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A different approach for bridging the digital divide

 

What is new on the Internet Para Todos project?

There are 100 million people not connected to the internet in Latin America. Most of them live in rural and remote areas, and according to the Facebook Inclusive Internet Index the closing of the connectivity divide has slowed down significantly in the last year, in particular in rural areas in emerging economies as the number of new Internet connections is almost stagnating.

The truth is that financial constraints push most telco companies to prioritize investment into urban areas, whereas unprofitable [under old business schemes] rural areas fall out of their investment scope. Network technology and operations are not optimized for low density rural areas but for urban ones. The fixed costs of network deployment turn into a heavy load for companies, so deployment is too expensive for rural areas.

 

“Traditional business models are not suitable for rural areas, with low population density, lower purchasing power and geographical barriers: remote and far to reach areas”.

 

To address all these challenges, we need a different approach. We need to innovate, and this is what we have done at Telefonica by launching this cooperative initiative, Internet para Todos Perú, innovating in these three areas.

  1. We are innovating in the technology ecosystem to bring down the cost of deploying and running a mobile network: we are deploying lower-cost towers, commoditized access and transport networks, with general purpose equipment based on open source software and fully virtualized and programmable network, open RAN designed by Facebook leaded Telecom Infra Project, new fibre deployment model… Network virtualization and automation through Software Defined Networks SDN and Network Function Virtualization (NFV) enable and open an programmable network, bringing down operational costs. By bringing down these costs we should be able to deploy a sustainable business model in areas with lower population density and lower expected usage / consumption rations.
  2. We are innovating in the business model, setting up a new open business model, opening the network to all operators. We are setting up an open wholesale infrastructure thanks to which Mobile Network Operators could extend its services to low-density areas using our infrastructure.
  3. We are also innovating in the deployment model, inviting local communities and entrepreneurs that can provide retail point of sales and carry out some basic maintenance work. In addition, we are also inviting other agents like telecoms, digital leaders and investors and international organizations and development banks to finance and co-build this infrastructure together.

This has been the Genesis of Internet Para Todos Peru (IpT), a new company, an open rural wholesale mobile infrastructure provider we have launched together with Facebook, CAF and BID Invest. IpT is a private company resulting from a public-private partnership that aspires to become sustainable and profitable. 

 

“Internet Para Todos already operates in Perú using Telefonica’s spectrum to provide services in rural areas and it has already connected 1 million people in 4000 towns”.

 

IpT mission is to connect 6 millions of Peruvians not yet connected to the internet. This would mean solving the connectivity divide of the whole country.  The social impact of bringing connectivity these millions of people in Peru is huge.

 

 

 

How could public-private partnerships help the extension of affordable internet access in developing countries, as well as ensuring that more rural, and remote regions are better served in developed countries?

Addressing the connectivity challenge is not an issue to be solve by a unique stakeholder, whether private or public. Telefonica is aware of that in order to bridge the digital divide it needs cooperation and partnerships. In Latin America, only through cooperation the challenge of connecting 100 million unconnected could be addressed.

For us is a priority these partnerships are managed under private criteria, leading into a sustainable and profitable business. Priorities and profitability requirements are different than for let’s call regular telecom businesses, and here is why the participation of other partners is relevant. It is a model opened for the participation of other telecom companies, business from other industries, intergovernmental organizations / development banks, and of course Nation / Governments.

This would allow expanding this initiative into another countries, with different / new partners that may have interests in the specific regions addressed.

 

"Internet para Todos project is not about charity. It’s about developing a sustainable business model in remote and far to reach areas, where traditional business models are not profitable, to connect people and so to leave no one behind”

 

Enrique Medina OECD

From left to right: Jason Karaian, Chiara Condi, Enrique Medina Malo, Guarún Agusta Oskarsdóttir y Federico Batista Poitier

 

Why did you choose Peru to launch the initiative? Is this a local initiative or you pretend to extend it into other countries?

Internet para Todos project was not launched in Peru coincidentally. Peru was the best place for Telefonica to launch this, as the country already provided an enabling environment to do so.

Peruvian regulation had the existing figure of the “Mobile rural infrastructure Operator” as a wholesale infrastructure provider in rural or other special interest areas where no other operator had previously deployed any network. Thanks to this figure, mobile network operators can provide service by reaching agreement with such Mobile rural provides.

Peru had also other differentiated regulatory approaches favouring the initiative, such as: asymmetric termination fees, possibility to use of universal service funds for private initiatives and having differential service obligations including quality of service in rural areas versus urban areas.

At the moment, we are currently looking to expand the IpT business approach into other Latin American countries, and together with the differentiated regulatory approach we are analysing existing networks, usage and consumption patterns, geographical features, and potential in order to define the following countries where the IpT approach is more likely to be successful.

We are open to collaborate with new partners to expand this approach taking the benefits of connectivity to the 100 million Latin Americans not yet connected.

 

Enrique Medina OECD

From left to right: Jason Karaian, Chiara Condi, Enrique Medina Malo, Guarún Agusta Oskarsdóttir y Federico Batista Poitier

 

What could the OECD do to close the Connectivity Divide?

We need to innovate and define an enabling environment. The most relevant aspect is to implement a regulatory sandbox for rural areas than will enable to address all the challenges a operator finds to implement a sustainable initiative. Policy makers need also to innovate in order to enable the sustainability and profitability of these initiatives aiming rural areas. The range of actions they could implement is wide. At Telefónica, we have identified the following ones:

  • Deploying one sustainable and profitable network in rural areas is more than a challenge. Regulators should acknowledge rural infrastructures need to be a monopoly, there is no room for competing networks. They should focus their efforts on assuring the network is based on an open model service-based competition can thrill, and Mobile Operators have the right conditions to provide services.
  • Regulation should aim to make rural initiatives attractive for investors. For instance, the burden derived from spectrum access, universal service fund contributions, regulatory fees should be significantly lower than what service providers pay today. But others are not so evident: quality of service obligations, service availability, times to recover service / repair, very costly to comply with in far off rural areas and thus potentially resulting in non-compliance fines.
  • Spectrum is another very relevant issue to provide mobile services. The issue is not lack of spectrum in rural areas, in fact in many cases there is unused spectrum by mobile providers in these areas. The problem is the cost. Why not then consider a new approach to spectrum? Why not dividing differentiating urban and rural areas for spectrum assignment?  And why not even pooling all spectrum in rural areas as there is only to be a unique network infrastructure provider?
  • Fiscal model towards network deployment also plays a relevant role. Network deployment, as the foundation for connectivity and access to the Internet, as well as telecommunication services and required equipment, both handsets and infrastructure equipment, should be supported and not highly taxed as it is today.
  • Take new approaches by defining new licensing regimes / operator models, like the “Mobile rural infrastructure Operator” in Perú (Operador móvil de infraestructura rural)
  • Redefine the concept of universal service funds (not to be applicable only wireline voice service) and of their usage to create an enabling environment for the sustainability of rural provides targeting the offer side and the demand side (partial subsidies for service cost for vulnerable communities, and social –hospital and health centres– and educative –schools– purposes)
  • Enable innovative approaches to comply with coverage obligations in rural areas, for example using the Internet Para Todos model.
  • Enable exchanging of regulatory costs and fees for expansion of coverage in rural areas.
  • Competence approach: enable a unique open infrastructure provider for rural areas, like Internet para Todos.
  • Modify spectrum policies, enabling a differentiated approach for rural areas, with reduced spectrum cost and fees.
  • Enabling environment for infrastructure deployment: ease administrative burdens / procedures, reduce local fees and ease construction permits, etc.
  • Differentiated fiscal approach for rural areas, fiscal incentives.
  • Enable asymmetric termination fees in rural areas.

We are sure that when the right policies are in place, partnerships as Internet Para Todos Peru can solve the connectivity divide without even recurring to public funds. And the OECD is best positioned to define these better policies for leaving no one behind and improving lives.

 

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Enrique Medina
Chief Policy Officer