broadband strategies handbook.pdf - Khazar University

Table 4.3Competition among Firms for Subsidies: Factors Critical to SuccessDemand factors Supply factors Enabling environment• Users are ableand willing to payfor services.• Service featuresare tailored touser needs andpreferences.• Services haveconsiderablegrowth potential.• Several firms arequalified to bidfor subsidies.• Businessopportunitiesare aligned withoperators’strategies.• Project componentsarecost-effectivelypackaged.Source: Adapted from Wellenius, Foster, and Calvo 2004.• Elements of a market-oriented legaland regulatory framework are inplace.• Government has access to stableand reliable sources of subsidyfinance.• Private investors have access tolong-term financing.• Donors and different tiers ofgovernment are able to coordinatefinancing policies.• Institutional capacity is in place toimplement and manage a competitivesubsidy mechanism.investment and start-up. There is ample evidence that even low-incomeusers, given the opportunity, spend a significant part of their income oncommunication services. In developing countries, about 10 to 20 percent ofrural household income is spent on infrastructure services (for example,communications, electricity, water, and transportation). 18 In some countriesin Africa, rural households spend over 5 percent of their income on telecommunications.A survey in Nigeria found that about 7 percent of householdincome was spent on mobile telephone service. 19 These levels of expenditureon communication may suffice for the provision of communalbroadband facilities (which aggregate the local population’s purchasingcapacity) even in very poor localities, but the income threshold will behigher for individual household connections. For competition for subsidiesto achieve its intended purposes, broadband service targets must be consistentwith realistic estimates of the users’ willingness to pay.Besides income, other factors influence the demand for rural infrastructureservices. These factors include location, information on options, ease ofuse and payment, and reliability of communal services as well as hassle-freeconnection, low fixed periodic charges, easy control of expenditures, accuratebilling, and prompt repair of household connections. Demand growthpotential is a major determinant of sustainability. For example, some companiesthat provided subsidized rural pay phones in Chile also offered individualtelephone lines and Internet access to homes and small businesses oncommercial terms using the subsidized infrastructure at marginal cost.Extending Universal Broadband Access and Use 175