Universal Broadband Service in rural Saudi Arabia
Innovations by USF & Operators close the Access Gap
Presented by:
Andrew Dymond
Saudi Arabia’s UAS Program – world leading case:
•
Advanced converged technology solution based on competitive,
technology neutral OBA tendering has resulted in voice and
broadband being deployed universally
 900 MHz 3G for economic wide area rural coverage
•
Efficient USF program roll-out since commencement in 2010
 Two area projects awarded per year across the Kingdom
•
USF has effectively promoted competition during a key market growth
phases and achieved active participation by all leading operators
 All four winning bids well below budgeted subsidy estimates
 All leading operators, including new entrant, have won at least one
award
Background
•
•
UA/US Policy created in 2006
Policy Targets
Set in 2006
Voice
service
Internet
Provided for USF Fund to use 1%
net operator levies
UA
3 years
5 years
•
USF created by the CITC with
operating autonomy
US
5 years
7 years
•
•
Competitive selection of Universal
Service Projects & Providers (OBA
style)
International UAS Consultant hired
in Feb 2008
USF Execution measures
CITC Decision (to create USF)
Jun 2007
Executive Rules &
Procedures
Jan 2008
Administrative Rules
Jan 2008
Policy Execution and USF Program Targets
•
Universal Service to all localities above 100 population
 Despite high mobile penetration, the USF targeted improvement of
voice quality to “indoor” signal strength for all US localities (Lower
quality was considered under-served).
 Voice and broadband Internet in a single program targeting universal
512 Kbps to all localities above 100 population
•
Universal Access to localities below 100 population
 For voice – defined as outdoor signal quality and maximum distance of
10 Km to US service, since all users already own at least mobile
handsets
 For Internet - useable data access within a maximum 10 Km distance
UA / US Issues as originally perceived
•
•
•
•
Key questions - voice
 Mobile almost ubiquitous - What role for fixed?
 How much UAS voice investment for the 1-2% uncovered
population is viable as smart subsidy?
 What investment needed to improve existing voice service quality?
 What role for public access?
Key questions – Broadband
 How much investment will be required to reach the fringe areas?
 What role for public access?
Data Market still “forming” - intervention problematic
KSA shaping as an advanced market - focus on Broadband
Market highlights
Saudi Arabia ICT Market
• 2010 SAR 61Bn (USD16.3Bn)
Fixed & data
• 10-13% long term growth
• Mobile dominant
 87% of accounts
90
 75% of revenues
70
• Two national infrastructures
 Bandwidth competition
• Fixed & data liberalisation
 Data will have high
penetration, affordable price
 Fixed-mobile competition
created fast changing market
Revenue from Foreign Operations
80
Revenues (SR Billions)
 3G emerging strongly
Mobile
16.6
60
14.5
0.5
50
0.1
40
45.1
30
20
10
0
8
20.9 25.2
12.9 17.7
11.8 10.6
9.5
9.8
9
28.5 33.2
9.8
9.3
38
39
11.2 13.5 15.4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: CITC Annual Report 2010
2008-11 Network shape – quality and reach
4
LS
NR M-4
ST
Halat Ammar
Tabuk MT15
FTJS#1
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r
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Kha
alah
Sals
Mililih
Madinah MOI-TV  1h
ER LS4
STM-4
IC
ST LS2
M-1
6
UAE
Batha
Hariq 3h
Hawtat Bani Tamim
Hawtat Bani Tamim TV  1h
Taif
Southern Ring
Khurmah 5h
Layla
3
LS
SR M-4
ST
MWO55
Ranya 4h
054
Route 302A
7+1
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Nahran – Taif (MW055)
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MOI-TV
Sulayil MOI-TV
FSHS#1
Sharorah
Sharorah MOI-TV
V
D.A.Janoub
Jizan II
Network Deployment Planning
1-1-2008
rain
Bah
Al Kharj
HQ-4
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STM
Zalim
Salwa
Haradh
Afif
FTR#4
Hofuf
Eastern Rings
Dawadmi
Jamum
Jubail
Dammam
LS1
ER -4
STM
Riyadh
Shaqra
Central Rings
Usfan
Ras Al Zawr 1h
MW092
FD93#3
North
Eastern
Ring
Madinah
4
LS
CR M-16
T
Badr S
CR
CR LS
ST LS
6
STM-4
M- 5
4
Makkah
Suman MOI-TV  4h
Majmaah
Al Ghat
Unayzah
LS3
CR -4
STM
S
ST R L
M S1
-1
6
CR
L
STM S4
-16
Jeddah
Artawiyah
5
LS
ER M-4
ST
NR
L
STM S1.1
-16
Khafji
MW093
Zilfi
2
LS 16
CR TMS
.2
LS1
NR -16
STM
Yanbu
Yanbu MOI-TV  1h
Butayn 1h
MT1
Ummlajj
Hail
Kahfah 1h
1h
Qaysumah
NE
MW099
ST LS2
M-1
6
Qurayat
al Ulya 1h
1
LS 6
NE M-1
ST
2
NR LS 6
-1
STM
Al Wajh
a
Taym
Route 303
MT10
STM-1
(MT15-Balad)
MT4
Al Ula 7h
MT3
CR
ST LS8
M4
3
LS
Duba
Al Jouf
Northern Ring
FTJS#3
Ash Sharaf
We
s
Rin tern
gs
IC
3
NR LS 6
-1
STM
Kuwait
Hafar Al Batin
S
ST R L
M S2
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6
Haql
Kuwait
Ruqi
Rafha
1
3.
LS 16
NE M KKMC
ST
Sakaka
NE LS3.2
STM-16
Jordan
NR LS
STM 5.2
-4
Qatar
TS-8  1h
Qurayat
Rafha MOI-AM
‘Ar’ar
5.1
LS
NR M-4
ST
ER LS
3
STM-4
Jordan
‘Ar’ar MOI-TV
Northern Border Ring
Turaif
Sakaka MOI-TV
IC LS
STM 1
-16
Qurayat MOI-TV
Qurayat MOI-AM
Route 301A
Najran
S.A.Ahad 7+1
Nahran - Najran
Yemen
Yemen
Yemen
Start-/Endpoint Line Section
SN/MSC
Non SN/MSC/Endpoint Location
FON Route Junction
FON Route
FON Closed Ring
DMW Route
Future new/diversity routes
Int. Border Crossing
Uncovered communities identified through GIS
• Only around 1,000
communities not
served by at least
low quality outdoors
2G signal
• But USF determined
that if mobile is to
be a vehicle of US,
quality should be
better.
• USF also envisioned
to meet voice and
broadband targets in
a unified approach
Detailed mobile coverage analysis
•
Two leading operators reached
 39.2% of geographical area with
medium quality outdoor signal
•
Population coverage
98.4% with med. QoS outdoor signal
96.9% with indoor signal
3,284 localities without indoor signal
• But demand survey showed 22%
of villagers “with service” have
poor QoS
 Less than -90dBm or -100 dBm
signal strength
•
Thus USF targeted indoor
service (above -80 dBm)
2008 mobile coverage scenarios – operators combined reach
The Internet opportunity parallels voice
2G Voice





☎



3G & WiMAX

Rural voice
coverage



2G Voice telephony coverage to
most areas
•
Two advanced digital backbones
link all BTS sites





•

How to provide
data?

•
 Fibre or microwave
 Can be accessed & upgraded
economically for broadband
Internet solution most likely to
be 3G / WiMAX in competition
 Internet use was within small
radius from some BTS towers
 WiMAX or 3G at 900 MHz could
extend range to 10-15 Km –
similar to 2G voice range
Draft Strategic Plan for consultation
Three voice service options were proposed
Mobile QoS level for US based on existing
CITC license requirements:
•
•
Signal level (minimum -80 dBm) requirement
for localities above 5,000
USF Option 1
Target USF subsidies to guarantee service above
the -80 dBm contour (Orange)


•
-90 dBm
-80 dBm
-70 dBm
Licence obligations to towns
All localities between 500 < 5,000 population to have US
Localities <500 guaranteed at least UA
USF Option 2
Target USF subsidies to guarantee service above
the -80 dBm contour (Orange)


•
-100 dBm
All localities 250 <5,000 population to have US
Localities <250 guaranteed at least UA
USF Option 3
Target all localities < 5,000 with -80 dBm
 Only exceptions most remote, very small places
 Consultation to seek guidance on size limit
3,839 known localities
< 5,000 population
currently outside
-80dBm
Stakeholder consultation outcomes
on the Draft Strategic Plan options
34 key questions / 31 responders – 7 operators, 21 Ministries &
organizations, 3 international USFs, 1 supplier
•
•
•
•
•
•
Target US to voice & Broadband for all localities above 100 population
3G &/or WiMAX capable of a meeting an Internet-for-all vision
UA coverage below 100 population with 10 Km max. travel distance
Overall policy confirmed – 7 years max, but tender lots to include
representative areas in all 13 districts within first 3 years
Minimum Internet data speed 512 Kbps for all localities
Confirmed all localities >5,000 population commercially viable
for 512 Kbps, thus not to be included in USF program
USF Program affordability
USF Targeted Budget
(SR Billions)
Voice &
Broadband
Internet
UA/US
Program
9.0
8.0
7.0
6.0
8%
5.0
•
13%
4.0
3.0
•
2.0
1.0
2010 2011 2012 2013 2014 2015 2016 2017 2018
•
Estimated cost of subsidy
SR Millions
Expected
Maximum
mid-range
4,600
6,000
Based on 1% of market revenues, USF
could afford SR 4.5 - 5.4 Bn (USD 1.2 –
1.44 Bn) over 7 years
Expected expenditures at lower limit or
below, due to conservative estimation
methodology, expected natural market
expansion and USF competition
Therefore the program affordable at
1% of revenues
USF Program Roll-out
•
7 year $1.3 Bn (SAR 4.85 Bn) program to reach whole Kingdom
 Strategic packaging - Each tender lot to comprise contiguous areas
(Mohafadats) to maximize operator interest in the competitions
 Regional balance - All 13 districts to be represented with partial
coverage within the first 3 years
 Mix near-viable with unviable areas
•
Tender lots for both voice and Internet together
 Voice + Internet integrated in areas currently with no USF quality
indoor voice service
 Internet only – already have voice, upgrade data speed to 512 Kbps
The expected operator solutions
(A – Internet only areas)
• Existing towers
• Voice already exists – short radius
• No Internet service
• USF supply Internet service only
• Overlay /upgrade feasible solution
without new towers
(B – Voice + Internet areas)
• No existing voice or Internet services
• USF supply voice & Internet together
• Larger radius, but
• Voice + data radius need to be similar
USF projects were tendered with both models together for minimum areas (Mohafadat)
Pilot project – awarded July 2010
• Three Mohafadats in
two Districts
 Al-Mahd in Madinah
 Al-Khulies & Al-Kamal in
Makka
 Territorial block
 Over 51,000 population
& 178 localities without
USF QoS voice (480)
 Disimilar commercial
characteristics
 Wide range of %
viability
 USD 13.33 million
subsidy awarded
Press Release: Connectivity
project success for Mobily
Nasser Al-Nasser
By ARAB NEWS Feb 3, 2012 (Excerpts)
Etihad Etisalat (Mobily) has announced the
completion of the pilot project for the
universal service fund.
The project aims to provide voice and broadband
Internet connectivity to the residents of the districts of Khulais and Al-Kamel in the Makkah Region, and
the district of Mahd Al-Dhahab in the Madinah Region. Mobily said 482 villages that belong to these
provinces have been covered in a record time despite the region’s terrain nature, and 153 locations
have been developed with advanced 3G technology while being connected via Mobily’s huge Optical
Fibers’ Network.
Al-Nasser thanked the CITC for the opportunity it has given Mobily to achieve the country’s overall
orientation by having communications services reach all the Kingdom’s residents. He also praised the
board’s admirable cooperation and keenness to complete the project on time, and determination …..
one of the many motives that contributed to the completion of the project on time.
First two year Program projects – 2010/11
Illustrate:
• Regional balance
• Territorial blocks
• Mixture of near-viable & higher risk
cases
• Maximum bids totalled $127.5 million
• Winning bids totalled $22.6 million
• All operators won at least one bid
Program and cost summary to date
Year
Districts
Localities
Voice +
Internet
Population
Internet Receive USF
only
quality voice
for 1st time
Highest
bid
Winning Company
bid
awarded
[USD]
[USD]
2010
Medina
Makkah
292
184
56,209
53.5
13.3
Mobily
(Etisalat)
2010
Al Jouf
N. Borders
Jazan
272
331
54,726
23.5
10.7
Zain
2011
Al Baha
Assir, Makkah
524
1,927
102,489
85.3
7.9
STC
2011
Riyadh
Eastern
146
128
13,464
18.7
4.0
Zain
Total
9 (of 13)
1,234
2,570
226,888
181.0
35.9
All three
Operator solutions
•
•
All three main suppliers – STC, Mobily and Zain - proposed an exclusively
3G design concept
3G @ 900 MHz (UMTS900) most economic solution (approved by CITC)
 New towers mostly 60 m for geographic range
 Radius 11-12 Km for data & UA voice in rural areas
• UMTS 1800 or 2100 urban is <3 km
 No investment proposed in WiMAX, in favour of 3G universally
•
3G offers less guaranteed bandwidth but meets CITC quality standards
and appeals to the operators as more flexible, manageable &
commercially viable on a Kingdom-wide universal network
 Even if BTS’s must be upgraded in future, the universal solution was still favoured
 Backbone needs less enhancement
 The solution offers >512 Kbps on a contention basis, i.e., not guaranteed
• However all wireless broadband solutions are based on customer contention
ratios and have been found to meet CITC QoS scheme & USF targets
Press Release: Zain Saudi Arabia
completes key project
By ARAB NEWS
Published: Feb 11 (Excerpts)
Zain Saudi Arabia confirmed that it had
completed the work on the second project
for Universal Service Fund.
The company, through this project, provided telecom
services and broadband data transmission to each of
the provinces of Aldayer, Darb and Raith in Jazan Region, and all provinces in Al-Jawf region
(Qurayat, Dawmat Al-Jandal and Sakaka) and the Northern Borders region (Arar, Rafha and Turaif).
The company said it had completed the entire project covering about 550 villages of these provinces
via the setting up of 170 sites. Through this project, the company’s new reach is over 175,000 people.
Zain KSA Chief Operations Officer Ahmed Al-Faifi said that although the company has provided higher
speeds than those required in some areas in order to provide the best telecom services and data
transmission to users of its network in the Kingdom.
He also indicated that the second USF project awarded to Zain KSA comes in line with government
guidelines for comprehensive strategic development, providing telephone and broadband Internet
services to all regions and all segments of society, under direct supervision of the CITC.
Next phase of UAS Policy
• 2 year UAS Policy update and USF benchmarking
 Policy is robust, though created with stronger fixed market
expectation
 Updates to be fine-tuning to the needs of Broadband ICT era
• Consultant carried out 67 country survey to ascertain




Policies on UA and US to voice and Internet
Level of integration with Broadband
Institutional & Administrative strategy with USFs
USF collection & disbursement
Conclusions
• The Saudi USF’s program is a good example of
 A technology and service neutral, integrated UAS solution
 Flexible regulation in support of cost-effective goals
 Competitive OBA approach yielding cost benefits - winning
operators making strategic bids below cost
 A key role played by USF in ICT market expansion
• Success factors
 Effective management by USF including qualified staff and
internalization of subsidy modelling & implementation
 Collaboration with operators through consultation
Thank you
Q&A
Andrew Dymond
Adymond@inteleconresearch.com
Extra slides for reference
USF Strategic Planning 2008 to 2010
May 2008
Sector
review &
market
study
July 2008
Baseline
demand
survey in
all districts
Jan 2009
UAS/USF
Benchmark
study
13 key
countries
for USF
admin
strategy
Feb 2009
Draft
Strategic
Plan
available
internally
June 2009
Draft
Strategic Plan
to
stakeholder
consultation
Dec 2009
Pilot
RFP
issued
June 2010
Final approved
Strategic Plan
released
7 yr Operating
Plan
UAS Developmental features
•
High level of user affordability
 Average household income SAR 6,745 (USD 1800)/ month
 Unserved rural households income 75% of average
 Users spend around 10% of declared income on ICT at all income levels
•
Telephony US almost complete – 98-99% have at least an outdoors signal
 However, like Australia or Canada, the last 1-2% is costly
•
•
•
Liberalized market and good access to competitive backbone
Data / Internet access penetration – 41% in 2010 (80% of which mobile)
Focus of the UAS program should be on broadband – fixed or mobile
 Broadband demand & affordability high
 Internet access was lagging others in the region but had ingredients for growth
related to both demand and supply – currently in high growth, though mainly urban
UAS Indicators at time of planning
High ICT indicators were predicted to drive Internet growth
KSA Ranking on telecommunications and ICT indicators
Indicator
Telecommunications market size (2007)
Saudi Arabia
Data
World
Ranking
Middle East & GCC
Ranking
US$ 11.5 billion
18
2
Fixed lines
4.1 million
37
4
Mobile accounts (end 2007)
28.4 million
27
4
Fixed line penetration (2007)
16.2
95
9
Mobile penetration (2007)
114.7
26
4
Internet user penetration (2007)
25.1
78
7
Internet subscriber penetration (2007)
7.1
67
6
Broadband penetration (2007)
2.4
80
6
Computer penetration (2005)
35.4
27
1
e-readiness (2008)
5.23
46
3
• Since 2007, Saudi Arabia’s mobile penetration has reached over 174 (#5 in World Ranking)
• Broadband penetration doubled by 2009, together with further rises in computer penetration
Fixed & Mobile voice service reach
Population centres in KSA
• Fixed network
5001 to 20,000
– Reaches well less than half of villages
– Present in less than 50% of Admin
Centres (Markaz)
2501 to 5000
• But serve 293 Markaz with DSL today
>100,000
Size of localitity
20,001 to 100,000
• Mobile operators
1001 to 2500
251 to 1000
– Together cover the vast majority
of localities, down to small populations
101 to 250
<100
0
1,000
2,000 3,000 4,000 5,000
6,000 7,000
Number of localities (Total 15,800)
Vast majority of the 1,142
Rural Administrative Centres
(Markaz) in these population
ranges
– 39.2% geographical area coverage with
at least medium quality outdoor signal
strength (-90dBm)
– Analysis shows that up to 3,284 villages
still uncovered for indoor service (-80
dBm)
29
ICT market & USF potential strong even in recession
•
•
•
•
Historical trend showed ICT
market growing at average
7.5% above GDP real growth
Saudi GDP was predicted to
contract by 1.0% in 2009 but
continue expansion at 4%
between 2010-2013
ICT market projected to
outpace GDP as the Kingdom
followed world trend on
increased use of ICT
ICT Market growth & GDP real growth
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2004
Market liberalization & new
operators guaranteed the
growth continued
2005
2006
2007
2008
2009
2010
2011
-2%
ICT market growth
GDP real growth
2012
2013
Competitive market – USF Context
• Mobily’s financial performance has
remained strong & strengthened
with data focus
 Broadband has increasing role
 First company to win a USF
competition
• STC in transition though remains
strong
 Was the last to win a USF
competition but keen to do so
• Zain new entrant has participated
strongly in the USF program to date
 Has used subsidies for
geographical expansion
 Won two competitions
Saudi EBITDA Margins - %
Mobily
STC
Zain
100.0
50.0
35.2
45.8
37.0 40.6
38.5 37.9
37.2 35.8
13.0
6.0
0.0
2008
-50.0
-36.0
-100.0
-150.0
-200.0
-250.0
-300.0
2009
-277.0
2010
2011
Saudi USF characteristics
•
•
•
•
Staff level 32 in 3 divisions
 Studies & Planning
 Projects
 Operations
Independent unit under the CITC
Decision & budgeting efficiency hindered by multi-level
authority – three CITC decision entities above the Administrator
Recommended to achieve a streamlined authority structure (as
originally recommended for Policy in 2006)
 Administrator answerable to one board (USF, CITC or Exec. Committee)