International Telecommunication Union
Improving IP Connectivity in
the Least Developed Countries
Background study
Claudia Sarrocco
Strategy and Policy Unit
International Telecommunication Union
12 April
2002
The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of
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the ITU or its Membership. The author can contacted by e-mail at claudia.sarrocco@itu.int.
International Telecommunication Union
Outline
12 April
2002
Introduction
Background
Vicious circle
Conclusions: barriers
What can we do? Proposal
Virtuous circle
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International Telecommunication Union
Background
Digital divide initiatives
- DOT force
- UN ICT task force
“Improve connectivity, increase
[ICT] access and lower cost”
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2002
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International Telecommunication Union
Objective
To provide low cost Internet
connectivity to LDCs through the
utilization of flexible, less expensive
and simple technology, like VSATs,
engendering a “virtuous circle”
which can help reducing the digital
divide among countries.
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2002
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International Telecommunication Union
Scope: LDCs
 Forty-nine countries, with a total population
of about 670 million inhabitants, are currently
designated by the United Nations as “least
developed countries" (LDCs).
 Cambodia, Gambia, Lao PDR, Mali,
Mozambique, Nepal, Rwanda, Samoa and
Uganda have been chosen as representative of
the LDCs group and will be object of a deeper
analysis.
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2002
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International Telecommunication Union
Why Least Developed
Countries?
• In LDCs teledensity is 0.59%, compared
to 10% in developing countries
In LDCs problems are more extreme
than those of developing countries, and
deserve special attention
• There is less than one Internet user per
one thousand people, against one user per
36 people in developing countries
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2002
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International Telecommunication Union
Why focus on connectivity?
 Connectivity is the possibility for a user
of an electronic network to communicate
with other networks
 Connectivity is fundamental, as it
precedes access to and use of the
Internet
 LDCs have very low levels of
connectivity …
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2002
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International Telecommunication Union
International Internet
Bandwidth…
Source: TeleGeography Inc. Data valid for September 2001
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2002
…is not equally distributed
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International Telecommunication Union
LDCs are falling behind…
World: 360 million
LDCs: 0.58 million
Estimated Internet Users
Total: 6 billion
LDCs: 680 million
0.13%
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Population
10%
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International Telecommunication Union
…and failing to catch up
Thousands
700
444%
600
LDCs % growth
500
400
300
281%
234%
230%
167%
200
100
116%
World % growth
56%
64%
57%
49%
0
1995
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1996
1997
1998
1999
2000
Internet
users growth
rate (56%) in
LDCs is only
a few points
above
average
growth
worldwide
(49%)
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International Telecommunication Union
Low growth, high demand
80
International Traffic
International Internet capacity
70
Bit-Minute Index
60
0.5
50
40
30
0.2
20
10
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0
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Bit-minute Index: any amount under 1 indicates the
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existence of latent demand for the Internet (selected countries)
International Telecommunication Union
Infrastructure: Limited
and Expensive
Country
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2002
Uplink/downlink
capacity
Population Proportionate cost
per 64 Kbit/s
(million)
unit/month
Lao PDR
1.644/ 1.244 Mbit/s
5.23 n.a.
Rwanda
1.256/1.5 Mbit/s
7.73 n.a.
Mali
2/3 Mbit/s
Samoa
512/2.256 Kbit/s
Cambodia
3.5/6 Mbit/s
13.11 USD 625
Mozambique
1.6/2.2 Mbit/s
19.68 n.a.
Gambia
5/5 Mbit/s
Nepal
5.5/10 Mbit/s
23.04 USD 625
Uganda
4/12 Mbit/s
23.30 n.a.
11.23 USD 1’500
0.18 USD 840
1.30 USD 625/265
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International Telecommunication Union
Result: High ISP costs for the
end-user
500
462
450
400
350
300
250
209
200
169
136
112
99
100
50
45
50
30
26
32
96
25
96
19
17
Ne
pa
l
90
am
bi
a
150
9.4
EC
D
O
G
oa
Sa
m
al
i
M
m
bi
qu
e
oz
a
La
o
an
da
Rw
da
M
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Ug
an
Ca
m
bo
di
a
0
ISP charges (month) USD
ISP charges (month) PPP
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This translates into a “ vicious
circle”
No exploitation of
No growth of
infrastrctures
Economies of scale
Low international
Internet connectivity
Low bargaining
Power of ISPs
Lack of competition
Little investment in
New infrastructures
Low demand for
Internet services
High connectivity
Charges for ISPs
International Telecommunication Union
Conclusions:
There are many barriers to
Connectivity for LDCs
 Infrastructure:
 High cost, low availability
 Restrictive regulation:
 Monopoly of telecommunication sector
 Only one provider imposing its tariffs
 Limited competition on the end-user side (ISPs)
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 Market Failure:
 Small market
 Operators cannot benefit from economies of scale
 Operators do not have bargaining power to obtain more
attractive prices
 Latent demand is not satisfied
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What can we do?
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The proposal
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
Internationally-funded project

Objective: to provide VSAT
bandwidth to LDCs at low cost

This bandwidth would be provided
to ISPs
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International Telecommunication Union
Why target ISPs?
- Allows not to bypass local market and
local network (less regulatory problems)
- ISPs are the most appropriate target for
the project, as they already have technical
knowledge and equipment to provide
services.
- Computer services shops and cybercafés
could also be targeted.
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The effect of improved connectivity:
Catching up…?
- Increased number of users
- Drop in costs
- Increased bandwidth
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The financing: VSAT costs are
still too high for LDCs
- Internationally-funded Project structured
over 5-7 years, decreasing each year to
support bandwidth provision
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- Financing allocated to ISPs through a
competitive tendering process based on the
reverse auction system (least cost subsidy):
The winner will be the entity providing the
service at given conditions with the smaller
financing
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International Telecommunication Union
Summary:
How will it work?
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 Connectivity will be provided to ISPs in LDCs
 Partial funding: ISPs will participate in the financing
 In exchange for funding they will provide basic access at
lower prices to private end-users, schools, etc.
 In addition, ISPs will be able to make commercial use of
part of the bandwidth provided to offer enhanced
services to business, foreign entities, etc.
 At the end of the 5-7 years, with the growth of the user
base, ISPs should be able to be completely self-financed,
and provide Internet services on a fully commercial
basis, at affordable cost.
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International Telecommunication Union
IP Connectivity Project: virtuous circle
Higher international
Internet connectivity
New investment in
infrastructures
Market growth
Bargaining power
Economies of scale
Higher Demand
For Internet services
Market
liberalization
Lower costs
International Telecommunication Union
Thank you !
http://www.itu.int/ipdc
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2002
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