The Disruptive Future of Telecom

1. The Disruptive Future of Telecom Raj Reddy and Rahul Tongia ictQATAR and Carnegie Mellon University March 7, 2006 rr@cmu.edu Talk presented at WTDC 06 in Doha

2. Eliminating the Digital Divide:Rural Connectivity at Affordable Cost? • 4 billion people at the bottom of the pyramid • Many in rural areas and without power • Most have never used a phone • Subsist on $1 per day income • Need access to ICT for eAgriculture, eHealth and eEducation • Also for entertainment and personal communication • All should be under $2 per month (~6% of income*) * Approx. global ICT average

3. Current Situation • Voice, Data and Video – The “Triple Play” • Multiple disconnected solutions • Approximate US Costs: • Voice • Landline: $20 to $30 per month (only long-distance falling measurably) • Cellular: $30-50 per month • Data – Broadband: $30-40 per month • Video via Cable/Satellite: $20 to $80 per month • Monthly “connectivity” costs: upto $200 • Average US household ~$120/month and rising • Excludes some content cost (e.g., periodicals, DVDs) • ~100 times more what people at the bottom of the pyramid can afford

4. Proposed Solution • 100 times more cost effective solutions requirements • Out of the box thinking • Radically different approach and solutions • Similar to roads, Governments should provide free basic communications infrastructure • Utility model • Overcomes fundamental disconnect between physical fiber infrastructure lasting decades, and electronics which must be amortized in 5-7 years • Private sector to provide all the services • Analogous to Cars, Gas Stations and Motels • Use (new) Fiber and WiMax technologies to provide enormous bandwidth at little cost • Integrated voice, video and data solution • Eliminate unneeded costs such as billing by using prepaid mechanisms

5. Example: FiberAfrica Concept • A revolutionary design to provide the majority of the population nearby access to broadband for a one-time capital expenditure of ~$1/capita • Can be cheaper by harnessing any existing infrastructure • Includes optical fiber of virtually unlimited capacity between major population centers, and broadband wireless hubs for wide-spread access over large areas • Excludes PCs and end-user equipment • Revolutionary business model could allow virtually free access to schools, hospitals and rural community centers More info at http://tinyurl.com/dttga

6. FiberAfrica Backbone Network • Almost 70,000 km core backbone (shown) • DWDM Technology for scalability and cost-effectiveness • 35,000 km fiber spurs (not shown) • Routing chosen to provide maximum coverage • Land-based systems routed to go through populations • Much less expensive than submarine fibers • Can leverage existing fibers/rights of way (along highways

7. Wireless Receiving Hubs (can resell access nearby using 802.11 or other shorter-range wireless) Inline Optical Amplifier (with add/drop capabilities) Wireless Transmission Central Hubs (10s of Mbps) Major City . . . Major City Upto 50 km Additional optical amplifiers 80 km 80 km 80 km 80 km Major Cities (hundreds of km apart) FiberAfrica Design Detailed design undertaken, for all capital and operating expenses

8. Barriers to Realizing the Dream • WB deals with countries not continents • Provides loans not solutions • Existing Stakeholders such as PTTs feel threatened • Requires complete transparency within member countries • Solution: Multiple Agencies and NGOs have to provide leadership • ITU? FAO? MDG? Gates and Bono? Intelsat? • Incremental country-based solutions based on sound principles; regional cooperation

9. Realizing the Dream of Rural Telecom • Standards • Interoperable systems and networks operating within international design standards • Common (perhaps ITU-based) Regulatory Environment • Enduring regulations enabling private sector to invest with confidence • Competition • At least 3 credible telecom services providers in each region, preferably one each from • Multinational • National • Local / community • Remove government up-front “taxes” on the public portion (common infrastructure) • Free Rights-of-Way, special spectrum, etc. • Only for “public good” network portions (common core), for internationally certified / standards based infrastructure providers

10. Realizing the Dream of Rural Telecom (cont) • Hybrid Fiber/WiMax network design for reaching rural communities • Must reach every cluster of 10,000 population • With Population Densities of at least 100 per square mile • Preferred Vendor Model for implementation • Enabling rapid deployment from qualified and certified vendors • Revenue Sharing instead of fixed taxation • No auctions or upfront costs increasing the total burden on the ultimate user • Affordable for people making a $1 per day • Target $1 per month telecom cost • triple play (voice+video+data) + 3 free calls per day + penny-call model + prepaid only (no billing)

11. Disruptive Future of Telecom • With the Emergence and Demonstrated Viability of Low Cost Unlimited Bandwidth Infrastructure • Many Businesses as we know them today will not exist in 10 to 20 years • Telecos: POTS (plain old telephone service) replaced by video phones • Death of time and distance: Fixed fee for all services • Broadcasting Companies like CBS/NBC • Broadcasting goes to Unicasting • Each person with their own channel • Cable Companies • Video Rental Stores • Music Industry

12. Next Steps after Fiber Infrastructure • Synergize development plans and rollout(s) • Develop capacity building programs to make 100% of the population “eLiterate” • Develop programs to overcome language barriers • Create multi-lingual interfaces, spoken language interfaces and multi-lingual translation systems • Build domain-specific capacity, content, and partnerships such as for healthcare, education, etc. • E.g., video conference with experts on problems of health (AIDS) or agriculture or other problems such pest control

13. Action Items • Help from ictQATAR • Free Design Assistance • To create National Hybrid Fiber/WiFi network • Capable of providing affordable Voice/Data/Video services for rural communities with per capita incoming of $1 per day • Within the Regulatory Framework of ITU • Technical support from Carnegie Mellon University • Financial Support from WB and ADB, Countries and Foundations

14. Questions and Responses (FAQs) • What role does Private Sector have if Government takes over? • Government DOES NOT take over • Dominant role remains for the private sector • Government merely establishes core infrastructure, like roads • Even that can be built/operated under contract by private vendors • Main innovations and investments (and competition) would occur for the services and applications • For poorer population segments and public users (e.g., schools) government may subsidize purchase of the hardware

15. Questions and Responses • How will Private Operators make money? • Volume • Even $1.5/month ARPU and only 10% penetration (same as mobiles today) means $120 million / month revenues • Revenues today for ICT (niche segments) are more than an order of magnitude higher • Govt. revenue share may be 10% only as “usage tax” to pay for maintaining the core infrastructure • Nearly free broadband reduces major cost component of today (uplinking) • Some investments expected for hardware, software and applications; recoverable (scale much better with demand than today’s models where provider has to “do it all”) • New applications and value-added services • Can allow viral growth of local entrepreneurs providing services (as happened in the case of cable in India) • “Franchising” model possible: National providers cover content, technology/equipment; local entrepreneurs provide the service

16. Questions and Responses • Who pays for CapEx? • For the poorer countries that accept the standard protocols, Capex is expected to be covered by International Agencies such as World Bank, ADB, Foundations, and G8 countries (and other donors) • Who pays for OpEx and Maintenance? • Each country is responsible operating and maintaining the Fiber/Wimax infrastructure, just as they do for roads. In steady state, this would be funded from “usage tax” revenues of 10% • What is the cost of Maintenance and operations? • About 5 to 10% of Capex or about $100M per year. Tax revenues are projected annually at $720M ($60M per month quoted earlier) at least in the steady state.

17. Questions and Responses • What happens to 10-25% of the population and areas not covered by this network (depends on design)? • Where population densities are very low, the self sustaining economic model presented here does not work. Governments have to subsidize or charge much higher rates which defeats the purpose of eliminating the Digital Divide. Niche solutions like satellite may be more cost-effective. • What about difficult Terrains for Fiber like Bhutan? • Direct Line of sight microwave (at gigabit plus rates) and wimax towers (non-LoS) would be used. The cost will be $5 to $10 per capita instead of $1 projected here. • Why ictQATAR? • Dr Hessa Al Jaber, Secretary General of ictQATAR is willing to provide the resources for telecom infrastructure design help