Broadband for unserved areas – innovative bidding by USF Pakistan

THE THING THAT INTERESTS OTHER COUNTRIES MOST IN USF PAKISTAN, IS OUR INNOVATIVE BROADBAND PROGRAM! Even this month (Oct. 2011) I will be conducting an ITU sponsored workshop on this topic in Thailand.

Designing the program was rather arduous. Initially we thought we would conduct standard auctions for Broadband too, just like the Rural Telecom Program, where one lowest bidder emerges as the winner and deploys the infrastructure. But ‘the devil lies in the details’. Soon we realized that in case of Broadband for unserved cities and towns, there were a host of other concerns that had to be addressed. We thought:

• If the sole bid-winner is a DSL Operator (likely scenario), how would Broadband get
deployed in areas with no copper cables?
• How would multiple technologies come in to spread Broadband fast?
• With one bidder winning, how would there be competition?
• What if the infrastructure was built but there were no takers in those towns?
• It would be necessary to create awareness among people of these areas. But how?
• What if Broadband tariffs (perceived high), prove to be an insurmountable
• How would those citizens, who cannot afford their own PCs, be served?
• Educated youth are the most important segment for broadband. What approach to adopt that Broadband is introduced in educational institutions of unserved towns?

In other words some innovations had to be brought into the standard bidding process. A lot of consultations with stakeholders and a lot of brain storming sessions of our team (mainly on weekends) resulted in the present Broadband bidding process.

I explain the major innovations – with the rationale of each – that differentiate the process.

First, bidders other than the lowest are also allowed to win (Multiple Winners), albeit only by matching the lowest bid. This makes it possible for multiple technologies (wired and wireless) to deliver Broadband while also generating competition!

Second, the higher one-third of the bidders get thrown out immediately – only the lower two-thirds remain in the race. This is because when you allow multiple winners there is less incentive to bid low in the first place. With this, you try to bid low to avoid getting thrown out!

Third innovation is the OBA (Output Based Assistance) nature of bidding. Even normally (except for 20% mobilisation advance) USF subsidy winners are not paid until they have deployed the infrastructure. But in case of Broadband, they are asked to actually bring Broadband subscribers on board before they get paid. This is to compel the subsidy winners to first deploy infrastructure and then make extra efforts to “sell” it to subscribers, for which obviously they have to create awareness and keep tariffs low!

Fourth – the “sold” subscribers, on the basis of which a subsidy winner claims payment, must have been on board for at least 90-days, so that only genuine subscribers are counted.

Fifth – a very comprehensive and robust Technical Audit is put in place that employs multiple measurements to confirm (or reject) the number of subscribers claimed by the subsidy winner.

Subsidy winners are required to set up “Community Broadband Centers” (CBCs), each with at least 5 PCs plus allied equipment to cater for those who cannot afford PCs.

Similarly for each and every Higher Secondary School, College and Library in the project areas, subsidy winners have to set up “Educational Broadband Centers” (EBCs) consisting of 5 PCs in a LAN, training of two teachers plus free Broadband for 12 months. In most educational institutions of small cities either there are no PCs to terminate Broadband on, or there are no budgets to pay the tariffs.

Other than that, all bidding terms are standard USF, ie: open transparent auctions, technology neutral and one-time subsidies.

Starting in April 2009, so far 256 small cities and towns have benefitted from USF funded Broadband, where 897 EBCs, 258 CBCs and nearly 310,000 subscribers are connected to Broadband and the numbers are growing each day.

Three more Broadband projects have been advertised that will add 122 towns, where 492 EBCs, 151 CBCs and 150,000 Broadband subscribers will be connected.

Through separate auctions, backbone for Broadband, ie: Optic Fiber Cables are being laid to connect all 115 yet un-served Tehsils (sub-districts).

So far USF’s Broadband bidding has been fairly successful – at least experts watching us from abroad tell us so, especially when they compare us with most Universal Service Programs in the developing world. But then, ‘one who rests on one’s laurels is obviously wearing those at the wrong place’! So we are not resting and are now working hard to take Broadband to villages also – through our Universal Telecenters program (described in my Blog “ USF Telecenters – The Simple Concept”).

It is our resolve to take Broadband to every corner of Pakistan.