December 2019 Innovative Business Models for closing the internet access gap: lessons for policy makers There are over 3 billion citizens of the world who cannot access the internet. As digital development specialists, this is the challenge of our time. To make this happen we must create the Safest, Affordable, Sustainable and Inclusive (i.e. SASI Access) means to access the internet for those left behind. So, imagine you are a Minister or Secretary of Digital Tech- nology in your country, and you are being bombarded by of- fers from private sector companies to solve the internet access gap, one promising solution after another. Your technical and regulatory teams are under stress to keep up and enact the enabling legislation and rules to bring in the new technolo- gies, and your citizens are at risk of falling further behind in the digital age. Or you are a young, tech savvy entrepreneur, who has found ways to connect the unconnected, but can’t do anything because of legal, regulatory and financial road- blocks. How can we help? To address these questions, we created a body of case studies, lessons, and decision tools to assist both government and in- dustry to come together and close the digital gap. This body of knowledge and tools is captured in a single report and e-learning modules titled, “Innovative Business Models for Expanding Fiber-optic Networks and Closing the Access Gaps.” The report is a reference tool to help policy makers assess alternatives for infrastructure deployment and adopt decisions tailored to their country circumstances and needs. It does not offer a cookie-cutter approach to these problems. The case studies and menu of solutions are not static as tech- nology evolves constantly, generating new opportunities and undermining traditional business models. The report was prepared under the framework of the Digital Development To help clients understand the internet value chain and Partnership (DDP) and was led by a team of the World Bank Group in partnership the greatest risks and challenges, the report also provides a with Telecommunications Management Group and Salience Consulting. WORLDBANK.ORG/DIGITALDEVELOPMENT description of the supply chain from first mile to last mile ac- and risks, building expertise, and adding critical finan- cess. Gaps may appear anywhere in the value chain. cial insight and caution that might not exist without it. As you move down the chain to the last mile, the techno- • Structural changes should be considered as part logical solutions become more diverse, and you will learn of the overall national plan. If the govern- that the last mile segment of the value chain is one of the ment-owned incumbent operator is part of the most economically challenging to deliver in rural areas. You solution, then some sort of restructuring of the will also learn that different technologies, have different cost operator will be necessary to better position the in- characteristics, depending on the type of geography served. cumbent to meet the broadband deployment goals. The challenges of deploying the last mile have led to a wide number of technological solutions, and efforts to lower costs • Utilities collaboration and enabling reuse. Public utilities of particular types of solutions, e.g. satellites, fixed-wireless have valuable assets for broadband deployment purposes, backhaul, balloons, HASPs, among others. such as ducts and poles, buildings, land rights, and even fiber networks that could be leveraged for cost-effective In reading the report and using it as a decision tool, you deployment of new broadband infrastructure. Particular- will find the biggest challenges in the middle mile and last ly with a limited budget, the more infrastructure that is mile access segments. There you will see many different ap- reused, the more homes and businesses could be covered. proaches using very different technologies and business mod- els, some with great success and others not so much (read the • Justification should be based on a realistic business case lessons learned section of this report as we must also learn and socioeconomic cost-benefit analysis with a view to from failures): 70 case-studies - geographically dispersed, but local, national, and regional trends in the future. Govern- mainly in developing markets. ments should intervene with the objective of mimicking risk-adjusted, externality-adjusted market outcomes. In The decision tool is provided to help you evaluate the type of other words, economic net present value (ENPV) should government involvement that is appropriate to help resolve be calculated and the initiative abandoned if not positive. the lack of broadband access. The first step is to figure out whether governments should even be involved, in particular, • One business model’s failure can lead to another’s suc- if there is no market failure or regulatory failure. There are cess. There are many examples of overbuild, asset strand- two main types of market failure in broadband infrastruc- ing, underutilization, and failed commercial endeavors. ture deployment: abuse of dominance; and missing markets While some projects may be wasteful in the short run, due to scarcity of capital, excessive uncertainty and/or un- long-lived assets can often be repurposed, commercial- dervaluation of benefits. Regulatory failures are cases where ized, or otherwise brought back into productive use and the government is either limiting commercial activities (e.g., facilitate new entry for the benefit of all. Policy makers heavy taxation, exclusive licensing) or has a laissez-faire atti- can act to reduce the time that assets lay idle by (re) tude when it comes to enforcing legal standards. commercializing and reducing barriers to cross-sectoral engagement. If government intervention, beyond standard regulatory ac- tion, is justified, the next step is to determine what kind of Finally, the business models reviewed provide a rich collec- intervention is most appropriate. A key initial question is tion of lessons for policy makers seeking to intervene to de- whether the infrastructure gap can be addressed while at the ploy broadband in underserved areas. While most successful same time creating competition. initiatives have been driven by the private sector, the report shows that public agencies have a crucial role to play by im- In summary the report provides infrastructure-specific rec- plementing effective sector regulation, addressing potential ommendations as follows: markets failures, and creating the conditions for an open, competitive broadband sector. • Private sector participation. Government interven- tion in infrastructure deployment should involve the To read the full report, click here: http://documents. private sector wherever possible. The advantages of pri- worldbank.org/curated/en/674601544534500678/pd- vate-sector participation include the sharing of costs f/132845-7-12-2018-17-20-11-InnovativeBusinessModels.pdf