Open Access: Enabling Access to Affordable Broadband in Kenya

There is now global recognition of the central role of the Internet in social and economic development.  This realisation is influencing government policies to improve access to affordable internet services.  To achieve this objective governments have pursued liberalisation and privatisation strategies to improve the state of telecommunication network infrastructure and services while the industry is employing strategies that will give them competitive advantage and achieve national development goals.

Unfortunately, these strategies have not resulted in reduced cost of services necessitating the need for new and innovative approaches to internet access infrastructure and services.  One such approach that is gaining ground in developed countries to meet the growing demand for broadband services is the ‘open access networks’.  This approach relies on the open and layered nature of the IP network architecture enabling service delivery by multiple players over a single network.

This paper explores open access principles, perspectives and benefits and seeks to establish an appropriate regulatory framework that will foster the development of open access networks.  The dissertation will seek to test the applicability of the open access concept in the Kenyan context.

There are several broadband technologies that are used to provide high-speed access to the internet namely fibre optic, wireless, broadband over power lines (BPL), digital subscriber line (DSL), cable modem and satellite.

The choice of technology is determined by the socio-economic demographics of the populations served, the price/quality ratio, local geography and topography and the type of services that can be supported.  Demographics factors relate to the reduction of unit cost due to proximity of consumers commonly referred to as the economies of density.  Operators seeking to maximise their return on investment (RoI) prefer to deploy fibre in urban areas with high population densities. 

Fibre Optic technology has the following advantages over other broadband technologies: It is considered to have unlimited capacity,  is not subject to interference, it is not subject to signal loss or attenuation and thus can transmit traffic over long distances without amplification. 

The use of fibre in providing last-mile broadband access requires substantial commitment of fixed costs, mainly associated with civil works which are estimated to account for 68 per cent of the total infrastructure cost.  Civil works or passive infrastructure cost include property, steel and cement prices which are in constant flux while active infrastructure, is on the decline due to price reductions of electronic components.  It is possible to spread the cost of passive infrastructure which is categorized as sunk cost over time by investing excess capacity through the installation of multiple fibre optic cables without significantly raising the costs.  However investment in substantial excess capacity, relative to initial demand may act as a disincentive for market entry as operators run the risk of having this excess capacity remaining unused.

The high costs of civil infrastructure though acting as a barrier to roll out are widely recognised as an opportunity for treating infrastructure investment on a different, longer term basis from other communication assets and being classified as a utility which the government can provide.  This is because governments have the power to finance the huge sunk cost without requiring assurance of future return and have the ability to overcome bureaucratic hurdles associated with obtaining rights-of-way.  These advantages enable governments to overcome the problem of unfavourable network deployment economics normally faced by private operators and have recently recognized the value of investing in international and national broadband infrastructure. 

The high sunk cost and high transmission rates makes fibre a desirable technology for the application of open access.  A single open access network is therefore an attractive alternative particularly in developing countries where resources are limited.  Open access networks allow the utilisation of infrastructure by multiple service providers therefore lowering the cost of business entry thus accelerating broadband access.

4.1.   Open access Infrastructure

Sharing of passive infrastructure includes the sharing of cables, ducts, splitters and shelters.  This commonly referred to as open access infrastructure.  In this case operators share some infrastructure but compete in the provision of services.  Infrastructure sharing promises to play an important role in enhancing FTTx (fibre to the home/office, etc.) access, as well as reducing the environmental impact of ICT network deployment.

Open access infrastructure operating models include:

• Non profit model: In this operating model broadband access is provided by a non-profit organisation financed through charitable donations, grants or loans. Like private operators the non-profit operator negotiates with the municipality to secure rights-of-way.

• Cooperative model:  In this model community groups pool resources to deploy an access network securing rights-of-way from municipality. 

•  Contracting-out model: The municipality provides rights-of-way and contracts out the development of the network to private telecommunication companies. 

• Public-private partnership model: In this model the responsibility of funding, implementing and maintaining the network is shared between the municipality and a private partner.

• Municipal model: In this model the municipality has the principle responsibility for developing the OAN.

• Government loan-grant model: In this model networks are deployed as part of government programs to improve broadband access, affordability, and adoption rates

4.2.   Open Access Networks

Sharing of active infrastructure includes the sharing of optical network unit (ONU), access node switches, management systems, broadband access remote server (BRAS), coarse or dense division multiplexing and software.  Open access in this context means the sharing of IP networks and means that anyone can connect to anyone in a technology-neutral framework that encourages innovative, low-cost delivery to users. It encourages market entry from smaller, local companies and seeks to prevent any single entity from becoming dominant as it provides for fair and non-discriminatory competition at all layers.  

Open access network means that each layer may provide any service transparency is essential to ensure fair trading within and between the layers, based on clear, comparative information on market prices and services.  On open access networks service providers can provide any services using any technology independent of the network.  Consequently, the principle avoids anti-competitive practices including predatory pricing, cross-subsidisation and cross-ownership.

5.1.   Operator strategies

Operators may make a business case to deploy fibre by linking the long term investment in infrastructure to the supply of services resulting in vertical integration.  This situation creates significant competitive advantages for ‘first mover’ operators raising new questions regarding the adequacy and sustainability of facilities-based competition.

5.2.   Regulatory strategies

Policy and regulatory tools are needed to open up access to network facilities without harming investment and innovation. Regulators may consider:

• Setting rules operators for the deployment broadband access to that ensure shared and equal access, preventing discriminatory behaviour or monopoly tendencies by the first infrastructure operator in a given area.

• Mandating functional and/or structural separation of vertically integrated operators where the separation would be in the wholesale functions or in the operation of a separate passive infrastructure company

• Allowing the entry of a new category of infrastructure providers including local governments, electricity transmission companies, railway and water companies

6.1.   Stokab, Sweden

The city of Stockholm, in Sweden, owns and operates an open and operator-neutral infrastructure for telephone and data communications, under a city chartered company, Stokab.   Stokab is owned by the company group Stockholms Stadshus AB, which is in turn owned by the City of Stockholm.

Stokab provides open ICT infrastructure as public service/ utility on commercial terms with the aim of lowering the barriers to market entry for service providers, and therefore increasing competition as well as minimising disruption of traffic occasioned by numerous operators digging up the streets.  The guiding philosophy for the establishment of the city network is that telecommunications infrastructure should be provided as a ‘public good’ to facilitate access to advanced communications services for its businesses and citizens and avert the risk of ‘digital segregation’. 

6.2.   Mode of delivery

Fibre is Stokab’s technology of choice as the technology offers virtually unlimited capacity and provides operational security and reliability.  The network comprises 1,200,000 kilometres of dark fibre with connections which provide customers with flexibility in customising the fibre. 

Since 1994, the municipality has built, operated and maintained fibre optic infrastructure on a open access basis to service providers and large businesses including telecommunication operators, ISPs, cable television networks, mobile telephone operators, municipalities, county councils, major banks, insurance companies, multi-sited organisations and media companies based in the commercial districts and industrial areas of Stockholm.

In addition Stokab targets to provide a fibre network for all homes within municipal housing referred to as multiple dwelling units (MDUs) because they house lower income families who might otherwise be ignored by the market.  Customers have exclusive right to one line or an entire network structure on cost-based rates.

6.3.   Critical success factors

One of the critical success factors of Stokab is that it is competition-neutral and provides a level playing field for all market players.  The fibre-optic infrastructure provided as a public utility provides platform for the development of new services. 

The affiliation with local government allows Stokab to secure easier access to public property including subways, water, electricity and sewerage pipes.  This significantly reduces the financial and administrative cost associated with obtaining rights-of-way.   Additionally, this affiliation gives Stokab a vantage position to facilitate the planning and coordination of the fibre network with other public service providers including rail, road and housing.

6.4.   Challenges

The challenges facing Stokab are not specifically documented, however it may be assumed that given that the project seeks to address the provision using supply-side incentives, there is a possibility that fibre capacity may not be optimally utilised. 

The main reason for implementing OAN is to service increased demand for higher speed and capacity i.e. broadband access particularly in the last-mile.  The demand in broadband infrastructure requires a significant shift in regulatory requirements and operators’ investment strategies:

• Implementation of the Code of Practice for the Deployment of Communication Infrastructure in Kenya;

• Classification of telecommunication infrastructure as a Critical National Infrastructure (CNI) or utility in the same class as electricity, water  and the development of a Critical National Infrastructure Strategy to protect the telecommunication infrastructure;

•  Encourage the establishment of Public Private Partnerships (PPP) in the provision of open access telecommunication infrastructure, where local governments who have limited expertise in network operations and lack an entrepreneurial culture could partner with private operators; and

• Structural and functional separation of vertically integrated operators to guarantee cost oriented basis, fair, non-discriminatory access to essential facilities/infrastructure.

Disclaimer: Views expressed here (except those quoted or referenced) are the author’s own

References

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