Economies in the developed world are increasingly reliant on widespread access to broadband services and applications (see the box below on  "Broadband provision in OECD countries"). The infrastructure on which these services depend is recognized as the key for citizens to participate in the information economy and take advantage of modern methods of education and health care. And when seeking a location for investment, businesses require a developed broadband infrastructure. Given the central role that information and communication technologies (ICT) play in the global economy, broadband access is now seen as a public asset similar to roads and railways. Without it, the digital divide for developing countries could grow wider.

Many developing countries are beginning to deploy technologies that will offer broadband access at a local level, including via W-CDMA, HSDPA and WiMAX. But a critical aspect of promoting wider availability of broadband is ensuring that a national fibre-optic infrastructure is in place, and that it is affordable. Sharing infrastructure may be one strategy for achieving this goal, more quickly than through simply letting the market take its course. While competition at the international level has often driven down the price of bandwidth, national bandwidth prices in developing countries are set by one or two providers and as a result, often remain high. Competition could overcome this, but what type?

The promotion of competition has taken different forms in various markets. In the United States, for example, because cable television networks are widespread and can be cost-effectively upgraded to provide broadband services, competition can exist between different types of access network. In Europe, alternative access networks are not widely deployed, and so service-based competition has been promoted through requiring incumbents to give other companies access to connections to premises (local loop unbundling), as well as through upgrading the legacy copper networks to digital subscriber lines (DSL).

BT

In developing countries, will lifting regulatory restrictions open the door to multiple backbone and backhaul providers (including small or regional firms)? Or is such a broadband market more likely to mirror the European example, requiring regulatory intervention to mandate its development? Only if both options are available will the answer be known.

Passive and active infrastructure

Meanwhile, the sharing of infrastructure by telecommunication operators — based on a model of open access (see the  box on "What is open access?") — is attracting greater attention from policy-makers. Liberalized markets already use such methods of sharing infrastructure as collocation of facilities, national roaming agreements, and local loop unbundling. They also encourage open access models that involve sharing the passive elements of the network, and increasingly allow sharing of the active elements too.

Once incumbent operators perceive how these innovative arrangements can generate revenue, new firms will be encouraged to enter the market. However, effective and enabling regulations and policy are critical to facilitate such arrangements.

Passive infrastructure for fibre-optic networks includes all the non-electrical or civil engineering elements, such as physical sites and ducts. Active infrastructure covers all the electrical elements, such as lit fibre, access node switches and broadband remote access servers.

Local loop unbundling

© IMAGINA Photography/Alamy

In some regions, local loop unbundling is an important way to promote the sharing of infrastructure. The term “local loop” traditionally refers to the circuit wiring (or loop) that links a telecommunication network with a customer’s home or business. Nowadays, it can also be applied to non-fixed telecommunications, in the term “wireless local loop”.

Typically, local loops are owned by the incumbent telecommunication operator, which thus has the ability to control access to customers. However, in many countries this model is being replaced by “local loop unbundling” or LLU. Regulators require incumbents, and/or other operators with significant market share, to provide competitors with access to local loops, allowing them to offer broadband and other advanced services to existing users of the fixed line.

Regulators must strike a balance between addressing competitive bottlenecks and encouraging investment in infrastructure. If there is already significant competition between different types of access network for broadband (as in the United States), unbundling might not be seen as a priority. But elsewhere the focus is on unbundling in order to promote such broadband services as asymmetric digital subscriber line (ADSL) connections. In the European Union, for instance, the number of unbundled lines rose dramatically by nearly 80 per cent between 2005 and 2006 as a result of LLU regulation.

Many developing countries have far fewer fixed local loops to unbundle. They are looking to broadband wireless access technologies to promote broadband deployment. However, those with a significant density of fixed lines in urban areas may also promote local loop unbundling to spur broadband growth. In West Africa, for example, local loop unbundling and collocation will become mandatory for dominant operators in all members of the Economic Community of West African States (ECOWAS).

In Morocco, network growth relies heavily on sharing the incumbent’s local loop, given the difficulty of building competing access networks. Market reports indicate that after partial local loop unbundling was enforced in Morocco in January 2007, the broadband market grew by 19 per cent within 6 months.

The bottleneck problem

Historically, telecommunication operators have been vertically integrated businesses that provide both the services and the network on which they are delivered. Mobile operators and second national operators usually have had a similar vertical structure. But the market has been changing shape, as, for example, entities such as Internet service providers (ISP) rely on infrastructure owned by others. This has led to the separation of infrastructure and services, or retail and wholesale functions.

Regulators have examined how best to promote such separation as a way to address the obstacles caused by “bottleneck facilities” that are controlled by a single dominant infrastructure operator. Increasingly, governments have insisted that a network business must be operated as separately as possible from other parts of a company, in order to allow completely transparent trading between the wholesale and retail sides.

In the United Kingdom, for example, the incumbent BT set up a separate company, BT OpenReach. According to Group Chairman Sir Christopher Bland, the company has two responsibilities: “…to keep the access network infrastructure healthy and to make sure that it is made available fairly and equally to all communications providers, leaving industry free to compete on equal terms”.

In February 2008, India’s Reliance Infratel was floated as a separate company to manage the carrier’s passive network infrastructure — land, towers, generators, and power supply elements of the mobile network — and will handle all new roll-out and network sharing deals with other operators.

In South Africa, the government has three initiatives to address the “bottleneck facilities” issue. First, it has mandated an “essential facilities” framework to give open access to key elements of national and international infrastructure. Second, it has created a State-owned company called Infraco that will operate the national fibre network assets of two State corporations, Eskom (the power utility) and Transtel (the telecommunications arm of the national railway company). The infrastructure will be leased to the second fixed-line operator, Neotel, on an exclusive basis for a limited term, at a lower, utility rate of return. Neotel can then sell capacity to any other service providers or operators.

Finally, the South African government has announced plans to lay an undersea cable around the west coast of Africa to alleviate the bottleneck caused by the exclusivity arrangements between consortium partners in the South Atlantic 3/West Africa Submarine cable (SAT-3/WASC), which is said to be near full capacity.

On a local level, to speed things up and make access affordable, the government in the town of Knysna, South Africa, has created a Wi-Fi coverage area to provide voice and data services to 50 000 people. Many other South African towns are also moving towards some form of self-provisioning of facilities, often through partnerships with existing service providers, including ISPs. The infrastructure created can be shared by any service provider on agreed terms.

The role of government

The above examples show ways in which governments can act to create a better environment for the spread of broadband. Governments have a key role to play in facilitating the most effective use of ICT infrastructure, and in identifying parts of a country that need most attention. Often, they are themselves major customers and can help to make a marginal location worth investing in by acting as “anchor tenants” in remote towns, by connecting government and other public facilities such as schools and hospitals.

In some cases, governments and regulators may have to create general authorizations, or augment their licensing frameworks, to encourage backhaul and backbone providers. In the case of Infraco, for example, the South African government had to create the company as a new legal entity and amend legislation to enable its licensing. In Lebanon, the newly established Telecommunications Regulatory Authority has said it intends to use the licensing process to encourage infrastructure sharing for the development of broadband networks.

The question of cost

Since liberalization of telecommunication markets, new private-sector providers have invested heavily in networks that have expanded coverage to a large percentage of the population. Nevertheless, the capacity of these networks is often modest, as, especially in developing countries, many only handle mobile voice services. With the steady upgrade in many markets to 2.5G and 3G, however, national backbone requirements are increasing rapidly. It is unlikely that existing microwave and satellite networks will keep pace with this growing demand.

Costs are a significant barrier to creating fibre-optic networks that can augment broadband capacity. For example, although the cost of active infrastructure elements is falling with the drop in price of electronics, the cost of passive infrastructure (which accounts for some 40 per cent of the total) fluctuates with the prices of such items as steel and concrete.

Furthermore, the cost of setting up towers in rural areas tends to be around 30–40 per cent higher than in urban areas. And while it might cost about USD 2000 per kilometre to string a fibre-optic cable along poles in a city, it can cost up to USD 17 000 to lay cable overland to rural areas, depending on the terrain.

Analysts say that telecommunication operators in the Middle-East and North Africa region will increasingly share infrastructure in order to help reduce capital expenditure by as much as 40 per cent. In India, the government plans to use the Universal Service Obligation Fund to provide free broadband connectivity at a speed of 2 Mbit/s across the country by 2009.

An opportunity to be seized

The examples above offer some lessons for countries seeking to adopt an open access model for sharing national infrastructure. Many countries have legacy, fixed-line networks that can be upgraded to support broadband. A number of developing countries are pursuing an ICT development agenda that will use existing wireless access networks to upgrade to 3G, broadband wireless access or 4G technology, which will also require upgrades to the backhaul and backbone networks.

Provided the legal and regulatory framework is correct and the right incentives are established, the critical factor in creating new, affordable broadband access, will be government action to ensure that national fibre-optic backbones are shared.