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Windhoek, NamibiaWindhoek, Namibia15 March 201015 March 2010

Mandla MsimangITU ExpertITU Expert

Validation WorkshopValidation Workshop

Session 4.1: International & Regional Session 4.1: International & Regional Best PracticeBest Practice

Session 4.2: Selecting, Designing & Session 4.2: Selecting, Designing & Funding ProjectsFunding Projects

Fund Context Selecting Designing Funding

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Remember….

Badly designed projects and programmes will result in ineffective project implementation, and in some cases a waste of human and

financial resources.

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Fund “Horror Stories” Examples exist of Funds that have:

been established in law but are still not operational as many as 5 years later;

determined levies, over-collected and under-spent; overspent, i.e. provided subsides for unsuccessful projects, or

for inefficient use in projects; become involved in project implementation, through rolling

out telecentres and in some cases networks; initiated projects but have not been able to coordinate them

amongst different levels of government and different affected government departments (e.g. education, infrastructure, health

not made their collections, and disbursements public on a periodic basis;

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Fund Risks The most commonly identified risks facing publically funded

projects include: Implementation of projects that distort the market; Creating dependence on ongoing funding; Potential abuse of funds; Favoritism; and Project failures which waste resources. 1998-2006, only 26 percent of USAF funds collected globally had been

redistributed to the ICT sector for use on universal access projects.

Source: http://www.ictregulationtoolkit.org/en/Section.3296.html

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Latin America Situation

Regulatel (2007): in the 13 Latin American countries with Funds, the

amounts collected ranged from $1 million in Ecuador to $1,8 billion in Brazil.

of the 13 countries, 6 of them had not disbursed any of the monies in the Fund,

of the 13 countries 4 had disbursed less than 45 percent, and 3 particularly effective funds in Chile, Mexico and Paraguay had spent over 95 percent of the money collected.

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Today, 9 SADC countries have established Funds in law.

9 have money in the Fund received through either seed funding from donors or government, levies from operators, or surplus Funds from regulator.

7 have undergone processes (competitive bidding, tender processes, or other means) to identify projects and disburse monies to assist in the implementation of such projects.

Disbursement levels are low, but exact figures over last 3 years unknown except some cases, e.g. Lesotho

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SADC Situation

Types of US/UA Financing

Ownership or Equity Participation, as seen in Brazil, Malaysia and South Africa; 

Public Private Partnerships, such as the infrastructure deployment projects in Australia, Thailand, Kenya and Tanzania

Provision of financial incentives and subsidies as seen in many Latin American countries through the use of USAFs, Japan, the USA and EU through broadband stimulus packages.

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Fund Management Process

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Fund Context Selecting Designing Funding

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Traditional US/UA Funding Framework

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High Cost Areas

Poverty

Impact of Broadband on USF

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There are several developments and considerations influencing the thinking about the future of Universal Service and Access Funds (USAFs), asking the questions:If universal access and service to telephony will be achieved in the near future, how relevant is the USAF model for ICT and broadband?; andHow will the move to Next-Generation Networks influence the funding model of USAFs?

[1] http://www.ictregulationtoolkit.org/en/Section.3286.html

Is Broadband included in Fund Mandates? Is there a Broadband Policy? What is the difference in approach between

Broadband and Narrowband financing?

EC Criteria for Determining an Eligibility for State Aid for

Broadband

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0 or unlikely

to exist

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Do not distort the market

Objectives

Provide a clear framework for state aid assessment, to facilitate investments from public funds in order to

bring broadband connectivity to underserved areas Deploy broadband and especially NGA networks

more rapidly and more widely, thus avoiding the creation of a new digital divide.

due to the conditions laid down for the granting of state aid (such as open access, open tenders) will allow the maintenance of competition

14http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/396

Outcomes Based Aid

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Output Based Aid Principles Benefits of Output Based Aid Link payments to delivery Ensure that the subsidy is linked to

specific measurable targets Contract services out to a third party

which receives a subsidy to meet the stated objectives

The Fund pre-finances the project (in tranches) until delivery

Subsidies must be performance based – payment is made only after services are rendered and audited

Transparency increases efficiency and effectiveness

Performance risk is carried by the provider (recipient of funding) and accountability is increased

the subsidy (and possibly subsidy award mechanism) incentivize the private sector

results can be tracked through a focus on outputs/ results

Fund Context Selecting Designing Funding

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Project Types

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Projects should be Targeted

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Information that will assist in the establishment of targets:Baseline data indicating the situation at the beginning of project implementation. When such data is not available, the project should include an activity to collect it from the start.Historical trends in the indicator value over time. What pattern of change has been evident in the past? Is this pattern likely to continue?Stakeholders’ expectations of progress. Exploring the achievement expectations of all of the partners, as well as the beneficiaries will assist in providing a realistic idea of what can be achieved.Universal Access Expert judgments and research findings. Experts knowledgeable about the programme sector and local conditions as well as research findings are other useful sources of information for target setting.Accomplishments of similar programmes (and projects). Information on what is being done under similar conditions by other agencies and organizations who have a reputation for high performance.

Adapted from USAID, TIPS Report, 1997

Start with an Exit Strategy Sustainability is frequently linked to the challenge of

financing a project Any form of OBA, including the Fund, will seek to make a

meaningful, preferably once off intervention to stimulate ICT sector development (infrastructure).

When you start a project, it should at the same time have "an exit strategy" or a means to wind down the financial support after a certain period of time.

From the beginning there should be clarity on: What the targets are (financial and developmental) When the funder intends to exit/pull out of the project What mechanisms are in place to ensure sustainability? How

will the project fund itself in the long term?

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Different Projects, Different Costs

Different projects will have different costs and cost structures and thus different financing mechanisms…

E.g. infrastructure vs. e-rate vs. computer labs Some dependencies for cost assumptions:

Country Project Technology deployment choices Revenue estimates

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Fund Context Selecting Designing Funding

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Infrastructure Projects Infrastructure Projects

Funder:Private funding, Public Funding Models including Ownership, Financing Incentives (including USAF), and PPPs (national, local, municipal) 

Funding: Subsidies, grants, loans, guarantees

Last Mile Access - Municipal and Local Authority Networks Funder:Private funding, Public Funding Models

including Ownership, Financing Incentives (including USAF), and PPPs (local, municipal)

Funding: Subsidies, grants, loans, guarantees, users/community access

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India – Infrastructure

sharing incentives for US/UA projects

India – Infrastructure Sharing (1) TRAI - market analysis, est. capital cost of BTS at $120,000,

inclusive of building and power equipment.

Noted that commercial sharing in urban areas already existed; need to encourage in rural areas to lower costs Incumbent reluctant (owned most rural infrastructure, first mover

advantage), smaller operators agreed

Proposed (2005) that operators provide coverage commercially in 5,161 towns/cities on their own, using infrastructure sharing. Those in rural/remote areas would receive a one time subsidy from USOF,

in 2 installments (maximum USD 30 thousand) per BTS, provided the installed infrastructure is shared with at least one other operator.

Subsidies to up to 3 requesting operators to share, 4+ in that area may negotiate other inter-operator settlements.

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India – Infrastructure Sharing (2)

7,871 BTS in 500 districts (27 states) were identified as eligible USOF financial assistance. Serving 212,304 villages and over 48 million households.

2007 competition was intense with final awards amounting to USD 23 million/year for five years. Average of a total of approx $3,000 per site (1/10 recommended by TRAI and this minimum subsidy amount on offer).

Separate competitions for the right to use the infrastructure were made to 3 mobile operators in each cluster. The required subsidy, after the competition, for use of the sites was negative (no need for subsidy, operators willing to pay for use)

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Some Infrastructure Examples

EquityBroadband Infraco (South Africa)

PPPNational ICT Backbone (Tanzania)SEACOM (Kenya)

Subsidies India

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School Connectivity Funder: Private funding, Public Funding Models including

Financing Incentives (including USAF), and PPPs (national, local, municipal, NGO, donor,etc) 

Funding: Subsidies, in-kind contributions, grants and loans, community access/user revenues

School Connectivity programmes developed in many countries including using a combination of license obligations USF financing, and PPPs, these countries include: Pakistan (linked to successful bidding/funding) Ireland (National School’s Plan) United States (e-rate, specific programme)

Some of these funds include specific provisions for school connectivity in their mandates.

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School Connectivity (2)

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Source: Gesci

Driving Demand :Content and Applications

In line with definitions of universal service and access that include “advanced services,” “Internet,” “broadband”

Financing of content and applications can include funding: Local content production User friendly and graphics based interfaces Local content in local languages Shared content (e.g. tourism, education, e-

government) that is locally relevant, where possible to a community level

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Mandatory Functions Basic Standard AdvancedNumber of PCs M>3 M>7 M>15Internet Access M (256 Kbps) M (512 kbps

uncontended for all PCs)

M (minimum 1Mbps)

Collaboration software M

Videoconferencing software

M

Web 2.0 access – webcam and microphone

M M

eSkills Training Services

M M M

Group training facilities M

Pasha Portal accessible

M M M

Government information

M M M

Management Information

M M M

M= MandatorySource: Cisco IBSG, 2010

Kenya: Pasha Centres/Digital Villages

Driving Demand

Grants and subsidies forfirms and software application

developers;to support local content and software

applications;laptops for university students

(“Wezesha”)

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Conclusion

Make sure the Fund Context is correct in terms ofFrameworkProject SelectionProject Design

Design relevant and targeted programmes and projects

Make your Fund relevant in a converged environment and a broadband world

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Thank You!Mandla Msimang

Managing Director, Pygma Consultingmmsimang@pygmaconsulting.com

Tel: +2711 7831210

www.pygmaconsulting.com

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