Broadband Infrastructure in South Asia and West Asia

Home , Europe India Gateway, I2i, MENA (cable system), SAFE (cable system)

Markets, Infrastructure, and Policy Options for Enhancing Cross-Border Connectivity

Michael Ruddy Director of International Research Terabit Consulting

www.terabitconsulting.com Part 1: Background and Methodology

www.terabitconsulting.com Completed ASEAN-9 Study Phase I: Between November of 2012 and August of 2013, Terabit Consulting completed a study of 9 countries in Southeast Asia, as well as adjoining regions: – Cambodia – Indonesia – Lao PDR – Malaysia – Myanmar – Philippines – Singapore – Thailand – Vietnam – Yunnan Province, China

www.terabitconsulting.com Completed North & Central Asia Study Phase II: Between June and November 2013, Terabit Consulting completed a study of 7 countries in North and Central Asia – Azerbaijan – Kazakhstan – Kyrgyz Republic – Russian Fed. – Tajikistan – Turkmenistan – Uzbekistan

www.terabitconsulting.com Current Study: South Asia and West Asia Between April and October 2014 (with analysis ongoing), Terabit Consulting performed a detailed analysis of broadband infrastructure and markets in 9 strategic markets in South Asia & West Asia: – Bangladesh – Bhutan – Iran – India – Maldives – Nepal – Sri Lanka – Turkey

www.terabitconsulting.com Scope (cont’d.) • The data and analysis for each country included:

 Telecommunications market overview and analysis of competitiveness  Regulation and government intervention  Fixed-line telephony market  Mobile telephony market  Internet and broadband market  Consumer broadband pricing  Evaluation of domestic network connectivity  International Internet bandwidth  International capacity pricing  Historical and forecasted total international bandwidth  Evaluation of international network connectivity including terrestrial fiber, undersea fiber, and satellite  Evaluation of trans-border network development and identification of missing links  Identification of key highway and rail projects www.terabitconsulting.com Sources of Data • Terabit Consulting has completed dozens of demand studies for submarine and terrestrial fiber networks worldwide – Constant contact with operators, ISPs, and other stakeholders • Terabit Consulting’s published reports include: – The Undersea Cable Report (1,500+ pages) – International Telecommunications Infrastructure Analysis (1,000+ pages) • Terabit Consulting’s data and intelligence covers infrastructure, demand, traffic flows, pricing, and market share

www.terabitconsulting.com Part 2: State of South and West Asia Bandwidth and Broadband Markets

www.terabitconsulting.com Overview of Broadband Status

Annual 1 Mbps GDP per Int’l. Fixed and Competitive- Broadband Capita, YE Band- Int’l. Domestic Mobile IP Transit ness of Subscription + 2012 width per Connect- Connect- Broadband Price Telecom Installation as % (PPP, Capita ivity ivity Infra- Market of Nominal GDP USD) (Kbps) structure per Capita Somewhat Bangladesh $2,200 0.3 Weak Moderate Expensive Limited Very Expensive Competitive Less Bhutan $7,000 7.6 Weak Limited Expensive Limited Reasonable Competitive

India $4,000 1.0 Excellent Moderate Moderate Competitive Limited Reasonable

Islamic Less Somewhat Republic of $14,300 1.5 Excellent Limited Expensive Limited Competitive Expensive Iran Less Maldives $10,200 24.0 Sufficient Moderate Expensive Limited Reasonable Competitive

Less Nepal $1,600 0.7 Weak Limited Expensive Limited Very Expensive Competitive Somewhat Somewhat Somewhat Pakistan $3,800 1.7 Moderate Expensive Limited Weak Competitive Expensive Less Sri Lanka $8,100 2.2 Sufficient Moderate Expensive Limited Affordable Competitive Very Less Extremely Turkey $16,900 30.7 Sufficient Moderate Limited Reasonable Competitive Affordable

www.terabitconsulting.com International Internet Bandwidth, YE13

Turkey: 2.3 Tbps

Iran: 113 Gbps Pakistan: 300 Gbps Nepal: 20 Gbps

Bhutan: 5.7 Gbps

Bangladesh: 50 Gbps India 1.2 Tbps

Sri Lanka: 45 Gbps

Maldives: 8 Gbps www.terabitconsulting.com Int’l. Internet Bandwidth per Capita (Kbps)

35 30.7

30 24.0 25

15 1 Kbps or Less: 7.0 10 Serious Obstacle to Development 2.2 5 1.7 1.5 1.0 0.7 0.3 0

• Difference between Turkey and Bangladesh: 100x • Average in Western Europe: 99 Kbps

www.terabitconsulting.com International Fiber Connectivity • The Study identified and analyzed 40 trans-border terrestrial fiber optic links in the region – Across borders within the region and at the edge of the region (e.g. to China, Mynamar, Afghanistan, Iraq, and Eastern Europe) • Some transborder links form segments of multinational networks – Trans Asia-Europe (TAE) – Europe-Persia Express Gateway (EPEG) – South Asian Sub-regional Economic Cooperation (SASEC) Information Highway • The analysis also covered 28 submarine cable systems – Including interregional systems such as the Sea-Me-We and FLAG cables, as well as regional submarine cables

www.terabitconsulting.com Our Gracious Hosts: Bhutan • Two terrestrial cables to India – Phuentsholing to Jaigaon, India (2007) – Galephu to Assam, India (2011) – Both fiber paths converge at Siliguri, India • Druknet/BT 5.3 Gbps with connectivity via LINX and HKIX – Third international POP in Singapore in 2014 • Tashi Infocomm: 370 Mbps • South Asia Subregional Economic Cooperation (SASEC) Information Highway network will connect Bangladesh, India, Bhutan, and Nepal – Included installation of new fiber link from Thimphu to Phuentsholing and Gelephu (2014) Fragile infrastructure reliant upon India, vulnerable to multiple bottlenecks including Siliguri, Mumbai, and Egyptian submarine cables www.terabitconsulting.com Bangladesh: Int’l. Infrastructure • Heavily dependent upon Sea-Me-We-4 cable – Operated by BSCCL; 200 Gbps is currently 20% used • Six ITC operators licensed to connect terrestrially to India – BTCL and BSNL networks were interconnected in 2010 – Bharti Airtel cable implemented in July, 2013 • Projects under development include Sea-Me-We-5 and a terrestrial link to MPT Myanmar Weak international infrastructure reliant upon Sea-Me- We-4 and terrestrial links to India, and vulnerable to submarine cable disruptions in Egypt.

www.terabitconsulting.com India: Int’l. Infrastructure • Eleven interregional submarine cables – FLAG Europe‐Asia (FEA) (1997), Sea‐Me‐We‐3 (1999), Sea‐Me‐We‐4 (2005) – SAFE (2002) and Seacom (2009) – i2i (2002) and TGN‐TIC (2004) – Falcon (2006), I‐Me‐We (2010), Europe‐India Gateway (2011), and the Gulf Bridge International /MENA network (2012) • International gateway share: Tata 39%, Bharti 30%, Reliance 26%, Sify 5% • Bharat Lanka Cable System and India-Maldives • Terrestrial cables: – To China: Reliance (2009), Bharti Airtel/China Telecom (2010), Tata Communications (2010) – India-Myanmar (2010) – Multiple links to Bangladesh, Bhutan, and Nepal – India-Pakistan cable between Amritsar and Lahore has been installed, but security agencies on both sides of the border are refusing its use for non-voice traffic Although India benefits from excellent international connectivity, it is still extremely vulnerable to submarine cable events in Egypt and the Strait of Malacca. Only improved, robust pan-regional terrestrial connectivity can provide a viable alternative. www.terabitconsulting.com Iran: Int’l. Infrastructure • Terrestrial connectivity to all neighbors – As of 2012, trans-border capacity was as follows: Armenia 1.4 Gbps, Azerbaijan 1.2 Gbps, Turkey 600 Mbps, Turkmenistan 600 Mbps, Iraq 300 Mbps, and Afghanistan 200 Mbps (Pakistani link reportedly under implementation) – Telecommunications Infrastructure Company of Iran (TCI) has set the following targets for 2017: Azerbaijan 4.3 Tbps, Iraq 1.2 Tbps, Turkey 1.1 Tbps, Armenia 930 Gbps, Turkmenistan 600 Gbps, Afghanistan 430 Gbps, and Pakistan 400 Gbps. • Pan-regional terrestrial networks: Trans Asia-Europe (TAE) and Europe- Persia Express Gateway (EPEG) • Submarine cables include Falcon, Gulf Bridge International (GBI), Pishgaman Oman-Iran (POI), EPEG Iran-Oman, UAE-Iran, and Kuwait- Iran.

Iran’s physicial connectivity within the region is excellent, positioning it as a viable and competitive transit hub for traffic from South Asia, the Middle East, and Central Asia, as well as Europe-Asia demand. However, activated bandwidth levels must be significantly increased. www.terabitconsulting.com Maldives: Int’l. Infrastructure • Two submarine cables connecting to India and Sri Lanka – Dhiraagu submarine cable (in partnership with SLT) (2006) – WARF Telecom Maldives-India-Sri Lanka (Wataniya/Ooredoo with Lanka Bell & Reliance) (2007/2008)

Although every country should optimally have more than two international outlets, Maldives’ existing infrastructure is advanced for a country of its size, and enables very high per-capita bandwidth

www.terabitconsulting.com Nepal: Int’l. Infrastructure • Terrestrial interconnections to four Indian networks – Reliance, BSNL, and Airtel via the Birgunj‐Raxaul and Birtatnagar‐Jogbani border crossings – Tata links to the network of UTL via Birgunj‐Raxaul and Bhairahwa-Sunauli • SASEC Information Highway and Nepal-China link under implementation

Nepal’s international infrastructure is currently very weak, leaving it reliant almost exclusively upon India

www.terabitconsulting.com

Pakistan: Int’l. Infrastructure • Incumbent operator PTCL operates three submarine cables and controls about 60% of international traffic – Sea-Me-We-3 (1999), Sea-Me-We-4 (2005), I-Me-We (2010) • Transworld Associates operates the TW-1 submarine cable and handles most of the remaining 40% of international traffic – System connects to Oman and UAE • Relatively weak terrestrial connectivity to neighbors – Afghanistan links are reportedly operational – Operation of Pakistan-Iran link could not be confirmed – India-Pakistan cable constructed but not activated – Contract awarded to Huawei Technologies in 2013 to implement a fiber link to China via the Khunjerab Pass Pakistan has access to three interregional submarine cables and a fourth regional system, but terrestrial connectivity is weak

www.terabitconsulting.com

Sri Lanka: Int’l. Infrastructure • Sri Lanka Telecom (SLT) is an investor in the Sea- Me-We-3 (1999) and Sea-Me-We-4 (2005) cables, as well as the planned Sea-Me-We-5 (2016) • Dialog Axiata is an investor in the proposed Bay of Bengal Gateway (BBG) submarine cable (2016) • Three regional submarine cables connect to India and Maldives

Sri Lanka’s international connectivity is sufficient.

www.terabitconsulting.com Turkey: Int’l. Infrastructure • Turkey’s primary international link is the Telecom Italia-owned Med Nautilus cable (2004/2011) which connects to Italy, Greece, Cyprus, and Israel – The network’s expansion to Turkey was funded by a $40 million, 15-year IRU commitment by Turk Telekom, which operates the system’s cable station in Istanbul • Turk Telekom also purchased significant capacity from OTE via the Trans Balkan Network (TBN) • Pan-European operator Interoute expanded its pan-European network from Bulgaria to Istanbul in 2010 – Recently offered 10 Gbps wavelength from Istanbul to European POPs for €10,000 per month, with a 50% premium for protection and 100% for IP transit (=$1.30 to $2.60 per Mbps • Turkey’s international terrestrial connectivity is robust and it also participates in several regional submarine cable systems – Investor in JADI Link and RCN pan-regional systems, however both are inactive due to Syrian Civil War – No identified connectivity to Armenia Turkey has robust access to European IP transit connectivity and has attempted to leverage this to serve as a transit provider for Central Asia

www.terabitconsulting.com Table of Fiber Connectivity in the Region

Bangla- Bhutan India Islamic Maldives Nepal Pakistan Sri Lanka Turkey Other Borders desh Rep of Iran 4,053km bor- No direct Sea-Me-We-4 Sea-Me-We-4 der: Multiple Myanmar (193km) – fiber Bangla- submarine submarine (& planned fiber links under implementation desh cable links cable Sea-Me-We-5 (& SMW4) 605 km border: China (470km) – no fiber Bhutan multiple fiber links 4,053km 605 km WARF 1,690 km 2,912 km China (3,380km) – multiple Falcon & GBI Sea-Me-We-3, border: border: Telecom border: border: unlit fiber links submarine Sea-Me-We-4, India multiple fiber multiple submarine multiple fiber cable (SMW/ Myanmar (1,463km) – fiber cables BLCS links fiber links cable links IMW cables present Afghanist. (936km) - yes 909 km bor- 499 km Islamic No direct No direct Armenia (35km) - yes der: fiber border: submarine submarine Azerbaijan (432km) - yes Republic under multiple fiber cable links cable links Iraq (1,458km) - yes of Iran development links Turkmen. (992km) - yes WARF Dhiraagu No direct No direct No direct Telecom Submarine submarine submarine submarine N/A Maldives submarine Cable, WARF cable links cable links cable links cable Subm. Cable 1,690 km border: China (1,236km) – proposed

Nepal multiple fiber fiber; could not be confirmed links 2,912 km 909 km bor- Sea-Me-We-4 No direct Afghanistan (2,430km) – yes border: unlit der: fiber Sea-Me-We-3, submarine submarine China (523km) – fiber under Pakistan cable (SMW/ under Sea-Me-We-4 cable cable links implementation IMW cables development Sea-Me-We-4 Sea-Me-We-3, No direct Dhiraagu & Sea-Me-We-3, (& planned Sea-Me-We-4, submarine WARF subm. N/A Sri Lanka Sea-Me-We-4 Sea-Me-We-5) BLCS cable links cables Armenia (268 km): No Azerbaijan (9km): Yes 499 km Bulgaria (240km): Yes border – Georgia (252km): Yes

Turkey multiple fiber Greece (206km): Yes links Iran (499km) : Yes Iraq (352km): Yes Syria (822km): Yes

www.terabitconsulting.com Analysis of Priority Trans-Border Projects

International Border International Border Analysis Recommendation Analysis Recommendation (and border length) (and border length) Given that Indian operators A 640-kilometer terrestrial The India-Myanmar border is a The border between BSNL and Bharti Airtel have fiber link was completed in critical corridor for connectivity Bangladesh and India is served activated terrestrial fiber India / Myanmar 2010 at a cost of $7 million and between India and Southeast (1,463 kilometers) is operated by BSNL and by one existing terrestrial fiber connectivity between the two Asia, requiring multiple fiber link, as well as an additional countries (with additional Myanmar Post and Bangladesh / India links. terrestrial fiber link currently terrestrial link under Telecommunications (MPT). (4,053 kilometers) under implementation. The implementation by Tata), and A terrestrial fiber link has been

two countries are also linked given existing and planned constructed between India and Deploying more robust Low Priority by the Sea-Me-We-4 submarine submarine connectivity between India / Pakistan Pakistan, but security agencies connectivity between India and cable and will be linked by the the two countries, there is no (2,912 kilometers) on both sides of the border Pakistan could be an important proposed Sea-Me-We-5 strong requirement for have refused to allow its use step to ensure regional stability, submarine cable. additional terrestrial fiber High Priority for non-voice traffic. The cable although there is currently little between Bangladesh and India. remains dormant as of mid- political momentum to do so. Myanmar Posts and 2014. Telecommunications (MPT) A link between China and Given Nepal’s almost exclusive Bangladesh / Additional fiber links are needed and the Bangladesh Submarine Nepal / China Nepal via Tatopani was reliance upon terrestrial Myanmar in order to ensure that Cable Company Ltd. (BSCCL) (1,236 kilometers) proposed in 2010 but as of connectivity with India, the (193 kilometers) Bangladesh has redundant are in the process of 2014 the status of its country is in urgent need of bilateral connectivity with more implementing a terrestrial High Priority development could not be diversified connectivity via High Priority than one country. fiber link between the two confirmed. China. countries. Although Iran has strong fiber Improved connectivity between Although Bhutan has two Islamic Republic of connectivity with each of its Iran and Pakistan would provide terrestrial links to India, with Iran / Pakistan neighbors, the Iran-Pakistan both countries with improved Diversification of Bhutan’s fiber Bhutan / India the first completed in 2007 and (909 kilometers) border has historically lacked interregional access, i.e. from links to India is urgently needed (605 kilometers) the second in 2011, both fiber fiber and the implementation Iran to South Asia and from in order to ensure the paths converge in Siliguri, Medium Priority of a trans-border link could not Pakistan to northwestern robustness of the country’s High Priority raising concerns about the be confirmed as of mid-2014. destinations. international connectivity. vulnerability of Bhutan’s There are multiple fiber links international connectivity. Islamic Republic of between Iran and Turkey, and The ability of the Chinese Iran / Turkey Telecommunications There is no urgent requirement terrestrial route to provide an (499 kilometers) Infrastructure Company of Iran for improved connectivity There are three fiber links has set a target of 1.1 Tbps of between Iran and Turkey. India / China outlet for Indian international between China and India, (3,880 kilometers) demand, coupled with the Low Priority bandwidth across the linking China to the Indian relative fragility of existing fiber countries’ border by 2017. networks of Bharti, Reliance, Both Pakistan and China would Medium Priority links, indicates a need for more and Tata. robust fiber links between the benefit from improved fiber two countries. Pakistan / China A fiber link between Pakistan connectivity, as the single fiber (523 kilometers) and China is currently under link under implementation is not Despite multiple fiber links, the India / Nepal Nepal Telecom is linked to the construction in the Khunjerab considered to be a definitive, importance of India’s (1,690 kilometers) Indian networks of Reliance, Pass. long-term solution for linking the connections with Nepal requires High Priority BSNL, and Bharti Airtel via two countries with robust mesh-like connectivity across Medium Priority multiple border crossings. connectivity. the countries’ border. Given the gradual improvement Turkey/ Armenia Terabit Consulting did not of relations between the two (268 kilometers) identify any activated fiber countries, as well as increasing capacity between Turkey and opportunities for closer social High Priority Armenia. and economic cooperation, www.terabitconsulting.com Summary of Priority Projects High Priority Trans-Border Projects  Bangladesh / Myanmar  Bhutan / India  India / Myanmar  India / Pakistan  Nepal / China  Pakistan / China  Turkey / Armenia

Medium Priority Trans-Border Projects  India / China  India / Nepal  Islamic Republic of Iran / Pakistan

www.terabitconsulting.com Part 3: Why a Coherent, Open-Access, Cost-Effective Pan-Asian Fiber Infrastructure Would Benefit the Region

www.terabitconsulting.com Why a Coherent Pan-Asian Infrastructure Would Benefit the Region

Reason #1 Telecommunications and Internet development in Bangladesh, Bhutan, Nepal, and Pakistan, as well as each country’s overall economy, has greatly suffered as a result of weak international infrastructure.

www.terabitconsulting.com The Impact of Low International Bandwidth & Weak International Infrastructure • At the macro level: a major obstacle to economic and human development – Detachment from digital economy – Continued economic inefficiencies and restrained growth – Lack of access to critical social development tools including telemedicine, distance learning, scientific/research networks • More specifically within the telecom environment: higher wholesale and consumer prices, and lower broadband adoption rates – Average IP transit price in secondary and tertiary markets in the region is $60 per Mbps • Compared to Mumbai: $12 per Mbps • Compared to Turkey: $2.60 per Mbps • Compared to USA: $1 per Mbps

www.terabitconsulting.com Why a Coherent Pan-Asian Infrastructure Would Benefit the Region Reason #2

Despite their developed international connectivity, the markets in the study with strong, low-cost bandwidth (e.g. India and Turkey) would greatly benefit from improved pan-regional terrestrial fiber.

www.terabitconsulting.com Pan-Regional Fiber Benefits Markets with Strong Connectivity

• Mesh connectivity throughout the region would increase all countries’ network reliability and provide critical outlets of connectivity – Allowing India to have a stronger alternative to the Egyptian bottleneck, for instance • Stimulating the region’s overall demand presents a greater market opportunity for transit providers and cable operators including Turk Telekom, Tata, and Reliance

www.terabitconsulting.com Why a Coherent Pan-Asian Infrastructure Would Benefit the Region Reason #3

Coherent pan-Asian terrestrial fiber optic infrastructure would benefit markets across the continent and beyond, and help address one of the international bandwidth industry’s most pressing concerns, namely the lack of reliable, cost-effective Europe-to-Asia bandwidth.

In financial terms, the viability of constructing coherent pan- Asian terrestrial fiber optic connectivity can likely be guaranteed by capturing even a small portion of bandwidth demand between Asia and Western Europe.

www.terabitconsulting.com

Strong Europe-to-Asia Bandwidth Demand

Lit Capacity, Submarine Cables serving South Asia (incl. Europe-Asia), 2007-2013

Source: The Undersea Cable Report by Terabit Consulting www.terabitconsulting.com Terrestrial as a Solution for Submarine

Source: The Undersea Cable Report 2014 by Terabit Consulting

The global telecommunications industry is desperate for a cost-effective solution that would avoid undersea choke points.

www.terabitconsulting.com A Pan-Asian Terrestrial Network Would Be More Competitive than Europe-Asia Submarine

Submarine Terrestrial Connectivity Cable station to cable station, POP-to-POP with expensive backhaul Repair Faults take weeks to repair; ships Networks accessible by highway running costs $50,000+ per day can be quickly repaired at low cost Capacity and Long-haul limited to 8 fiber pairs; Unlimited capacity with proper Upgrades submerged electronics poses duct installation and maintenance limitation Costs Unrepeatered 3-fiber pair cable: $1,250 per km with marginal fiber $12,500 per km, marine services costs of as low as $60 per km $20k-$40k / km Risk and No viable alternative to Egyptian Mesh configuration could offer Reliability bottleneck “five nines” if properly designed

www.terabitconsulting.com Part 4: The Case for Installing a Terrestrial Pan-Asian Fiber Optic Network Along Highway Rights-of-Way

www.terabitconsulting.com International Highway Infrastructure

• In the near-term, many of the countries in the region will be upgrading existing highway infrastructure and installing new links • Simultaneous installation of high-capacity fiber and ducts would be a negligible marginal cost in most projects

www.terabitconsulting.com Installing Fiber within a Road Project • In the US (high labor-cost market), conduit+fiber installation during open road construction costs between USD$6,000 and USD$18,000 per kilometer • Road installation costs at least USD$1.8 million per lane, per kilometer • Cost of fiber network installation during open road construction: much less than 1% of project total

Photos: Terabit Consulting www.terabitconsulting.com Part 5: The Case for Intervention to Ensure Network Development

www.terabitconsulting.com Market Failure: Broadband Divide • The analysis showed that the growing chasm between the broadband “have” and “have-not” markets results in vast differences in: – international fiber connectivity – domestic connectivity – the pricing of IP transit capacity – the competitiveness of telecommunications and Internet market – fixed and mobile broadband infrastructure – the affordability of consumer broadband services • This impacts overall economic growth and development. • Landlocked markets can’t compete using the existing trans-border (bilateral) infrastructure.

www.terabitconsulting.com The Need for Intervention Intervention (by government or int’l. organizations) is required to ensure the implementation of a pan- Asian terrestrial fiber optic network for 5 reasons: 1. To overcome the region’s vast broadband inequality and assist landlocked nations. 2. To ensure that the region receives broadband services on a par with more developed markets. 3. To finance or assist in financing a major capital project that is unlikely to be fully financed by the private sector. 4. To pool and leverage private-sector resources which are disparately insufficient. 5. To stimulate and facilitate future private investment through market development and maturation.

www.terabitconsulting.com Options for Government/UN Participation

Full Government / Int'l. Choice of Project Design Organization and Engineering, Supplier, Ownership and Project Maintenance Authority, Management Operational Plan

Special Purpose Vehicle Intervention by (SPV) with Government Government / Int'l. Shareholding (Investment) Construction of Organization to Ensure Implementation Coherent, Pan- Asian Terrestrial Special Purpose Vehicle Asian Terrestrial Fiber Network Marketplace Left to (SPV) with Government Fiber Optic Implement Its Own Public-Private Contribution (Subsidy) Connectivity Continued Use of Coherent Solution Partnership (PPP) / Fractured, Bilateral Private Sector Project Management Terresrial Fiber Build-Operate-Transfer Infrastructure (BOT)

Project Management Contract

www.terabitconsulting.com Available Public-Private Partnership Options Special Purpose Vehicle (SPV) Model with Government/Organizational Shareholding • Network operators form a special purpose vehicle to assume full responsibility for the development, operation, and maintenance of the pan-Asian terrestrial network. • Government, organizational, and/or developmental entities make capital contributions to the SPV and receive equity stakes and/or capacity on the network. • The contributor(s) receive a seat on the board of the SPV, thereby ensuring that policy goals are achieved. • A regulatory framework is adapted to ensure that the SPV’s outcome fulfills policy goals and improves the overall welfare of the region. • The contributor’s equity stake may be divested once certain milestones are achieved, or alternatively may be held until the winding-down of the SPV.

Special Purpose Vehicle (SPV) Model with Government/Organizational Contribution • Network operators form a special purpose vehicle with full responsibility for the pan-Asian terrestrial fiber optic network. • The government, organizational, and/or developmental entities make capital contributions to the SPV. • The contributor(s) do not receive equity or capacity on the network. • However, the contributor(s) do participate in the creation of the SPV’s governance framework, and receive a seat on the board of the SPV. • Mechanisms are instituted to ensure that policy goals are met.

Build-Operate-Transfer (BOT) • Following an open tender process, a concession is granted to one or more network operators for a fixed long-term duration (typically 20 years). • The network operators are assigned full responsibility for financing, operating, and maintaining the cable. • Certain market privileges may be accorded to the network operators. • The operators are allowed to retain all revenues during the period of its concession. • Once the concession agreement expires, ownership of the network is assigned to the government(s) at no cost.

Awarding of Project Management Contract • A tender is issued to select one or more network operators responsible for the construction, operation, maintenance, and commercialization of the pan-Asian terrestrial fiber optic network. • The contract recipient is paid to manage the cable and assume these responsibilities, including the sales of capacity to operators. The contract recipient’s management fees may be fixed or based on a percentage of revenue. • The network remains the property of the Government(s), which collect all profits (less management fees). www.terabitconsulting.com Part 6: Principles to Guide Network Development

www.terabitconsulting.com Principles to Guide Future Network Development

1. Fully integrated and coherent – Mesh configuration to allow for in-network healing in the event of physical cable outages or political instability affecting connectivity in specific countries. 2. Functioning and monitored as single, uniform network – Existing multi-national terrestrial networks cannot offer uniform quality- of-service guarantees between endpoints (as good as “weakest link” or “weakest operator”). 3. Leveraging existing infrastructure – Right-of-way procurement and uniform construction techniques would be enabled through the use of the Asian Highway network, Pan-Asian Railway project, or power transmission networks.

www.terabitconsulting.com Principles to Guide Future Network Development (Continued) 4. Cost-effective – With suitable transmission capacity and fiber count, a pan-regional terrestrial fiber network could compete effectively with submarine cable on both a regional and intercontinental basis. 5. Open access and non-discriminatory pricing – In order to achieve development and policy goals, as well as to serve the region’s consumers, all purchasers of capacity must be able to access the network on an equal, non-discriminatory basis. 6. Developed and managed by a Special Purpose Vehicle (SPV) – SPV shareholding would ensure the neutrality and efficiency of the network – Allows participation by all stakeholders while still maintaining arm’s- length terms over all capacity sales and leases.

www.terabitconsulting.com Part 7: Gaining Support for the Project

www.terabitconsulting.com Stakeholder Participation is Key

• Key stakeholders should be involved in the project: – National Regulatory Authorities – Incumbent Operators and Major International Gateway Operators – Competitive Telecommunications Operators and ISPs – Road and Railway Authorities/Operators • Suppliers and contractors should also be consulted in the development stage

www.terabitconsulting.com Convincing Governments of the Project’s Advantages

1. Benefits to consumers – Better, more cost-effective connectivity in the region will greatly reduce consumer prices in less developed markets and improve broadband reliability throughout the region. 2. Economic growth – Improvement in ICT infrastructure yields: • Increased demand for the output of other industries (demand multiplier) • New opportunities for production in other industries (supply multiplier) • New goods and services for consumers (final demand) – It also increases firms’ innovation capabilities and increases the probability of new products, innovations, and organizations

www.terabitconsulting.com Convincing Governments of the Project’s Advantages (Continued) 3. Increased government revenue – Growth in economic output from ICT investment results in greater tax revenue – Increased employment in the telecommunications sector – Greater collections from telecom licenses and excise 4. Regional stability through better international and intercultural relations – More efficient routing of trans-border traffic would encourage trans-border initiatives in the education, healthcare, and research sectors that would not otherwise be possible.

www.terabitconsulting.com Road Map / Next Steps

• Critical international connectivity weaknesses throughout Asia are being identified by Terabit Consulting • As more market analyses are completed, the viability of a coherent pan-Asian network is becoming clearer • Detailed Feasibility Study (DFS) should be undertaken • Rough Order of Magnitude (ROM) costing exploration should be initiated • Determination of support among stakeholders • Identification of financing options