EXTENDING BROADBAND ACCESS AND SERVICES
This Chapter focuses on good practices aimed at ensuring that broadband infrastructure and services are as widespread as possible. Leading mechanisms and tools at the disposal of policy makers are described to extend broadband access, such as through national broadband plans, universal service funds and public-private partnerships.
1. A clear precondition to foster broadband use by people and business is the availability of broadband infrastructures and final services in the geographical area where potential users are located. Any demand-side policy assumes that potential users have at their disposal broadband access and services or is designed to overcome barriers that may not result from availability of infrastructure (e.g. skills).
2. Ensuring that broadband networks and services are developed to attain the greatest national coverage and use is a priority for most governments. Policies aiming to promote competition, private investment, and independent regulation have been tremendously effective in extending coverage. By doing so, they reduce the size of that segment of the market that requires alternative approaches to meet policy goals. In those areas where markets cannot fulfil all policy objectives a range of further approaches are possible. Policies aimed at increasing access, in such instances, can be addressed in national broadband plans using tools such as “universal service funds” or through legal obligations imposed on operators, such as using spectrum licences that have coverage objectives, or via public funding aimed to foster network deployments and broadband service provision in specific areas. Even here, the market may play a role through the use of tools such as public tenders for competitive bidding to find a provider that best meets delivering the infrastructure and services required, an approach successfully used by Colombia.
3. Together with increasing competition, extending the availability of broadband access is one of the key challenges that need to be addressed in the Latin American and Caribbean area. A diverse and sometimes challenging geography (e.g. the Amazon basin rainforest or small Caribbean islands) combined with low incomes, a lack of basic infrastructure (e.g. electricity grids) result insufficient broadband access infrastructure in large geographical areas. This is the case for many rural and remote areas, where population density is low and where fewer incentives for investment by the private sector exist. This limits access to the wealth of content and applications available on the Internet. In turn, this constrains the opportunities for people to participate in the economy, increase their civic engagement and for the country as a whole to benefit from the potential productivity gains broadband access makes possible.
4. Policy objectives for extending broadband access have often been articulated around concepts similar to those found for telephony. These can be “universal service” (availability of the service in a residence or carried with the individual through wireless devices) and “universal access” (availability of the service accessible in a public space, such as at telecentres). Although the economic and social objectives that served as the original foundation for universal service for fixed telephony remain valid today, objectives on universal access acquire a new dimension with the expansion of high-capacity networks and the evolution of social needs. In order to extend broadband access and services data are needed to identify coverage gaps and bottlenecks in the LAC region. In addition, government policies must be implemented together with funding where objectives are not met by the market and monitoring undertaken of their effective use. In this regard, ongoing collaboration between the public and private sectors is crucial, as it allows for creating synergies and mobilising resources and expertise (Broadband Commission, 2014a).
5. The challenges of extending coverage for broadband access are not new, nor exclusive to the LAC countries. Many experiences in the area and in other regions of the world exemplify successful policies to extend broadband access. Additionally, the evolution of wireless technologies allows for new ways to extend broadband access, including via mobile broadband, which extends access at lower prices and at a more rapid pace than traditional fixed technologies. Nonetheless, fixed networks play a key role including for backhaul and must be an integral part of any plan.
6. This chapter examines current policies to expand access in LAC countries, focusing on demonstrated good practices and experiences with their adoption.
Key policy objectives for the LAC Region
7. Facilitating wide availability of broadband access at affordable prices for all segments of society, including for people with low incomes and living in rural areas, is the main policy objective. Fulfilling this goal requires that two related policy objectives are addressed:
• Encouraging private investment aimed at extending broadband access. Most of the good practices aimed at fostering competition by lowering barriers for investment can and should be used to encourage private investment to extend broadband access. This is the case, for example, in simplifying licencing requirements, lifting foreign investment restrictions, simplifying and harmonising rights of way acquisition, or encouraging network sharing and co-investment. These issues are further addressed in Chapters 1 and 3.
• Solving critical bottlenecks for infrastructure deployment and use. In certain situations, these critical bottlenecks, such as addressing the availability of high-speed backbones or backhaul infrastructure cannot be addressed adequately by private initiatives thus requiring active public policies which will allow for sustainable infrastructure deployment by private actors in the access portion. Bottlenecks for infrastructure deployment are further addressed in Chapters 2 and 7.
8. These policy objectives are usually set down in a comprehensive manner through National Broadband Plans (NBPs) where policy makers provide clear objectives, taking into account the level of development in the country, existing coverage gaps by fixed and mobile broadband networks and the level of competition (Chapter 1). Such policy objectives should also take into account the broadband demand side since encouraging demand will also stimulate the rollout of broadband networks by the private sector (Chapters 5, 8, 9, 10, 11, 12 and 13).
Tools for measurement and analysis in the LAC region
9. Setting broadband objectives and preparing plans may not be sufficient for expanding broadband access if attention is not paid to metrics which allow policy makers to assess progress in meeting the desired goals. Establishing an effective and powerful oversight mechanism is important in order to promote better performance from managers and stakeholders, evaluate how a broadband plan affects targeted beneficiaries, determine resource allocations, improve planning, and to provide input for decisions regarding the strategic direction of the broadband plan. In this context it is also important that the national authorities have the necessary legal powers to obtain the necessary data from market players. Using broadband metrics to compare performance relative to other countries in a region can also provide an indication on how national policies are working.
10. Key metrics and data required to determine objectives and monitor advances in broadband access include data on geographical/households coverage and speed for broadband access. This information can be collected from operators (both fixed and mobile) and processed and analysed by the authorities or regulator in charge of policy measures to address broadband access extension. The nature of the Internet means that they can also engage in their own independent assessment of network availability and performance, including through new tools such as apps that enable users to provide information. In the United States the FCC is one regulator using this tool , and Anatel in Brazil has also an initiative in this line (Box 1). Regular updates of data must be undertaken to check advances as well as to identify critical bottlenecks.
11. Measurements of broadband availability and access should address geographical coverage as well as the share of population (households) where broadband coverage is available. This implies that data on the availability of broadband access for households in a geographical area, in addition to the geographical coverage in that area, is important. As explained in the section on good practices, broadband maps are a key tool to be used for this purpose.
12. Speed and quality of services is also important for broadband access since low speeds or poor quality may make it difficult or impossible to use certain Internet applications and services. Regular collection of data on real speeds and quality of service (QoS) parameters should be undertaken. Although this data can be requested from operators, real speeds and QoS parameters, such as on delay, can also be collected directly from the network (Box 1).
13. When evaluating national broadband plans it is useful for any LAC country to compare their performance with others in the region, as well as other reference regions. For example, OECD countries provide comparative data enabling members to view their performance relative to others, and the DigiLAC initiative from the IDB is aimed, among other uses, to compare the situation in the LAC region regarding broadband access (Box 2). Comparisons with broadly analogous countries are also often undertaken (e.g. Chile compares its performance with other Latin American countries, while South Africa compares itself with the other BRICS). In the United States the FCC is required by legislation to make comparisons with at least 25 countries in its annual report on advanced services.
14. Peer reviews are also useful to assess broadband access extension plans. Peer reviews consist of the systematic examination and assessment of the performance of a country by other countries, with the ultimate goal of helping the reviewed country to improve its policy making, adopt good practices, and comply with established standards and principles. Peer review is also a useful tool for assessment of policies aimed at extending broadband access. The methodology developed by the OECD (2003) has been extensively applied, including by other international organisations, and could be also applied in the LAC area for the assessment of National Broadband Plans. The examination is conducted on a non-adversarial basis, and relies heavily on mutual trust among the countries involved in the review, as well as their shared confidence in the process. When a peer review is undertaken in the framework of an international organisation, the Secretariat of the organisation also plays an important role in supporting and stimulating the process. With these elements in place, peer reviews tend to create, through a reciprocal evaluation process, a system of mutual accountability.
Overview of the situation in the LAC region
15. According to the information provided by countries in the LAC region for this report, as well as information publicly available, policy makers are keenly aware of the challenges for extending broadband. Many have taken action in different areas with a special focus on rural areas, underserved peri-urban areas or for other people with particular challenges.
16. Although countries in the LAC region lag the most advanced countries regarding broadband access and use (Figure 1), significant advances have taken place in recent years in several countries in the LAC region in terms of broadband access availability, use and skills. The ICT Development Index (IDI) published regularly by the ITU adds to the information provided by the aforementioned Broadband Development Index prepared by the IDB (2014a). Countries such as Costa Rica, Suriname, Brazil and Colombia have advanced in a very significant way their position in the ICT Development Index from 2010 to 2015, reflecting a wider availability, use of broadband access as well as an increase in skills on ICTs. It should be noted though that the average increase in IDI level was substantially higher for countries in mainland Latin America (1.09 points) than for the Caribbean and Caribbean-facing countries (0.73 points) (ITU, 2015).
17. Despite advances in a few countries, many challenges, common across the LAC region, remain in providing adequate broadband:
• The geography of many areas is especially complex for deploying broadband networks. This is the case for the Amazon basin that extends to Bolivia, Brazil, Colombia, Ecuador, Guyana, Peru, Suriname and Venezuela, but also for other densely forested areas in Central America. Additionally, there are other mountainous areas or small Caribbean islands with sparse populations and lack of backbone infrastructure where network deployments are likely to be expensive and expected revenues may be limited for one let alone multiple operators. If these areas do have service they may not be offered at competitive prices due to monopoly power.
• Affordability issues are still a major challenge in the LAC , as a relatively large segment of the population has relatively low incomes in the LAC region, resulting in a lower take-up of broadband services and reducing the incentive for private investment. Nonetheless experience with competition in mobile markets demonstrates operators will develop tools such as prepaid services to adapt to particular circumstances if the initial challenge of deploying infrastructures can be overcome. These issues are further analysed in Chapter 5. In some countries and regions there is a lack of basic infrastructure necessary for network operation (e.g. electricity). The availability of roads for access to roll out infrastructure and for maintenance of network infrastructure is also an issue in remote areas. Even when electricity is available, in most rural areas there is a lack of backbone and backhaul infrastructure, which makes deployment of both fixed and mobile networks very challenging and expensive, discouraging even further private investment.
18. Many of these issues such as the lack of basic infrastructure cannot be solved by policy measures specific to broadband. This means concurrent public policies in other areas must be taken to ensure effective development of broadband access. This requires close co-ordination among different sectors of the government in charge of infrastructure planning.
19. With a few exceptions, most of countries in the region have developed national broadband plans or digital agendas that include specific actions on extending broadband access or have defined objectives or projects aimed to increase coverage. In addition, most countries define broadband access in a technologically neutral way. Nonetheless, a number of broadband plans, and the associated funding for network deployment, are aimed at specific technologies, even when several different technologies could fulfil the policy objectives.
20. The national broadband plans and projects in Latin America and the Caribbean that focus on extending broadband access differ in scope, the level of detail, specific objectives, and the funding and collaboration models between the public and private actors. Many of these plans are ambitious, well-designed and address the key issues required to extend broadband access. Some of the weaknesses of these plans, which will be addressed in the section on good practices, are:
• Key indicators aimed at measuring progress in attaining policy objectives are not defined or are defined in a very general way and, in many cases, not directly related to the actions defined in the broadband plan. This makes it difficult, or even impossible to assess fulfilment of policy objectives.
• In a number of cases, regular updates on the achievement of the broadband plan objective are not made public. Transparency and accountability in this area are needed so that stakeholders’ can provide input to improve plans as well as to ensure that citizens can monitor advances. Increased transparency also provides an incentive for public authorities to implement broadband plans efficiently.
• Inventories of available fixed broadband infrastructure and maps are not in general publicly available at the national level in LAC countries. In a number of cases this also applies to the available coverage of mobile broadband. As highlighted in the next section, collecting and aggregating this information is complex and resource-consuming. However, obtaining clear and detailed information on where coverage is lacking is crucial in order to focus policy measures on priority issues and experience shows that operators themselves become the largest users of this information.
• Although the most ambitious and well-designed broadband plans in the LAC region benefit from stakeholder involvement in the design and implementation phases, there is little evidence to show that some plans have benefited from public consultations. As noted in Chapter 1 when addressing digital agendas, lack of stakeholder involvement raises the risk of defining policy objectives that are not aligned with real needs, as well as setting measures that are unrealistic or very difficult, if not impossible to meet.
• Broadband national plans aimed at deploying broadband access infrastructures must be co-ordinated with other projectes to encourage demand and build the skills needed for individuals, businesses and governments to reap the benefits of the digital economy. Policy makers should take into account that demand-side policies can represent an equally, or even greater, challenge and should be taken into account even from earlier phases of digital economy development. Coordination issues are addressed in Chapter 1 and demand-side policies in Chapters 5, 8, , 10, 11, 12, 13 and 14.
• When the regulatory framework does not clearly separate responsibilities, it also results in an overlapping of powers among different institutions that can undermine an effective management of broadband plans, as described in Chapter 1 on regulatory frameworks and digital agendas. This is the case for plans where the responsibilities of the ministry in charge of telecommunication policy, the regulatory authority and/or federal or municipal institutions are not clearly delineated.
21. The most frequent source used for funding broadband extension is a Universal Service Fund (USF). Contributions to any USF may be obtained from several sources, such as contributions from operators, revenues from spectrum licences, specific taxes for broadband extension, public government budget. Annex 2 shows detailed information on the universal service funds in the LAC region. Additionally, IDB (2014b) has developed a comparative study on different USF in the LAC region and in other parts of the world. It has been observed that in a number of countries USF contributions are not always disbursed on extending the network and the funds remain unspent, often resulting in large surpluses. This suggests that the capacity to develop and implement projects aimed at extending broadband access has proven to be insufficient.
22. In a number of cases, fees from spectrum auctions are used for funding of universal service. Although such fees can be an important source of funding, they only become available when new licences are issued and are a ‘one-off’ source of funds whereas spectrum licence fees provide a continuous source of funding allowing for better planning of broadband extension projects. However, caution should be taken to ensure that the level of annual spectrum licence fees are not determined by the financial needs for universal service projects since this may raise costs for mobile operators which are reflected in end-user prices. Spectrum management an policy-making in the LAC are further addressed in Chapter 2.
23. In the LAC region, as in other areas of the world, contributions from operators for the USF are usually based on total revenues for each operator (i.e. a percentage of revenues is set as a contribution for the USF, typically around 1%-2%). In general, there are no exceptions for small operators, nor a minimum threshold for revenue contributions.
24. Authorities can sometimes meet part of their broadband coverage policy objectives by exemptions from specific fees. For example, through lower or not applying spectrum licence fees in rural areas, or through lowering fees paid for the USF when specific objectives for broadband access are implemented by an operator. This can be the case for publicly or privately owned operators.
25. An important means to extend mobile broadband coverage is to incorporate in spectrum licences coverage obligations to ensure that mobile broadband access is also available in rural areas and that a certain percentage of the population will have broadband and mobile telephony access. Coverage obligations will also affect the valuation of spectrum licences by operators. In a number of cases, spectrum licences include conditions to provide connectivity to specific premises, such as schools and to apply special rates, provide free services for low-income citizens, or to provide terminals for schools. This is for example, the case in Peru when renewing the license for Telefonica de Peru.
26. USFs were first used in the LAC region to invest in rural telephony and install payphones in remote areas. As USF objectives evolve, the schemes can be used to extend broadband access and coverage to households, and when needed, to provide broadband connections to telecentres in underserved areas, schools and other public institutions or satellite broadband in remote areas. These funds can also used to invest specifically in backbone and backhaul networks in areas lacking trunk connectivity with the aim to foster access network investment by network operators. Furthermore, some objectives can relate to demand side issues and funds used encourage demand by low income consumers and spur or digital literacy plans.
27. The method for the selection of the operator that will obtain the subsidy to develop projects for broadband extension varies across the region and according to the type of project. A tendering process is used for many projects, encouraging operators to bid and compete to obtain the subsidy, while in other cases, the project is directly awarded to the incumbent operator or to public-owned operators that are in charge of providing rural broadband or to provide wholesale access networks to be used by other operators.
Mechanisms to extend broadband access
28. The best mechanism to develop nationwide broadband is to foster investment by the private sector through measures such as lowering administrative barriers to deployment, providing regulatory certainty for investors, encouraging network sharing and so forth. Having said that, the market will not provide broadband in certain situations access to meet policy objectives. When this is the case, several mechanisms are available as options for public authorities.
29. These mechanisms can be classified as obligations (e.g. obligations to provide coverage in a certain area), incentives for operators to cover broadband access gaps (e.g. subsidies or reduction of fees for rural deployment) or direct funding of broadband infrastructure (e.g. public-private partnerships and deployment of public-funded backbones).
30. It should be noted that policies on extending broadband access availability, as stated in Chapter 1, should always be coordinated and complemented with policies aimed to encourage demand, as adequate taxation regimes and programs addressing affordability (Chapter 5), digital skills programs (Chapter 8), encouraging ICT use for business (Chapter 9), e-health and e-governement programs (Chapters 10 and 11) and building consumer trust (Chapters 12 and 13).
31. Obligations aimed at extending broadband access. Any obligation imposed on operators regarding coverage should be carefully assessed against the costs and benefits. This includes comparing the expected positive effects (e.g. the number of households to be covered) against other potential implications (e.g. the cost of extending the network in less profitable areas or the effects on competition resulting from higher costs to an operator or cross-subsidies applied).
32. Universal service obligations (USO) for telephony services are usually in force in most OECD countries. However, the compulsory provision of fixed broadband access, with a minimum speed at affordable prices for all citizens in all geographical areas, is seldom imposed as part of, universal service obligations. Countries such as Finland, Korea, Spain and Switzerland are an exception in that broadband access has been included as part of USOs. Even in those countries, a great deal of effort and investment was devoted via national and regional broadband plans to increase coverage in rural areas before considering universal broadband access as a right for all citizens (Box 3). In addition, a key difference across countries that introduce such policies is the definition they apply to broadband in terms of guaranteed baseline performance levels to be delivered (i.e. the threshold speeds to be delivered).
33. Licenses for fixed telephony have also traditionally entailed obligations to cover rural areas where the cost for providing the service may be high relative to the expected revenues. Historically, this has usually included the deployment of fixed pay-telephones in small villages. With network convergence, a shift is taking place from service-specific licences to a general authorisation framework so that these type of universal service obligations evolve, similar to models applied in many OECD countries, where a competitive bid process is put in place to provide universal service, and the cost is assessed by regulatory authorities and shared by operators or funded by the state. Obligations for deploying pay-telephones can also be re-assessed in areas where penetration and coverage for mobile voice are high.
34. In the context of mobile broadband, obligations to be imposed on operators are defined in terms of specific network rollout obligations that are typically set out in the licence conditions or spectrum auctions. Once more, careful analysis must be performed when setting coverage obligations. Too lax coverage obligations may result in losing opportunities to ensure mobile broadband access in areas where there are not enough economic incentives to deploy network infrastructure. On the other hand, obligations that provide for extensive geographical coverage in a short time may impose an excessive burden on an operator. It is important that all MNOs in a country, with a similar license, have the same obligations although for new entrants the time required to fulfil obligations may differ from MNOs already operating in the market given that these actors have a first mover advantage.
35. One additional issue to be taken into account when setting obligations associated with spectrum licences is the inclusion of obligations to finance other objectives not directly related with coverage and the provision of mobile services, such as providing terminal equipment to certain communities (e.g. schools), or funding ICT skills programs. While these are laudable objectives, in general, including such obligations in the conditions for licences usually may result in market distortions. Any initiative to increase demand or policy objective not directly related with coverage, quality and services should be separated from auction proceedings and be funded using other sources such as universal service funds.
36. Incentives for operators to extend broadband access are aimed at bridging the investment gap in areas where expected returns do not justify network deployments. These incentives can be articulated in different ways: partial or total tax exemptions, lower or no fees for spectrum licences in certain areas associated with the obligation to provide coverage, direct partial/total subsidisation of rural or backbone/backhaul deployments, or loans at reduced interest rates. In many cases these types of incentives are sufficient to enable private sector action to extend broadband access.
37. Direct funding, policy measures and incentives to extend broadband access are usually articulated via National Broadband Plans (NBPs) and Digital Agendas, which are closely interrelated. Both aim to provide a comprehensive set of co-ordinated actions involving the public and the private sector, and addressing issues both on the supply side (e.g. funding of network rollout or specific measures to encourage private investment) and on the demand side (e.g. policies on education, e-health, or e-government, aimed at fostering use of broadband access by citizens, the public sector and business). Digital Agendas, as discussed in Chapter 1, however, have a wider scope (covering issues related to access and application of ICTs in general across the economy and society) than NBPs, which are usually focused on extending broadband access and coverage. In many cases, NBPs are a part of national Digital Agendas. The next section focuses particularly in NBPs.
National Broadband Plans
38. Defining goals for broadband expansion consists of framing national social, political and economic goals and is usually done by a government Ministry. However, communication authorities have a crucial role in providing input especially on issues involving the implications for investment and competition, and in many cases they are in a good position to manage its implementation as well as to collect and manage universal service funds. Other stakeholders including operators, civil society, academia and the technical community should also be consulted and play a role in developing such plans.
39. Any NBP should include a reference to the gaps identified, clear objectives to cover these gaps, setting measurable targets, milestones and check points to identify and correct deviations, as well as the financing mechanisms and funding to be applied. The literature on the design of NBPs and examples of existing plans is rich and can further be found within the body of work produced by OECD (2011), IDB (2014b), ITU and other authors such as Calvo (2012). This section will address mainly good practices on the design, funding, execution and assessment of NBPs, with an emphasis on issues related to the extension of broadband access.
40. The first step prior to defining and implementing public interventions, is to ensure that existing bottlenecks for infrastructure deployment by the private sector are addressed. In this context, it is of special relevance to ensure that rights of ways are simple, inexpensive and quick to be obtained and that existing passive infrastructures owned by the State or utilities can also be used for broadband access deployment. Chapter 3 on competition and infrastructure bottlenecks elaborates further on these issues.
41. The next key step when designing a National Broadband Plan is to identify areas needing public intervention to fill the gaps in the availability of broadband. This requires collecting and aggregating data on the availability of broadband infrastructure. Promoting broadband access differs from promoting broadband penetration; the former relates to coverage (geographical footprint where service can be accessed) and the latter to the take-up by users.
42. When considering programmes to expand coverage, policy makers need to have reliable geographical data on current service availability. A useful way to understand the landscape of current coverage is to visualise it on a map. Additionally, maps can be used to aid in the communication of a new policy including information on outcomes (e.g. “this new programme will have this effect on these geographical areas”, “role out is scheduled for this area following a given timetable” and so forth). Broadband availability maps can also be a useful tool when policy makers are looking at the status of competition among communication service providers or across different access technologies. Mapping broadband penetration rates in addition to availability and demographic indicators may also provide a good overview on the achievement of policy goals in different locations and this may be useful for work that informs broader questions (e.g. economic or social developments in areas with and without broadband).
43. Broadband maps are also useful to users. Maps can assist users to better understand the availability of services at their location and to compare this performance with other geographical locations. To meet such requirements a map may have to provide information at a detailed geographical level and for each location viewers should be able to access at least some references to service providers, such as their names or contact points to get more information on prices and other service conditions. The social and economic benefits through this kind of usage of a map may be large, if well designed for users to take advantage of this information.
44. Broadband maps have also commercial utility for a variety of stakeholders. They can be used to inform entities that provide services (e.g. e-commerce) as well as help existing and new players plan to meet the level of demand and the roll out of network facilities in a location. They can also contribute to more effective infrastructure investment. In the United States, for example, the national broadband maps assist business to identify the proper funding and targeted areas for universal service fund allocations (Box 4).
45. In summary, preparing and publishing a broadband map is a good practice that, although resource-consuming, will render excellent results not only in terms of policy decisions on the focus of broadband national plans, but also in terms of competition analysis, as well as to provide information to stakeholders.. A good example on broadband maps for the LAC countries showing key information for countries, regions and municipalities is the infrastructure maps developed by the IDB under the Digilac Initiative (Box 4).
46. When setting goals for broadband national plans, preference can be given to projects with high social returns that benefit groups residing in rural and low-income urban areas, with the knowledge that the market is likely to serve other areas. These projects can be prioritised according to a comprehensive assessment of the social and economic situations of these areas, including household income and poverty levels, demographics, existing infrastructure, and the cost-effectiveness of any project.
47. An important issue to take into account when analysing broadband gaps and the need for intervention is affordability, which is a particular challenge for the LAC region. In most of the rural areas lacking broadband access, affordability of broadband services (as analysed in chapter 5) is a very relevant issue to ensure the take-up of broadband. This implies that policy actions, for example, should not be restricted to availability of broadband access, but should also be reinforced with targeted subsidies to low-income people combined with ICT training (Affordability issues are further addressed in Chapter 5 while Chapter 8 looks into skills for the digital economy). It is also important to understand current commercial and technological trends and how the market could evolve without public support. Although subsidies may appear to be required in the short term, this might not be the case in the medium term for specific areas.
48. Another important action when designing and implementing NBPs is making sure that NBPs are co-ordinated with other initiatives in digital agendas and ICT plans. The availability of broadband is linked with many other areas which NBPs need to take into account. These include a broad range of government responsibilities, such as law enforcement, finance, education and training, environment, health, industry, transport, regional and rural development, science, technology and innovation.
49. Digital government plans (or e-government plans) and e-health plans need also to be co-ordinated with NBPs. For example, from a geographical perspective, it is important to ensure that the communication infrastructure is deployed in some regions before engaging in programmes to promote ICT skills. Closer co-ordination would serve to ensure that all parties have realistic goals and assessments of the factors that will ensure their successful achievement.
50. Furthermore, it is crucial to guarantee stakeholders’ envolvement in the process of designing NBPs. When defining goals for broadband expansion, stakeholder input is needed to ensure a correct identification of needs and potential bottlenecks, as well as to ensure that the goals which are set and the initiatives to be taken are targeted and feasible. A good practice is to create a council, “platform” or forum to involve institutions, vendors, operators, business users and consumers. Another tool used in some OECD countries is “town hall” meetings where stakeholders debate issues and address areas of public interest.
51. Even when key stakeholders have been involved in the definition of goals, national broadband plans should be subjected to public consultation in order to get additional feedback from all stakeholders, ensuring that the parties concerned can provide input. Publication of responses received as well as the rationale for rejecting or accepting suggestions received is a good practice that helps increase transparency. Local authorities can also provide key inputs in terms of the definition of needs, objectives, as well as on the articulation and implementation of broadband plans in municipalities.
52. Setting measurable targets and periodic assessment of fulfilment of objectives plays a central role in the success of NBPs. In order to do so, goals defined in NBPs must be measurable and procedures and tools should be defined to assess how they are met in a regular way. Government should typically set targets in terms of geographic and household coverage, as well as minimum and/or average transmission speeds. Other quality of service measures can also be defined to ensure support to services that are sensitive to specific requirements (e.g. for VoIP or some e-health applications). The period over which targets should be met needs to be well defined and the progress in meeting targets should be monitored on a regular basis enabling corrective measures to be taken if needed.
53. When setting measurable targets, governments and regulators may use references based on best practices in the LAC region, or when it makes sense, in other regions, such as the OECD area. Broadband plans should cover a period of between five to seven years given that markets and technology change too rapidly to plan for longer periods. Establishing not only long-term targets but also short-term ones is also advisable as it allows for quick gains and assessment.
54. Increasingly, targets for national broadband plans and digital agendas are being set for the adoption rather than for the availability of broadband. This requires governments to specify a different set of indicators and policies, addressing those socioeconomic groups that have been slower in adoption of ICTs. Stimulating broadband adoption can also help in providing an incentive to invest in broadband infrastructure, for example by creating demand through policies aimed at the take-up of broadband by government entities (municipalities, schools, hospitals, police and so forth). A further good practice is to publish periodic reports subjected to audits and related to the assessment of achievements in terms of coverage, access (e.g. population penetration) and usage.
55. Traditionally, broadband availability has been understood as fixed broadband access. However, wireless technologies have evolved rapidly in recent years, and mobile broadband can be in many cases a good alternative for fixed technologies, especially in rural areas with scattered population and where deploying fixed access infrastructure to households is especially challenging and costly.
56. For this reason, when possible, technological neutrality should be a guiding principle when setting targets for broadband extensions. Broadband access can be provided using many different technologies, such as copper, fibre, Wi-Fi, cellular networks or satellite. Each of them have different implications in terms of costs, speed supported, quality of service, and so forth, and can be sufficient for some applications. Allowing for a range of different technological proposals to cover broadband access goals expands potential options, increases competition, and at the end of the day improves the cost/benefit relationship. It also allows for a more transparent process, providing a level playing field for all actors and avoiding selecting “winners”.
57. One of the reasons for the lack of broadband access is the absence of transport infrastructure at the core network (backbones) or the infrastructure connecting these backbone networks with the access switches or base stations (backhaul networks). This is the case for rural areas, including in the LAC region where there are fewer incentives for investment to extend nationwide backbones. In such cases, funding backbone/backhaul infrastructure with contributions from operators, direct funding by the administration or a combination of both via public-private partnerships, may help to bridge this gap and enable access infrastructure deployment by operators.
58. Insufficient backbone and backhaul networks, especially in rural areas, is a problem in many countries in the LAC region and a number of governments have launched ambitious projects to roll-out backbone/backhaul networks (Box 5). These facilities are aimed at providing transit connectivity for operators, which in turn are expected to invest in rolling out the “last mile” to households in the area covered by funded backbone/backhaul networks.
59. Some good practices when designing projects to deploy backbone/backhaul networks are:
• All market participants with technical and managerial ability to roll-out the network should have the possibility to bid for projects.
• Before launching a project, it is important to ensure that there are commitments from broadband access providers that they will use the financed backbone/backhaul network and extend coverage for broadband access networks.
• Open access clauses for the future use of backbone/backhaul networks should be set down ensuring that all market participants, and not just the one deploying the network, are able to use it for connecting their own access networks. Provisions on conditions for access, including guides for pricing and non-discrimination, should be set and be made public from the outset.
• Backbone and backhaul networks should be designed to take into account estimated future growth of Internet traffic. To avoid future congestion fibre is likely the best technology, although in specific cases where fibre cannot be deployed or is too costly due to geographical characteristics, microwave links can also be considered. In this case, special attention should be paid to future capacity upgrading.
• Backhaul capacity should be designed in order to facilitate fixed and mobile broadband. Base stations supporting mobile broadband access need high speed fibre-based connections to cope with the growing need of bandwidth, and backhaul/backbone networks availability is essential to enable mobile broadband access at reasonable speeds.
• Structural or functional separation may be considered as a means to ensure a non-discriminatory access to backbone networks. Under this model, the operator deploying and operating the backbone network is limited to providing wholesale services to other operators ensuring that all retail operators are treated in a non-discriminatory way. This is the model applied in Brazil with Telebras and in Mexico with Telecomm (Box 5). Structural or functional separation is often considered as a measure of last resort used when other measures do not succeed in ensuring under open access conditions.
60. Mobile networks usually cover a large proportion of a country or a region for which a license is issued. Where service levels are not sufficient there may be justification to use public funds to assist in extending and upgrading mobile broadband access networks. All market participants should have the opportunity to opt for the network upgrade subsidy, and open access conditions should be set to allow for infrastructure sharing among all operators to encourage competition at the retail level. Infrastructure sharing and open access conditions can be part of national roaming access conditions. Specific provisions on speed and capacity to be supported should be included in the conditions for obtaining the funds.
61. New spectrum auctions can include specific provisions for coverage in rural area, lowering (or even exempting) regular fees to be paid for spectrum, in order not to impose a high burden for a new operator that is expected to compete with existing players with no obligations for coverage in the corresponding rural area. This form of exemption has already been used in the LAC region.
62. Technological neutrality is an issue to be taken into account: objectives on extending broadband access should not be limited to wireless broadband, and when possible, funding for extension of broadband access should be open to any type of technology and operator, including fixed operators, provided that requirements on speeds, quality of service parameters and costs are fulfilled.
63. Extending fixed broadband access networks are usually part of NBPs initiatives. Fixed broadband access, however, has not been traditionally subjected to coverage obligations, and there are areas in the LAC region where no broadband access service is available and no copper access exists to provide DSL service. In certain cases this is because network operators consider these areas as unprofitable to invest in telecommunication infrastructure and public support may be warranted in order to provide citizens living in these areas with broadband access.
64. When requiring open access in publicly funded network expansion, it can be specified that the operator receiving public funds provide bitstream or unbundled wholesale services for other operators. Generally, for rural areas, bitstream is much more effective to facilitate access, since unbundling is too costly in rural areas with a low population density and insufficient economies of scale to justify unbundling by other operators. However, if new fixed access deployments are fibre based, there may be room for fibre unbundling since fibre covers much larger distances and other fibre cables can be aggregated in a single point. Networks originally built for cable television and upgraded for broadband have less distance constraints than those built for telephony.
65. Policy makers should also incorporate minimum speeds and quality of service parameters into their plans. Any publicly funded project aimed at extending broadband access should delineate the geographic area to be covered and the minimum download/upload speeds to be provided. These speeds are usually set in terms of averages for each connection. Definitions of the precise threshold of transmission rates that determines whether Internet access is considered broadband vary substantially by country and over time as demand and technology evolves. At the low end, broadband is often defined as download speeds of at least 256 kilobits per second (kbit/s) for the purpose of data collection. This is the definition used by the OECD, the ITU, the United Nations Conference on Trade and Development, and the Partnership for Measuring ICT for Development, a consortium of international organisations and agencies.
66. The key consideration is to set minimum speeds and quality of service parameters that enable information flows in a continuous and uninterrupted manner, with sufficient capacity to provide access to data, voice and video applications that are common or socially relevant to users. When connecting education centres or hospitals, for example, sufficient speeds are needed to cover all potential uses, such as telemedicine. When connecting individual households more modest speeds could be considered if this allows larger areas to be broadband-enabled given the available resources.
67. Policy makers need to evaluate the costs and benefits of investment in NBPs by conducting an estimate of costs and impact assessment. The objective is to select initiatives, which deliver both strong immediate aggregate demand effects, such as the employment created by rolling out networks, and strong longer-term aggregate supply-side effects, which would increase the productive capacity of the economy, as an improved foundation for commerce and communication. It is important to ensure that broadband plans are targeted, cover short-term objectives, and ensuring that government contributions directly relate to public service goals.
68. The provision of broadband in public premises at adequate speeds and quality of service is key to ensuring that communities and individuals can reap the benefits of the digital economy. In universities and schools, for example, it is important to ensure that students can benefit from the wealth of content and applications available on the Internet to support the educational process as well as to foster the acquisitions of digital skills. This is further analysed in Chapter 8. In hospitals and health centres, as considered in Chapter 10, the availability of broadband access is also key to enable the use of e-health applications that contribute to increasing the quality and efficiency of public health provision. In government offices, it is also essential to spur digital government initiatives and increase the efficiency and quality of public services delivery, as discussed in Chapter 11.
69. Moreover, in geographical areas where broadband access is not available or the penetration is low, other public buildings or spaces (such as public squares) may also act as an anchor for broadband connection by enabling, for example, the provision of broadband services in these premises for citizens, similar to services provided by public libraries. For these reasons, provision of broadband access in public premises is generally prioritised in broadband plans. It is good practice to first assess the need, feasibility and potential impact of broadband access deployments aimed at connecting public premises, and especially educational centres and telecentres, where communities can take advantage of spaces already equipped with computers to have broadband access (Box 6).
Universal Service Funds
70. Projects to extend broadband can be funded in several ways, ranging from direct full subsidisation by the public sector, mixed public-private funding, to setting incentives for network deployment by private operators (for example, through tax reduction/exemption or loans at reduced rates). Comprehensive plans for broadband extension may combine several of these mechanisms for funding, depending on the level of the access gap, funding needed to bridge gaps not covered by market forces, fiscal impositions that may be applied to operators without adversely effecting investment and competition, and the availability of public funding.
71. The constitution of USFs allows for aggregating and managing in a simple and comprehensive way different sources of funding, to increase transparency of funds management and enable the implementation of broadband plans.
72. Different models for providing funds and rules for using the USF are applied in each country in the LAC region as well as in the OECD countries. Some OECD countries collect USF contributions from operators and the funds can only be used to finance universal service obligations and are not available to invest in broadband projects. Other OECD countries, as well as most of the countries in the LAC region, use USFs to pay for a wide range of different broadband projects. These are not necessarily limited to infrastructure deployment but also demand side programmes such as improving digital literacy, improving affordability and development of e-government and e-health applications.
73. It is important to note that the original purpose of USFs – such as extending of the PSTN to rural areas – is still relevant in most LAC countries. Nonetheless, given the ability of mobile networks to provide telephony and the growing relevance of broadband networks to provide a range of services, as well as acting as backhaul networks, policy makers should consider adapting such USF programmes. In this respect, a case-by-case analysis is needed, taking into account a series of factors that will be analysed in the following sections. Annex 2 provides information on USFs in the LAC region.
74. First, policies can be put in place to provide direct funding by the public sector to fullfill universal service goals. Providing broadband access to people in both urban and rural areas, as well as to those in the LAC region with lower incomes is fundamental to achieve digital inclusion. The level of financial support for broadband extension projects depends on many factors such as existing gaps in broadband coverage, priorities for other investments in infrastructure (e.g. water or electricity) and the availability of public funds.
75. Secondly, contributions from operators to the USF are another, and potentially important, mechanism for financing broadband expansion. Setting an adequate level of contributions to USFs from operators is complex and there is not a one-size-fits-all rule. Policy makers should analyse data on the financial returns for operators, existing incentives for investments, the availability of public funding, as well as compare the burden imposed and its implications on investment and competition relative to the benefits to be obtained. Benchmarking with similar and reference countries is also a useful tool to set an optimal level of USF contributions from operators.
76. Regular contributions from operators based on their revenues allows for a steady stream of funds to address requirements for broadband expansion. As such, this can be considered as an option, provided that the burden to be imposed on operators is reasonable. Imposing high contributions to the USF from operators could also discourage other critical investment in the region. In addition, when there is a lack of competition, as is the case in many LAC countries, the additional burden for operators would be automatically transferred to consumers via increases in prices for telecommunication services. Conversely, setting too low contributions to the USF may not be optimal, since covering all broadband deployment projects with public funding may not be feasible in the region.
77. Therefore, a balance should be found between the burden to be imposed on operators and funding requirements needed to complement public funding in order to implement broadband plans, taking into account the potential effect on investments by operators and final prices as well as the real needs to fund universal services based on operator’s contributions. When possible, and if governmentbudgets allow it, contributions should gradually transition to being funded by general government revenues, bearing in mind that imposing high burdens on operators may have the effect of preventing broadband development and hindering its positive economic and social spillovers (OECD, 2014b).
78. Accumulating contributions to the USF without disbursement on broadband access projects, or disbursing substantially less than contributions collected would extract rents from operators, affecting the incentives for investment without benefiting consumers. When this occurs, as is the case in certain countries in the LAC region, there is a need to reinforce management capabilities to invest in projects with the funds obtained or to adapt the level of contributions from operators to fit the existing ability to implement USF projects.
79. It is important to note also that the level of USF contributions should be reviewed regularly. When broadband access is successfully extended and broadband penetration increases, improvements in quality and speeds may rely more and more on market competition. This means contributions from operators can be reduced, providing more room for competition and private investment. Finally, in a pro-competitive regime favouring market entry, it can make sense to set a minimum revenue threshold for contributions to the Universal Service Fund. This would lower barriers for new entry and simplify the management of the Universal Service Fund.
80. A third mechanism used to finance broadband access is through revenues from spectrum licenses and cross-subsidies between services. Some countries in the LAC region use, for example, spectrum license revenues as a source for universal service funding. Although spectrum revenues can be an important source of potential funds, the availability of such funds is unpredictable. This is because spectrum auctions only take place periodically and the outcome of auctions is not known in advance. As a result, auction earnings can be used to supplement USF but should not be relied on for planning purposes. Similarly, income from fines imposed on operators for infringing regulations do not provide for a predictable source of revenue for USF funds.
81. Applying cross-subsidies between services, using revenues from one service to subsidise other service, for extending broadband access is not advisable, and any contribution from revenue obtained from a telecommunication specific service should be avoided. This is because tariff rebalancing can be an essential requirement for the creation of effective conditions for competition and, distorting prices through cross-subsidisation, is likely to have a negative effect on affordability and demand for other services.
Selection of providers for broadband access extension in the LAC Region
82. When possible, publicly funded infrastructure deployment projects should be awarded using a transparent, open and competitive process where a variety of operators can tender and offer the use of different technologies, speeds, quality of service, operational support, future upgrading of a network, and so forth. This may also offer increased levels of co-funding and reveal actors knowledge on the actual costs of meeting policy objectives or result in more beneficial offers (e.g. wider coverage). This allows for better outcomes and the potential to foster competition among operators.
83. Special attention should be paid to the scope of the project since, for example, breaking up projects to cover smaller geographic areas can provide an opportunity for small operators to take part in the bid, fostering competition and allowing for diversification and experimentation with different models for deployment of broadband networks. However, in other projects, for example nationwide backbone networks, management and implementation may be more complex, such that it is necessary to use larger players with experience and adequate financial and management capacity.
The interrelation between public and private sectors when extending broadband access
84. There are several issues to be taken into account in the relation between the public and he private sector when extending broadband access. Some of them are the considerations on the potential implications of public funding for competition among private providers; the opportunities brought by Public-Private Partnerships; and finally, the role public owned operators can play in closing the access gap.
85. First, as discussed in Chapter 3 on competition and infrastructure bottlenecks, ensuring fair competition among telecommunication providers is key to enabling good quality of service and lower prices for broadband access services. Any broadband expansion plan or project involving public funding must take into consideration the potential implications for competition to avoid distorting the market or inhibiting future competition. In order to address this potential concern, the following good practices can be applied:
• In geographical areas where competition for broadband service with adequate quality of service is already present, or where there is room to foster competition (lowering for example administrative barriers), policy makers should, in principle, abstain from funding access infrastructure projects. Experience shows that well-functioning competitive markets can foster positive outcomes in terms of prices, speed and quality of service; in such areas public intervention may distort a competitive market. At the same time, the use of public funds in such areas diverts these resources from geographical areas that may be underserved by the market. In the European Union the legal framework does not allow for public funding of NGA deployments in areas considered as competitive (Box 7).
• In general, any partially or totally public funded network deployment should promote open access by enabling the use of the access infrastructure by all operators. Open access clauses should be inserted in tender documents stating price conditions, and also technical and other requirements needed to ensuring access from other operators.
86. Secondly, the public and private sectors can complement each other through Public-Private Partnerships (PPPs). PPPs can be an efficient model for structuring public funded broadband access extension plans or projects that take advantage of synergies that benefit both private and public interests, and that ultimately contributing to increasing the welfare of consumers.
87. The role for public authorities in PPPs should in general be focused on defining objectives and specific targets; setting conditions and clauses for deployment and operation of a network; contributing with funding; selecting private partners to execute the project; and monitoring and assessing projects. The role of the private sector, and specifically operators and technology suppliers, is to implement their know-how on efficient network technologies and deployment, as well as to contribute on project management and execution. Therefore, PPPs should be structured such that the comparative advantages and natural roles for each partner are used in the most efficient manner. There are many different experiences and models of PPP that can be used. Examples can be found in the OECD and IDB documents included in the references. The OECD has established principles for public governance of public-private partnerships to assist with good practices in this area (Box 8).
88. Finally, fully or partially public-owned operators may play a role in extending broadband access and are already present in a number of LAC countries. Most of these public-owned operators already act on broadband expansion projects, deploying rural and backbone/backhaul networks.
89. In the LAC region publicly-owned operators are often in a position to take a leading role in the execution of national and rural broadband plans. In many countries in the region, they control a national-wide copper access network deployed for fixed telephony services, as well as much of the backbone and backhaul networks that can be upgraded and extended rather than rolling out new networks. That being said, it is important to ensure that public-owned operators are not treated favourably relative to other operators based just on the fact that they are publicly owned. Taxation of publicly-owned operators, licenses, obligations and conditions for providing broadband services should be in principle the same as for any other operator, and any different treatment (such as obligations to provide access to essential facilities) must be based on regulatory decisions (e.g. because they have a dominant market position and should not be related to an ownership structure).
90. Any broadband subsidy for public operators should be granted under the same transparent and open access conditions, with any obligations applied being similar to those imposed on any other operator. When possible, subsidies for broadband access expansion must be awarded based on competitive bidding, open not only to publicly owned operators, but also to any other operator fulfilling pre-requisites for participating in the bidding process. It is also important to ensure that publicly-owned operators have no additional obligations compared to other operators, such as providing universal service for specific communities at lower prices or in rural areas without compensation for any additional costs born by the operator.
91. Exemptions for public operators from contributing to universal service funds, paying for spectrum licenses or any other financial burdens applied to private operators, or more favourable conditions to use the public infrastructure in exchange for universal access projects should be in general avoided. Such exemptions are not always transparent and may distort competition between public and private operators, and make it more difficult to apply competitive processes for universal access projects.
92. Publicly-owned operators can also be used in certain situations as a wholesale provider deploying backbone or access infrastructures to be used by other operators at the retail level. For example, Telebras, a publicly-owned operator in Brazil, has a mission to implement a broadband plan aiming to provide coverage in rural areas, schools, and other locations where there is a lack of coverage provided by the market. Telebras operates mainly as a wholesale infrastructure provider for other operators. Other countries in the LAC region and in the OECD area have also applied this model. Although separating the wholesale level and the retail level is attractive in terms of non-discrimination, and is applied in specific OECD countries, there is not a consensus on its merits. There is a potential risk of infrastructure re-monopolisation if all retail operators rely on a single wholesale access network, and loss of potential efficiencies in retail-wholesale integration. However, for broadband expansion plans aimed at providing coverage in areas where there would otherwise be insufficient infrastructure, such a model may be necessary and considered as good practice. The merits and risks of such a practice must be analysed on a case-by-case basis.
93. This Chapter focused on good practices to extend the availability of broadband access. While the private sector is expected to have a central role in expanding infrastructure and services, sound regulatory frameworks that lower administrative barriers to deployment, provide legal certainty for investors, promote competition and investment are also crucial. Once the existing bottlenecks for infrastructure deployment by the private sector have been addressed, policy makers should identify areas or locations needing public intervention.
94. National Broadband Plans (NBPs) usually set out the guiding policy objectives for broadband expansion. They should be done in a comprehensive manner, in coordination with stakeholders, Digital Strategies (if present) and demand-side policies; provide clear objectives and both short and long-term measurable targets; take into account the different levels of development among regions; map coverage gaps by fixed and mobile broadband networks; assess the existing level of competition; and implement a routine evaluation of target’s fulfillment. Furthermore, NBPs should be guided by technology neutrality principle, allowing market actors with different technologies to bid for coverage projects, giving preference to those with high social returns (that connect public premises and benefit disadvantaged groups, for example).
95. After assessing the policy objectives the next step is selecting mechanisms to meet these goals. Policy makers can choose to impose obligations, set incentives or provide funding for closing access and usage gaps. Obligations, when revised for the new requirements and uses of high-capacity networks and directly related to coverage and quality (demand-related objectives should be met through other procedures), could be aimed at extending broadband access in certain areas and tied to licensing frameworks and spectrum assignment. Incentives could be carried out by partial or total tax exemptions, lower or no fees for spectrum licenses in certain areas, or loans at reduced interest rates. Direct funding of broadband infrastructure, usually articulated via NBPs and Universal Service Funds (USFs), should be in the reach of all market participants equally and awarded in a transparent and competitive manner, with the inclusion of infrastructure sharing and open access conditions. USF are used to aggregate and manage different sources of funding, such as contributions from operators based on revenues, general government revenues and, complemented in some cases, by spectrum auction earnings. Well-functioning USFs rely on transparent and effective management processes, steadier streams of funds, consider the financial returns of operators in order to not over-burden them and impact investment, avoid cross-subsidies so as not to distort prices, and review USF contributions regularly through benchmarking exercises and economic analysis.
96. Furthermore, the public and private sectors can complement each other through Public-Private Partnerships (PPPs). PPPs can be an efficient model for structuring public funded broadband access extension plans or projects that take advantage of synergies that benefit both private and public interests, and that ultimately contribute to increasing the welfare of consumers.
97. Finally, public-owned operators may also have a role to play, but licenses, obligations and conditions for providing broadband services should be in principle the same as for any other operator, and any different treatment should be based on regulatory decisions (due to a dominant market position, for example, and not to ownership structure). Broadband subsidies for public operators should be granted under competitive process open to any operator fulfilling prerequisites.
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ANNEX 1: NATIONAL BROADBAND PLANS IN THE LAC REGION
ANNEX 2: UNIVERSAL SERVICE FUNDS IN THE LAC REGION
2. See http://www.itu.int/net4/ITU-D/idi/2015/
3. There is one specific case where incomes for a specific service (termination for international calls) is used to set the contribution for the USF
4. See http://www.mtc.gob.pe/comunicaciones/concesiones/renovacion_telefonica.html
5. These mechanisms are further described and addressed a report by Broadband Commission (2014b).
6. OECD, Recommendation of the OECD Council on Broadband Development, 2004 http://www.oecd.org/sti/ieconomy/recommendationoftheoecdcouncilonbroadbanddevelopment.htm and OECD, Recommendation of the Council on Principles for Internet Policy Making, 2012 http://acts.oecd.org/Instruments/ShowInstrumentView.aspx?InstrumentID=270