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BWA Licensing Conditions, Auction or merit based comparative evaluation approach

BWA Licensing Conditions, Auction or merit based comparative evaluation approach

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BWA Licensing Issues
Auction or merit based comparative evaluation approach

Saturday, May 31, 2008 01:46 PM
1. Country “A” plans to provide end to end Internet connectivity to its residents at affordable cost. Though, it is as small as New York State, but the estimated population is almost 150 million. Country “A” is concerned that the Internet penetration rate is as low as 0.4 percent till date. The country is connected to only one submarine Internet backbone, installed at a cost about 94 million U.S. dollars back in 2006, but almost 90% of its capacity has remained un-utilized, due mostly to its initial high tariff rates, lack of proper nationwide telecommunications backbone infrastructure and its pricing model which failed to promise the ability to reach it’s prospective subscribers in under-privileged areas. As usual, the state owned incumbent phone/Internet company could not reach those unconnected as expected and they long ago amortized the cost of their fewer copper network, as they hardly added new connections over the years, and spent barely anything on expanding it. The e-commerce could not start, as you have guessed it right - where is the connectivity?
2. Let’s get to some of the basic facts which will determine the Internet business cases viable for this country. The country is very flat, I would say, it is the radio propagation heaven. The population is heavily dense, which means you get to meet more than 2700 people in a square mile. This will bring the thought in your mind that investment on infrastructure will have its return over night. That’s why the local subsidiary of foreign cell phone companies is earning their fortune here. The single radio BTS don’t even need to reach out to cover cell planning area, because it gets filled up way before half of its expected coverage.
3. The per capita GDP is close to US$ 470 (as estimated in 2007) which will depict the baseline of affordability of the common people. I would say, the lowest Internet connectivity tariff may start at 4 USD, because that *really* can be termed as affordable for this country. I understand Maintaining QoS of Internet at this price can be challenging, but the existing broadband policy sets 128 kpbs as a minimum for time being. Here most of the existing (mostly unlicensed) ISP’s don’t care about the contention ratio for the home users, because with the existing higher bandwidth pricing, it is nearly impossible to provide good contention ration like 1:20 or 1:30 with 8-9 USD. The taxation on CPE (modems) is also arbitrarily high to get the cost down.
4. Say, right now, the policy makers of this country really want to connect all the unconnected like providing universal access services obligation. Let’s set the initial connection speed to 64 kpbs for some time to get the initial cost down. While there is very less infrastructure on copper or fiber (FTTH and ADSL relies heavily on infrastructure) in this country, Broadband Wireless Access (BWA) technologies can be life saver for reaching everyone. The population density, the vibrant private sector with state support for ICT should be able to deliver when it comes to connecting those unconnected. Here technologies like WiMAX/Wi-Fi and HSPA can be good contenders for connecting everyone wirelessly. For most countries, these BWA services are complementary to those offered by ADSL/cable and FTTH, but here the scenario is different now. For reaching everyone, it (BWA) has to be the primary stop gap solution before the real infrastructure comes up. We have to give it a time. With regard to spectrum costs and charges, telecommunication experts sometimes opine that charges paid for radio spectrum exceeding the costs for administrative spectrum management - either caused by auctions or set in beauty contest’s spectrum fees - should be avoided as far as possible and in any case should flow back into the telecommunications sector for the benefit of the in
BWA Licensing Issues
Auction or merit based comparative evaluation approach

Saturday, May 31, 2008 01:46 PM
1. Country “A” plans to provide end to end Internet connectivity to its residents at affordable cost. Though, it is as small as New York State, but the estimated population is almost 150 million. Country “A” is concerned that the Internet penetration rate is as low as 0.4 percent till date. The country is connected to only one submarine Internet backbone, installed at a cost about 94 million U.S. dollars back in 2006, but almost 90% of its capacity has remained un-utilized, due mostly to its initial high tariff rates, lack of proper nationwide telecommunications backbone infrastructure and its pricing model which failed to promise the ability to reach it’s prospective subscribers in under-privileged areas. As usual, the state owned incumbent phone/Internet company could not reach those unconnected as expected and they long ago amortized the cost of their fewer copper network, as they hardly added new connections over the years, and spent barely anything on expanding it. The e-commerce could not start, as you have guessed it right - where is the connectivity?
2. Let’s get to some of the basic facts which will determine the Internet business cases viable for this country. The country is very flat, I would say, it is the radio propagation heaven. The population is heavily dense, which means you get to meet more than 2700 people in a square mile. This will bring the thought in your mind that investment on infrastructure will have its return over night. That’s why the local subsidiary of foreign cell phone companies is earning their fortune here. The single radio BTS don’t even need to reach out to cover cell planning area, because it gets filled up way before half of its expected coverage.
3. The per capita GDP is close to US$ 470 (as estimated in 2007) which will depict the baseline of affordability of the common people. I would say, the lowest Internet connectivity tariff may start at 4 USD, because that *really* can be termed as affordable for this country. I understand Maintaining QoS of Internet at this price can be challenging, but the existing broadband policy sets 128 kpbs as a minimum for time being. Here most of the existing (mostly unlicensed) ISP’s don’t care about the contention ratio for the home users, because with the existing higher bandwidth pricing, it is nearly impossible to provide good contention ration like 1:20 or 1:30 with 8-9 USD. The taxation on CPE (modems) is also arbitrarily high to get the cost down.
4. Say, right now, the policy makers of this country really want to connect all the unconnected like providing universal access services obligation. Let’s set the initial connection speed to 64 kpbs for some time to get the initial cost down. While there is very less infrastructure on copper or fiber (FTTH and ADSL relies heavily on infrastructure) in this country, Broadband Wireless Access (BWA) technologies can be life saver for reaching everyone. The population density, the vibrant private sector with state support for ICT should be able to deliver when it comes to connecting those unconnected. Here technologies like WiMAX/Wi-Fi and HSPA can be good contenders for connecting everyone wirelessly. For most countries, these BWA services are complementary to those offered by ADSL/cable and FTTH, but here the scenario is different now. For reaching everyone, it (BWA) has to be the primary stop gap solution before the real infrastructure comes up. We have to give it a time. With regard to spectrum costs and charges, telecommunication experts sometimes opine that charges paid for radio spectrum exceeding the costs for administrative spectrum management - either caused by auctions or set in beauty contest’s spectrum fees - should be avoided as far as possible and in any case should flow back into the telecommunications sector for the benefit of the in

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Published by: Raqueeb Hassan, Lt Col Md Rakibul Hassan on Nov 30, 2009
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11/29/2009

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1
Auction or merit based comparative evaluation approach: BWA Licensing Conditions
1
 BWA Licensing Issues
Auction or merit based comparative evaluation approach
Saturday, May 31, 2008 01:46 PM
1. Country “A” plans to provide end to end Internet connectivity to its residents at affordable cost. Though,it is as small as New York State, but the estimated population is almost 150 million. Country “A” is concerned thatthe Internet penetration rate is as low as 0.4 percent till date. The country is connected to only one submarineInternet backbone, installed at a cost about 94 million U.S. dollars back in 2006, but almost 90% of its capacity hasremained un-utilized, due mostly to its initial high tariff rates, lack of proper nationwide telecommunicationsbackbone infrastructure and its pricing model which failed to promise the ability to reach it’s prospectivesubscribers in under-privileged areas. As usual, the state owned incumbent phone/Internet company could notreach those unconnected as expected and they long ago amortized the cost of their fewer copper network, as theyhardly added new connections over the years, and spent barely anything on expanding it. The e-commerce couldnot start, as you have guessed it right - where is the connectivity?2. Let’s get to some of the basic facts which will determine the Internet business cases viable for thiscountry. The country is very flat, I would say, it is the radio propagation heaven. The population is heavily dense,which means you get to meet more than 2700 people in a square mile. This will bring the thought in your mindthat investment on infrastructure will have its return over night. That’s why the local subsidiary of foreign cellphone companies is earning their fortune here. The single radio BTS don’t even need to reach out to cover cellplanning area, because it gets filled up way before half of its expected coverage.3. The per capita GDP is close to US$ 470 (as estimated in 2007) which will depict the baseline of affordability of the common people. I would say, the lowest Internet connectivity tariff may start at 4 USD, becausethat *really* can be termed as affordable for this country. I understand Maintaining QoS of Internet at this pricecan be challenging, but the existing broadband policy sets 128 kpbs as a minimum for time being. Here most of theexisting (mostly unlicensed) ISP’s don’t care about the contention ratio for the home users, because with theexisting higher bandwidth pricing, it is nearly impossible to provide good contention ration like 1:20 or 1:30 with 8-9 USD. The taxation on CPE (modems) is also arbitrarily high to get the cost down.4. Say, right now, the policy makers of this country really want to connect all the unconnected like providinguniversal access services obligation. Let’s set the initial connection speed to 64 kpbs for some time to get the initialcost down. While there is very less infrastructure on copper or fiber (FTTH and ADSL relies heavily oninfrastructure) in this country, Broadband Wireless Access (BWA) technologies can be life saver for reachingeveryone. The population density, the vibrant private sector with state support for ICT should be able to deliverwhen it comes to connecting those unconnected. Here technologies like WiMAX/Wi-Fi and HSPA can be goodcontenders for connecting everyone wirelessly. For most countries, these BWA services are complementary tothose offered by ADSL/cable and FTTH, but here the scenario is different now. For reaching everyone, it (BWA) hasto be the primary stop gap solution before the real infrastructure comes up. We have to give it a time. With regardto spectrum costs and charges, telecommunication experts sometimes opine that charges paid for radio spectrumexceeding the costs for administrative spectrum management - either caused by auctions or set in beauty contest’sspectrum fees - should be avoided as far as possible and in any case should flow back into the telecommunicationssector for the benefit of the information society of a country. The attribution processes should be judged on meritshow the country is benefited, and not to consider this as an opportunity for governments to withdraw additionalmoney from this sector in order to reduce their budget deficit. For future expansions, experts generally supportthe principle of “technology neutrality” as proposed by other regulatory authorities for the optimum delivery of BWA services.5. Now, let’s say, we have devised BWA services to be the best methodology to bridge the digital dividequickly. Before opening up these BWA operations to private sector, the country needs to figure out what is best
Raqueeb Hassan | raqueeb.wordpress.com
 
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Auction or merit based comparative evaluation approach: BWA Licensing Conditions
1
way to reach its goal. That is why the authorization of Telecommunications Services to the companies and right touse radio spectrum and licensing rural and universal access services should be dealt differently. Other countrieswhich has ADSL and FTTH up and running might have the luxury to earn extra cash by auctioning, but we have belittle careful about that. Let me put something from ICT regulatory toolkit document ….“There are significant differences in the authorization practices in force in different countries. At one endof the spectrum are wide-open authorization regimes, where no form of governmental approval isrequired to start a telecommunications service business or to operate network facilities. At the other endare individual licensing regimes with lengthy licence documents customized to the circumstances of aspecific service provider. In between are many forms of general authorization or “class licences” thatauthorize and provide generally applicable regulatory conditions for classes of telecommunicationsservice providers.”6. We hear loads of good thing about spectrum auctioning but it does not work when it comes to using it foruniversal access services. But, it is true that as per the Telecommunication Regulatory Handbook, in least-costsubsidy auctions, a selection is made based on which qualified applicant requires the lowest subsidy to provide anon-economic service. The services authorized using a least-cost subsidy auction is generally subsidized as part of a country’s universal access program. This country “A” is yet to work on that kind of program right at this moment.Others would say, prices for mobile communications services in the United States continue to drop despite thebillions of dollars paid for licenses in FCC auctions. Those who claim that bid prices will be passed through toconsumers have yet to provide a sound economic argument or to show any empirical evidence that this hasoccurred anywhere in the world. It’s confusing, it is!7. On the contrary, beauty contest seems to the most adequate method to allocate the spectrum licensesbecause the regulatory authority is in a position to design the comparable criteria around the country’s need. It(merit based comparative evaluation approach) has its downside for not being that transparent like auction. Mostof the comparative evaluations require the applicants to make the best use of the limited resources associatedwith the license to serve the public. That saves the hidden cost passed on to the subscribers. It also relies in part onquantitative measures, such as the time it might take to cover the whole area (coverage obligation), the number of years of operational experience. Others rely on more qualitative (and thus subjective) criteria, such as themanagement skill. But, it brings out the applicants technical competence, experience, and cost efficiency. Someregulators might even put specific criteria like the lowest tariff for Internet connectivity to the home users. Thisrequires the applicants to review their business case to offer the lowest tariff based on its ROI. This exercise makesthe prospective service provider to open up its business case to the evaluator. The evaluation committee mighthave to get down calculating the cost per Hz per population, which seems a great idea to minimize the cost as thiswill be passed on to the subscribers. But, its success largely depends on building a smart merit based comparativeevaluation metrics (criteria) with some pre-set list of selection criteria with the distribution of weight-age. Thosecan be listed under some broad head like, Business Plan, Telecommunications Sector Experience and FinancialStrength and Stability and Network roll-out obligation.8. Here’s how I thought of building one from some of the regulatory consultation papers Merit Based Evaluation on Defined Performance Metrics1. Past Performance (should the country consider licensing from existing operators).a) Service Roll-out and Coverageaa) Coverage Provided (a. Number of transmitters, b. Number of base station sites and theirdemographic distribution, c. Percentage of Land mass and Population receiving coverage fromApplicant’s network, d. throughput)bb) Spectrum Efficiency (a. Earlngs per MHz of spectrum allocated, b. Quality of Servicebased of allocated spectrum, spectrum reuse schemes)
Raqueeb Hassan | raqueeb.wordpress.com
 
3
Auction or merit based comparative evaluation approach: BWA Licensing Conditions
1
b) Delivered Telephony Penetrationaa) Number of subscribers served, Subscriber Growth, Subscribers per MHz of spectrum.bb) Urban Penetration (Contribution to penetration over 5 Year period, Spectral efficiency interms of cell planning in dense area)cc) Rural Penetration (Contribution to penetration over 5 year period, aggressive pricingscheme to reach the under privileged area)c) Investmentaa) Financial Standing (Audited financial statements for the past 3 years to assessoperational track record)bb) Investment Record (Annual investments on network and non network capital assetsover the last 5 years)d) Regulatory Complianceaa) Compliance Confirmation (Minor and major violations if any, show causes also to beconsidered)e) Technology Developmentaa) New Services (Number of new services introduced over last 5 years)bb) New Technologies (Pioneering technologies introduced over the last 5 years)cc) Local R&D (Locally developed products and the contents)dd) Technology (development contribution to ICT sector partnerships established topromote/assist local ICT sector)f) Quality of Serviceaa) Network Performance, Fault Incidence and Repair, Customer service complain handling,throughput as promisedbb) Ability to provide broadband service with the expected contention ratio9. Now, when inviting new players it to this BWA regime, we need to evaluate their business case toevaluate their capability to roll-out throughout the country.a. The Business Plan1) Pricing of services, the introduction of services and distribution plans.2) Local employment, skills transfer and training.3) The involvement of local businesses either as shareholders, partners or as suppliers of goods and services leading to reinvestment in the Country “A”s economy, and minimizing theexportation of economic benefits.4) Geographical coverage and coverage in terms of population, of network and services,and rate of roll out. (Number of transmitters and roll out plan, number of base station sites and
Raqueeb Hassan | raqueeb.wordpress.com

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