CLOSING THE ICTs ACCESS GAPS IN KENYA

by

Paul Kiage

Presentation Outline

1. ICTs Access Gaps Study Objectives

2. Methodology & Modelling Process

3. Key Findings

4. Closing the ICT Gaps: Proposed USF Projects FY 2016/17

5. USF Projects Implementation Plan

Objectives of ICTs Access Gaps Study

• Map out the gaps in voice, data, broadcasting and postal &courier services at sub-location level across all counties in Kenya.

• Engage the industry and other stakeholders to identify the gaps in service provision.

• Closing the Identified ICT Access Gaps – Priority Projects

4

Access Gaps Methodology

Methodology and Modelling Process

• Populations based on 2009 Census up scaled to 2016 at 2.6% av. per annum growth

• Population distribution within sub-locations provided by LandScan dataset• Mobile -90dBm coverage prediction maps from the three operators for Q4 2015

 

GIS AnalysisIntegrates all

data and provides output

to the Gap Model

 Then displays

the results

 

The Access Gap Financial

Model 

Excel Spreadsheet

Inputs from KNBS,

Operators and other

infrastructure & service providers

 

Gap projectsand

estimated Maximum Subsidies

The GIS-Referenced Model for Mobile Gaps

Identifies:• Uncovered areas & populations per sub-location (from the GIS) • How many new mobile base stations (BTSs) required

– based on assumed tower height & coverage radius

• Demand side assumptions – User penetration and average revenue per user (ARPU)

• Cost side assumptions– Direct sales costs (% of revenues spent on customer acquisition & sales)

– Base station CAPEX costs (towers, power, backbone & equipment)

– Base station OPEX costs (O&M, fuel, spectrum fees and security)

7

Key Findings

The 2G Voice Service Gaps today

Combined operator 2G coverage at -90 dBm signal strength • Minimum 94.4% of population covered

• 5.6% unserved (2.66 Million @ 2017 projection)– Halved since 2011

• 5,657 sub-locations 100% covered• 418 sub-locations with less than 50%

population coverage • Max. 164 sub-locations with zero % coverage

Sub-location population 2G coverage 

Coverage  100% >90% 50% - 90% < 50% 0%Sub-locations 5,657 485 425 418 164

3G Data Service Gaps and Fibre access3G coverage and Fibre Routes

• 78% population covered

• Only 17% of the land area

• Huge geographical gap areas,

• But fibre routes reach a high % of population concentrations along the major routes, incl. schools & other institutions

Table 4-2: Sub-location population 3G coverage

Coverage 100% >90%50% - 90% < 50% 0%

Sub-locations 2,454 1,324 1,146 977 1,244

Post & Courier Sub-Sector

• Decline from 900 PO’s (2000) to 695 (2011) has been halted since 2014

• While representation has declined seriously in the North and East, so have volumes of letter mail

• International letter mail and parcel traffic are is increasing

• E-Commerce offers a lifeline but private couriers may be taking the most advantage

• Over 1,000 couriers but only 146 are licensed– Permanent footprint of the larger companies <200 

locations 

ISIOLOWAJIR

GARISSATANA RIVER

LAMUMARSABITMANDERATURKANASAMBURU

WEST POKOT

NANDIKILIFI

TRANS NZOIAELGEYO-MARAKWET

NAROKLAIKIPIAKWALE

KAJIADO

BOMETMIGORI

BARINGONYANDARUAKIRINYAGATHARAKANYAMIRA

BUSIATAITA TAVETA

EMBUKERICHO

KITUIUASIN  GISHUMURANG'A

SIAYANYERI

MOMBASAMERU

MAKUENIHOMA BAY

VIHIGAKAKAMEGA

KISIINAKURU

BUNGOMAKIAMBUKISUMU

MACHAKOSNAIROBI

0 10 20 30 40 50 6022

3555555

66

7777

89991010

1111111111

121212

1515

1616

1717

18181818

19202020

2125

3155Post Offices per County

 Jun-2013  Dec 2013  Jun-2014  Dec-2014  Jun-2015  Dec-2015

667 634 622 622 623 623707 707 707 788

2117 2117

Postal and Courier Outlets

PCK  Private courier outlets

Postal and Courier Analysis

• Universal Service defined but no access standards

• Average penetration varies from 1: 25,000 in Nairobi to 1: 178,000 in the worst cases

• Largest area per outlet 10,000 Km2 (100 Km square)• PCK claims making loss in most departmental PO’s, but costs

due to universal service not yet well defined • Courier presence also economically constrained

– Largest domestic network by G4S has 141 POPs, 26 of which are “operating at a loss”

– Some limited efforts to network with smaller couriers in remote areas

Country wide distribution of Post OfficesAdministrative Level

Total  At least one PO  present

Penetration of post offices 

Min Average Max

County 47 47 2 13 55Constituency 295 264 0 2 14Ward 1,450 480 0 33% 10Sub-location 7,149 524 0 7% 7

Broadcasting Sub-sector

• Over 100 FM radio stations• TV Digitalisation well advanced

– Two licensed signal distributors

• 40-50 Digital Terrestrial Television (DTT) have been commissioned

• Will be 70-80 by mid 2016• Presence in all counties• Will be 69% population coverage

Digital TV Stations (contracted to Mid-2016)

(dbµV/m)

DTT Broadcast coverage to sub-location level (% of population)

Coverage 100% >90% 50% - 90% < 50% 0%Sub-locations 2,704 677 884 957 1,927

Closing the ICT Gaps -Proposed USF Priority Projects

• Maximum population impact

• Sustainable projects

• Areas not soon to be covered under operator obligations

1. Voice Infrastructure Projects

• Note these estimates are being checked visually with GIS, aggregated if feasible and bidding lots optimised

No. sub-locations with >30% uncovered population 746Total subsidy for all sub-localities and spaces without prioritisation US$ 157 MTotal persons covered if all reached 2.3 MCost per unserved person if all covered KES 6,800

Sub-locations meeting best-case* impact and sustainability criteria

349

Total subsidy for best USF candidates, with populations above 1,000 US$ 41.8 MAverage subsidy per sub-location US$ 120,000Total persons covered if all reached (*50% of the existing gap) 1.3 MnCost per unserved person if all covered KES 3,262

USF reduction due to operator licence commitments

Obligations (No. of sub-locations)Years of

commitmentSafaricom Airtel

2016 243 102017/18 138 302019/2020 140 92021/2022 71 22

• Operators agreed on roll-out obligations under their licence renewal negotiations in 2015 Licence Framework

• “The Licensee shall expand its network coverage to all population centres in the sub-locations listed by the end of the respective financial years indicated”

• Commitments similar to USF objectives and therefore USF need not duplicate these in the short term (2016-2018)

• Beyond 2018, a reduced subsidy formula will be applied

USF potential project overlaps with operator commitments

• Bidding lots will be reduced through aggregating sub-location within wards• Also competitive tenders will reduce USF expenditures to around 67-70% of the budgeted

maximum subsidy estimates

Sub-locations meeting best-case USF criteria 349Total subsidy for best USF candidate sub-locations US$ 41.8 Mn

Sub-locations committed by operators in 2016 81Sub-locations committed by operators in 2017/18 53

Net priority sub-locations needing subsidy from the USF 214Maximum net subsidy for USF US$ 22.6Net Population covered (over half of the 1.3M identified) 693,000Average subsidy per sub-location US$ 105,00Average subsidy per person KES 3,262

Budget for Voice Projects

• Field validation done in April to finalise maximum subsidies• Demand• Sites & coverage• Aggregation & Lot development

• Following competition, it is expected that 67-70% of the maximum estimate will be awarded as subsidies

• Due to progressive tranche-based payment of subsidies over 1 year, max 67% of the budgeted subsidies will be awarded in Fiscal 2016/17

Voice Gap Budgeting

Maximum subsidy estimateUS$ 22.8 M

Distribute in Fiscal 2016/17

US$ 10 M

Expected award amountsUS$ 15.0 M

Example of potentially viable USF projects• Identified at the Sub-location level• But some could be combined into

ward level projects and extended to neighbouring sub-locations

• Important to build contiguously from existing network to avoid repeater sites

USF should not Fund sub-locations already committed under operator licence obligations

Potential projects after overlaps eliminated

Map legend:Combined Operator 2G coverage

Potential USF Selection

Operator commitments 2016 

Operator commitments 2017/2018

Overlap - potential USF & 2016 commitment

Overlap - potential USF & 2017/2018 commitment

Potential USF single or multiple sub-location Bidding Lot

Close with modified criteria

How to address the worst cases after Year 1 E.g., remaining sub-locations with zero coverage

Status of 164 sub-locations with zero coverage in 2015  USF

Year 1Operator license commitments Remain

    2016 2018 2020 2022 2024  Sub-locations

42 43 20 25 6 - 28

• 85 to be covered or awarded in 2016– A further 20 by 2018– 28 outstanding after all

commitments made– 7 are commercially

viable

• Some can be addressed with partial coverage through LandScan analysis in year 2 and 3 projects– Reaching the most

populated parts only, contiguous with existing network coverage

3G and broadband

• Mobile coverage is very limited in the Northern and Eastern regions

• Current 3G coverage at 78%– Fibre services also have a very

limited last mile reach into spacious rural areas

• But NOFBI, KETRACO and KPLC routes have strong potential to reach all major population centres and key major institutions

3G coverage and Fibre Routes

Broadband & 3G Options considered• Cover all gap area projects with UMTS900 3G base stations

– Maximise revenues - offer broadband, incl. schools & institutions Not recommended for new areas for several technical & user reasons

• Upgrade 2G served areas – USF finance the upgrade of priority 2G sites to 3G throughout the country

(using 900 MHz on a national scale)• Include telecentres and connect schools & Huduma centres within range

Not recommended to “drive” this market except in specific instances after Year 1

• A national demand-driven approachGear broadband advance to a schools connectivity programNational gap - educate and assist the emerging generation to become more

IT literateLeverage the project for public access & capacity building 

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2. Schools Broadband connectivity Project

The public system:• 22,000 primary schools

18,000 electrified Many communities preparing lab

facilities Some teachers trained in ICT

integration in all schools

Laptop initiative upcoming

• 7,000 secondary schools 90% electrified 3-4,000 have computers Computer studies program

examinable at Form 4 Many ICT trained teachers

Situation with connectivity• Very few schools connected

• Other operators have small sized CSR initiatives

• The environment for USF to support progressive connection of schools is in place, while MoICT / ICT Authority role also strategic

Reasons for USF Schools Connectivity Projects ICT capacity in schools – upcoming generation – biggest

potential impact on country’s economy

For Kenya’s digital aspirations to thrive - school connectivity & integrating ICT into education – the gap transcends geography

Demand stimulation among future users of ICT - broadband market still expanding

Internet readiness – the ecosystem is developing with electrification, computer studies curriculum, teacher ICT integration training & the laptop initiative

But also allows more industry players to participate

The USF Educational Broadband Strategy

• Focus on secondary schools & tertiary colleges below university level– Primary school e-learning initiative already supported by Safaricom and Airtel

• Define the conditions for Internet connectivity readiness1. Connection to the National Grid2. Existing ICT facilities – e.g., secure computer lab with min. 10 computers3. ICT specialist teacher or support staff4. Active support of KCSE Computer studies curriculum

• First year Schools broadband project to connect 1,000 schools in Kenya1. Controlled access to Internet and to KICD Content “Kenya Educational Cloud”2. Cloud access via an education portal3. Training and Help-desk support4. CAPEX and OPEX for 3-4 years 5. Innovative solutions to be solicited through bidding lots

Budget for Year 1 USF School Connectivity Project• All counties – with Min. of Ed. select

minimum of two demonstration schools from each county– Based on readiness selection

criteria

• Educational portal - gateway into approved educational resource content

• Expert Help Desk - IT specialists

• Teacher ICT and Internet training for the participating schools, – Or candidate schools demonstrate

already meet min. capacity criteria;

• Competition - All network infrastructure and last mile access provided competitively under USF tenders

School Broadband Connectivity Project Approx. (KES M)

  Year 1 Year 2 TotalDetails CAPE

XRecurrent  

School ICT Infrastructure

420 80 

 

80 580

Last Mile costsInternational capacitySchools Portal costICT Capacity developmentNetwork operationsMonitoring & EvaluationSubtotalGrand total 500 80 580

The Authority has in FY 2016/17 allocated Ksh 1.5 billion from the Universal Service Fund to support; Support roll-out of Voice Infrastructure projects in

approximately 214 sub-locations areas without voice services (Kshs 1 billion)

Support Education Internet Connectivity in 1,000 secondary schools and tertiary institutions to be selected by the Ministry of Education Science and Technology (Kshs 0.5 Billion).

NB: Award will be through competitive tendering process

Summary of USF Projects FY 2016/17

USF Projects Implementation Plan

Final Bidding Lot preparationCommence

Bid Submissions

Bid Evaluations

Subsidy awards

contracts

USF Service Contracts

signed

ICTs Access Final Report

Industry Workshop

USF Issue Bidding

Documents

Pre-Bid Meeting

Stakeholders Report / Industry

Workshop

2016 29-Feb 25-April 2-Jun 26-Jun 5-July 18-Jul 15-Aug 29-Aug 26-Sept

Prepare Bidding

Documents

Approval & Confirmation

Thank you!

Q & A