returns reducing willingness by operators to make the required and significant capital investment. In order to resolve the issues, investment-friendly regulations and policies are expected to facilitate the broadband development.

i. Right of Way opening improves network deployment efficiency

Securing Right of Way agreement in emerging markets is often time consuming and expensive, to enlarge broadband coverage, supportive policies in RoW for broadband deployment are vital. There are, of course, many countries such as India, Philippines and Germany that are efficient. In India the telecom department issued the Indian Telegraph RoW Rules in 2016. This updated regulation has three key points: firstly, the government appoints a nodal officer to administer RoW applications. Secondly, it standardizes a framework to give RoW approvals in a time-bound manner, as well as online application process to increase speed and efficiency. Finally, the application must be assessed within 60 days and cannot be rejected without first inviting the applicant to make its case.

ii. Infrastructure synergy reduces network deployment cost

Cross industry collaboration is another model of efficiency. Routing fibers along exiting electrical or other public utility ducts is an efficient way to reduce network cost and improve deployment efficiency. In Ireland, the Commission for Communication Regulations granted the country’s national power company a license to provide electronic communication services in 2014. In 2015, SIRO, which is a joint venture between the electricity supply board and Vodafone, was formed to build and manage 100% fiber networks.. Taking advantage of existing power substation sites, pylons, electrical poles and ducts, the fiber rollout cost is reduced by more than 30%. SIRO aims to connect 500,000 households or one third of the total, with an FTTx network by 2018.

To address the last-mile fiber deployment issue in China, the Ministry of Industry and Information Technology and the Ministry of Housing issued a joint code that requires that last mile cables, ducts and equipment rooms must be pre-installed and reserved before the sale of new residential buildings, helping to decrease the cost of fiber access in residential buildings.

iii. Fixed/Mobile synergy accelerates broadband coverage

Mobile operators can leverage fiber-ready base stations to develop fixed broadband networks. Under this construction mode, operators reuse existing wireless station sites, cabinets, power supplies, and backhaul resources, and deploy mini optical line terminals (OLTs). There is no need for additional outdoor engineering or optical distribution network (ODN) planning, engineering, deployment, or operations and maintenance. These mobile operators are able to use fixed/mobile synergy to quickly build FTTx networks. One operator from Mexico City uses base stations to provide fixed broadband access services to customers, with households within 300 meters of the based station covered by fiber broadband services. This fixed/mobile synergy reduces the time to deploy to less than two months, and shortens the investment payback period to 2.5 years or less.

iv. Tax incentives encourage broadband development

The other cause of low broadband penetration in emerging markets is that Internet service charges are high relative to income. Governments can provide tax incentives for operators and customers to boost broadband penetration. In 2010, for example, the government of Malaysia provided 100% capital expenditure tax allowance to operators investing in last-mile broadband equipment. Broadband equipment and consumer access devices were also deemed eligible for import duty and sales tax exemptions. Further, the Malaysian government launched the Lifestyle Tax Relief in 2017 to enhance the usage of computers and Internet. Customers can have tax relief with a limit up to $600 for Internet subscriptions and smart phones, tablets or laptops purchase. As of 2016, the household broadband penetration had reached 78.5% in Malaysia.

v. Wireless improves rural broadband coverage economically

Wireless broadband based on 4G technology and its evolution is gaining more and more momentum in recently year in many emerging markets. From the ecosystem perspective, vendors are providing competitive end-to-end solutions such as WTTx, or other similar.

According to a Boston Consulting Group Study2, fixed wireless is the most cost effective solution for densities between 10 and 1000 inhabitants per km2 with a committed DL/UL speed of 10/1Mbps.

In the context of such industry trends, deployment of wireless broadband is an important approach to transform the ICT sector, and hence to boost the transformation of digital economies. However, in order to leverage the advantages of wireless broadband, there are still a lot to do in public policy and regulation. The first step is to include wireless technology in national broadband strategies as a useful supplement, in order to increase the incentives of service providers to adopt the latest wireless technology based on market needs. Policy should be blind to fixed versus wireless technologies if they offer the same service. The last but not the least, spectrum is the cornerstone for all wireless technology, thus it is necessary for governments to allow the service provides to deploy mobile broadband on legacy spectrum on a technology neutral basis, as well as to allocate more dedicated spectrum with mature eco-systems, such as 2.3G, 2.6G and 3.5G. With the support of such regulations and policies, service provides will be encouraged to make long term plans, to make more investments on the latest technologies. It will be a win-win-win situation for government, consumers and operators, as we can see from the recent cases in Philippines, Sri Lanka and many other countries3.

Based on Huawei’s analysis of best practice globally, we’re convinced that investment-friendly regulations and policies can facilitate the development of broadband in emerging markets, and can be summarized as follows:

1. Streamline Right of Way application processes and standardize charges to both shorten the application time and reduce cost.

2. Infrastructure collaboration with utility companies can reduce network construction costs and improve deployment efficiency.

3. Leverage mobile/fixed synergy to achieve home broadband rollout cost-efficiency.

4. Look to tax incentives to encourage broadband deployment and development to mitigate the internet service cost.

5. Apply wireless technology for as an alternative to fixed for rural broadband coverage.

Huawei believes that, with such supportive strategies and policies from governments and regulators, the build out of broadband network can be cost-effective and both enable and accelerate national ICT transformation.

Footnote 1: ITU Facts and Figures 2017

Footnote 2: Boston Consulting Group Study, Connecting Rural Markets, 2016
Footnote 3: GTI 4G Wireless Broadband Industry White Paper, 2017