Recommended broadband policy

Recommended broadband policy

By : Jan van Rees, World Bank Contents Current status Main issues to be addressed: Broadband backbone Mobile/wireless Broadband Fixed Broadband Investments required

Role of Central Government Recommended Regulation Role of local Government Role of Public works and PLN Conclusions and proposed Time Schedule Current status of Broadband in Indonesia In West-Indonesia the main fiber optic backbone between all provinces is in place Submarine routes to abroad are available and new routes are added Broadband access still in early stage: Technology Fixed broadband ADSL Cable internet FTTH Wireless broadband

Mobile 3G, PC Based Mobile 3G, Phone Based Number of Subscribers (latest available data) Providers (1) Telkom First Media More than 5 > 3.0 million (4)

> 25 million (5) Telkomsel. Indosat, XL, also some of the other 3G/UMTS and CDMA EV/DO mobile operators Telkomsel. Indosat, XL, also some of the other 3G/UMTS and CDMA EV/DO mobile operators 1,300,000 (2) 500,000 (3) 4,000 Mobile Internet/broadband shows rapid growth and is the main broadband access for individual users

Market S Not includ different n service an Regional comparison Broadband Quality Source : Global broadband quality study sponsored by Cisco Main issues to be addressed Broadband backbone Inter province backbone in Sumatra-Java-Kalimantan-Bali-South Sulawesi exists East Indonesia is missing (Palapa Ring East) Extension to many Kabupaten still to be implemented

Mobile/wireless Broadband 3G deployed on part of the network in 2100/1900 MHz band, focused on cities WiMAX auctioned Requires cost-effective mobile broadband everywhere Fixed Broadband Monopoly on copper infrastructure ADSL (up to 1 Mb/s, Speedy, PT Telkom) Monopoly on cable TV network Very limited Fiber To The Home Requires large scale fiber optic deployment Backbone investments required

Palapa Ring East: $ 186 million Completing Palapa Ring East with Sorong-ManokwariBiak-Jayapura and Sorong-Fak-Fak- Timika-Merauke. Estimated at $ 145 million Extension to remaining Kabupaten Sumatra-KalimantanSouth Sulawesi, 9.820 km, $ 113 million of which $ 31 million is expected to be not feasible commercially Extension to Kabupaten in Eastern Indonesia. If possible $ 225 million. However most non-coastal Kabupaten in Papua lack any infrastructure to lay fiber optic cable along (no roads, pipelines, etc.). Some intermediate use of microwave might be required. Total: $ 444 million + (part of) $ 225 million Kabupaten extensions in Eastern Indonesia Mobile/Wireless broadband access investments required

Passive infrastructure (towers and facilities) already established Upgrade of active radio network required (3G everywhere, future upgrade to LTE) Backhaul from towers to backbone On the largest network about 5.000 out of 32.000 basestations are 3G. Current 3G spectrum is not cost effective for rural roll-out (would require many more towers). However if 850/900 MHz is used a simple overlay can be deployed. Estimated costs: $ 500 1000 million Backhaul is crucial. Could cost around the same amount as the active infrastructure Note: Short-term, activate EDGE feature everywhere instead of only GPRS

CAPEX/OPEX impact Source : GSA Information Paper UMTS 900 September 4 th, 2008 Fixed broadband access investments required Future requirement is 100 Mb/s+, many countries are deploying FTTH (like Singapore, Australia, etc.) Main investment (50-80%) is passive infrastructure The largest investment in the future telecom infrastructure will be in the migration to fiber optic access networks Assuming $ 800/home then the replacement of current copper network (8 million lines) would be in the order of

magnitude of $ 6400 million. Connecting up to 40 million homes would increase this to $ 32000 million Smart and opportunistic deployment required to reduce investment level Note: Short-term, deploy ADSL on all copper networks, increase speed to technology limit (20 Mb/s) where possible Analysis The mobile (broadband) market is highly competitive.

Operators have made, and continue to make, multibillion $ investments each year The number of mobile operators/networks is quite high and consolidation should be anticipated. Fewer mobile networks & more MVNOs are a likely scenario. Use of lower frequency bands (850/900 MHz) is critical for cost-effective mobile broadband everywhere Fixed broadband (ADSL) over copper wires, has been more or less a monopoly business although cable Internet is a competitor. Investments have been limited A more competitive fixed broadband market is required. This implies a transition from monopoly on copper to competition on fiber. Source : Point Topic Broadband by technology Q4 2008 Central Government role

Timely issuance of permits and rights of way Facilitate coordination between entities responsible for different infrastructures for example ensuring that construction of new roads, railways, power lines and pipelines provides for co-location of fibre-optic cables. Such practice is widespread around the world for new infrastructure development Financial incentives like a minimum subsidy for a backbone extension to a marginal Kabupaten in return for Open Access and early deployment (ICT fund) Demand aggregation Regulatory measures required (1) Infrastructure sharing. For towers this has already been done. This should be extended to include other passive infrastructure like ducts, poles, dark fibers, etc.

Open access requirements: Passive infrastructure for essential and not easily replicated infrastructure Active layer/service layer. IP level is open and net neutrality should be maintained The transition from monopoly on copper to competition on fiber implies that a fully unified license is provided: Licensed operators can deliver all services (local, SLJJ, SLI, Mobile, Internet, IPTV, etc.), typically over the broadband access. Current legacy regulation focused on individual services should be phased out This is a prerequisite for a competitive fixed broadband market. Regulatory measures required (2)

Equal access to buildings Remove all monopoly practices related to access to the building and the in-building cable system. Allow non-Telco entities (construction companies, real estate developers, local Government) to construct and provide passive infrastructure. However mandate open access Number portability (mobile & fixed) for consumer protection and additional competition Mobile/wireless broadband Allow in-band migration to 3G/4G technologies Release more spectrum for the long-term (700 MHz, 2500 MHz). 700 MHz requires an accelerated migration from analogue to digital TV to free-up the Digital Dividend

2500 MHz is currently mostly used for satellite TV Regional/local Government role What can be done to accelerate deployment? Timely issuance of permits and rights of way Provide and prepare passive infrastructure whenever constructing other infrastructure like roads. Example: Kabupaten without extension to the backbone and without fiber infrastructure Invest in the passive infrastructure to lower the barrier for entry. Stand-alone or as co-investor. Aggregate initial demand (schools, puskesmas, Government offices) and tender this demand in return for early service and deployment of open access backbone and local fiber optic network

Public Works role By default Public works should incorporate the need for ducts whenever constructing roads, etc. Arrange a general agreement between Telcos and the Government with respect to the use of passive infrastructure. PLN role PLN is operating a very large passive infrastructure of power lines and electricity access network on poles. Fair and equal access to this passive infrastructure is important to deploy cost-effectively.

Arrange a general agreement between Telcos and PLN with respect to the use of this passive infrastructure. Conclusions (1) The future of telecom is Broadband (10+ Mb/s today and 100+ Mb/s tomorrow). Main backbone (West+ East) and extension to all Kabupaten in West Indonesia + South Sulawesi requires a remaining investment of $ 444 million. Fixed broadband is essential to provide real high capacity

cost-effectively Mobile broadband can be deployed fast to provide initial connectivity Remaining (in particular non-coastal) Kabupaten in East Indonesia Eastern Indonesia might require intermediate solutions like microwave Transition from monopoly on copper to competition on fiber through regulatory steps: Fully Unified License for all services and phase out of legacy service by service regulation. Infratructure sharing Open access Conclusions (2)

Mobile broadband in the lower frequency bands (850/900 MHz) is critical for cost-effective rural deployment Short-term fixes based on existing infrastructure: Deploy ADSL at all local PSTN switches. Where there is copper there should be ADSL Activate the EDGE feature on the GSM network everywhere to provide, almost instantly, better mobile internet all over Indonesia Use demand aggregation and investments in passive infrastructure to accelerate fiber optic roll-out of backbone

and access. Consider use of the USO/ICT fund for those areas which are commercially not feasible. Local/regional Governments can play an important role to realise broadband in their area. However it is important that the Central Government arranges the regulatory prerequisites to create a competitive fixed broadband market. Proposed time schedule 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 2012 2013-later Short-term action to better use existing infrastructure Roll-out of ADSL to all PSTN switches with terrestrial connectivity Activate EDGE capability on every GSM basestation Plan Plan Implement Implement Implement Implement

Implement Implement Broadband backbone: Palapa Ring East Palapa Ring East: Lombok - Kupang: Announced start end-Sept 2009 Palapa Ring East: Manado-Sorong-Ambon-Makassar: Expected start Dec 2009 Palapa Ring East: Sorong - Jayapura & Sorong - Merauke Announced Implement Implement Implement Implement Plan Implement Implement Implement Implement Implement Plan Plan Implement Implement Broadband backbone: Extension to remaining Kabupaten Shared (passive) infrastructure is going hand-in-hand with broadband access in regions Parallel with more broadband access deployment Create a competitive broadband access market for Next Generation Access (fiber optic based) Duct/passive infrastructure sharing regulation Plan

Plan Implement Implement Implement Regulation to facilitate access to buidlings by multiple operators Plan Plan Implement Implement Implement General arrangement between Government and Operators for access to passive infrastructure Plan Plan Implement Implement Implement Unified acces license, one license to offer all telecom services. Any broadband provider should also be able to offer telephony over broadband. Major reduction of current legacy PSTN Plan Plan Implement Implement Implement oriented regulation Remove any restrictions for VoIP over broadband Plan Plan Implement Implement Implement Allow and support local initiatives to construct local open broadband access networks Plan Plan Implement Implement Implement Aggregate early, initial, broadband demand (schools, health care centers, Government Offices) Plan Plan Implement Implement Implement Implement Implement Implement and tender this. Initially current broadband followed by NGA broadband Provide more E-Government services

ContinuousContinuousContinuousContinuousContinuousContinuousContinuous Continuous Accelerate mobile broadband also in rural areas Allow mobile broadband (initially 3G, later LTE) in lower frequency bands 850 & 900 MHz Facilitate in-band migration in general to allow more spectrum efficient technologies Plan Plan Implement Implement Implement Implement Implement Implement Implement Implement Provide additional spectrum to support Mobile/Wireless Broadband growth Auction remaining part of 2.3 GHz band (currently called Mobile WiMAX, potentially also LTE) Free up the 700 MHz band (Digital Dividend), currently expected 2018-2020, consider earlier Free up the 2.5 GHz band for mobile/wireless broadband Plan Plan Plan

Plan Plan Plan Plan Plan Implement? Plan Plan Plan Plan Plan Plan Plan Customer protection (& facilitating competition)

Number portability for mobile & fixed numbers Implement Implement Implement Implement? Implement? Why are lower frequency bands so important? 850 and 900 MHz bands offer a much better coverage than 2100 MHz Many countries do have very extensive rural areas which could benefit from 3G (mobile as well as in fixed deployment) to deliver telephony and broadband service Typically spectrum use in rural areas is less intensive making it easier to allow in-band migration to 3G at much lower cost Examples:

Telstra Next G network (850 MHz). Covers > 2.000.000 km2 Elisa Finland/Estonia (900 MHz) Vodafone New Zealand (900 MHz), Australia under construction Optus in Australia (900 MHz) AIS Thailand (900 MHz) Europe is anticipated to accept UMTS 900 widely, many trials/plans on-going No of UMTS basestations required A lower frequency band results in a much more cost efficient roll-out in rural areas. UMTS 900 is already standardised.

Source : UMTS Forum presentation Cell Coverage Comparison in typical urban case Source : GSA Information Paper UMTS 900 September 4 th, 2008 CAPEX/OPEX impact Source : GSA Information Paper UMTS 900 September 4 th, 2008 Example: Telstra HSDPA at 850 MHz 3GPP standard allows > 200 km. Telstra demonstrated 2 Mb/s even up to 200 km for high elevation basestations and free of obstructions Source : Telstra presentation at Mobile World Congress in Barcelona 2008 Co-existence issues

UMTS 900 GSM 900 uncoordinated (2.8 MHz) UMTS 900 GSM 900 co-located (2.6 MHz) UMTS 900 GSM 900 micro/pico cells (> 2.8 MHz) Suggested frequency arrangements: Source : ECC Report 82

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