This study is part of a set of resources and toolkits being made available by infoDev to sub-sovereign areas, municipalities and communities who aim to improve the welfare of their citizens, increase business competitiveness and encourage open and accessible local government through the use of ICT. This resource set in turn complements other infoDev material in areas such as Business Incubation, e-learning, ICT regulation

This project is designed to provide an overview and some insight into recent developments in the deployment of local access network infrastructure by municipal and regional governments for the provision of telecommunications services.  It is one of the first attempts to provide a systematic review of local open access networks being deployed by municipal governments and as such, it has to be viewed as an initial treatment of a very complex area. 

A fundamental issue to emerge from the work underpinning the Study relates to the applicability or not of developed world experience and examples to the developing world. The firm conclusion is that the relevance or otherwise of successful experience in one context to another, has nothing to do with the GDP rating of the country. Rather is it all to do with a number of critical factors which are discussed fully in the ensuing chapters. These include local political commitment and vision; population density, technological limitations, incumbent behaviour, and economics. Indeed, some of the local ‘open access’ networks in the developing world afford useful templates for more developed contexts in that they are more technically advanced than many commonly cited as exemplars from the developed world. The appropriate course of action to be taken towards successfully delivering a local ‘open access’ infrastructure in any particular context, requires detailed analysis, an assessment of a variety of different inputs and the translation of this to fit the specific circumstances of the local situation.

One of the main achievements of this project is the development of the infoDev web platform, which is the first central repository on local access networks enabling systematic collection and retrieval of case studies from both developing and developed countries on local access networks. 

Local governments have had a long history of providing basic utility services to their residents and there are still many communities that provide a range of these services through local government owned utilities.  While many communities once provided telephony services, most of these systems were absorbed and integrated into the operations of the incumbent carrier.  In recent years, an increasing number of local governments have begun to re-enter the telecommunications field by building their own networks with the intent of competing with the local carriers.  Although this has been primarily restricted to municipalities in developed economies, this trend is now being seen in developing economies, as witnessed by recent municipal wireless deployments, such as Knysna, South Africa and Pirai Project in Brazil.

These initiatives raise a fundamental question about the reason why local governments see the necessity for becoming involved in the deployment of new local access networks.

The primary drivers for municipal involvement in developing local access networks vary, but the most often cited reasons are to:

• Improve the availability and affordability of broadband Internet services
• Lower the cost of providing municipal services
• Increase government efficiency and productivity
• Promote local economic development and competitiveness
• Address social development and inclusion

As evidenced by recent examples from developing countries, the motivation of local governments is virtually the same as those in developed countries.  As noted by Mayor Dr. Joy Coyle on the deployment of the municipal wireless network in Knysna, South Africa:

“We firmly believe that this town can only grow and achieve success if we create an environment where we all grow together and have access to technology through which we can have information to grow business, empower ourselves and ultimately become proud citizens of Knysna with one vision.”[i]

The major driver is the perceived importance of broadband Internet services to the local community and the view that incumbent operators are failing to provide ubiquitous access at affordable rates.  This broadband theme is extremely important, as there is a virtual universal acceptance that broadband access is a necessity for community economic and social development. This underlies the importance of the examination in this study of the empirical evidence on the social and economic impacts of broadband that is used as a justification for the deployment of these networks.

There are few examples of local access networks deployed by municipal governments in developing economies.  This is still a relatively new phenomenon in most parts of the world, and so the study is heavily weighted to developments in North America and Europe, where much of the deployment has taken place to date. However, as indicated by recent developments in a number of cities in South Africa and South America, this is becoming a worldwide movement.  As will be demonstrated, much of the experience of municipal governments in developed economies has a great deal of relevance to those in developing economies and vice-versa.  Although the deployment of fibre networks by local governments in the U.S. and Europe has received a great deal of attention, the majority of new networks are wireless using the same technology as those in developing countries.

The United States has one of the longest continuous histories of local government involvement in the provision of telecommunications services, almost exclusively through both municipal owned telephone and electric companies that had developed their own telecommunications networks.  This existing infrastructure made it possible for a number of these electric utilities to provide telecommunications and video services, as part of their overall service offerings.  This situation is not unique to the U.S., as indicated by experiences from Sweden and South Africa where locally owned electric utilities are playing a pivotal role in developing local access broadband networks.

The lack of this publicly owned infrastructure in most U.S. cities has been a significant barrier to entry, as it is in most countries.   However, with recent advances in wireless technology and spectrum liberalization, it is now possible for most local governments to offer broadband services.  This has resulted in a virtual explosion in the number of municipal wireless broadband networks in the U.S. that are either in operation or planned.  One of the most often cited sources of data on municipal and regional wireless broadband networks is MuniWireless which provides information on wireless deployments around the world.  In its July 2005 report, it recorded 117 city and regional networks of which 63 were in the United States, 51 in Europe and 3 in the rest of the world.[ii]  It is likely that wireless will continue to be the dominant platform for municipal networks in both developing and developed economies. 

Although municipally deployed local access networks providing fibre to the home have received a great deal of attention, it is estimated that there are less than 50 of these networks worldwide. New wireline deployments in Europe are characterised by fibre and according to a survey undertaken by IDATE, there were 167 locations in Europe where fibre had been used.  However, the majority of these deployments were pilot projects and did not involve the provision of service to an entire community by local governments.  Given the cost and revenue profiles of this type of infrastructure, it is unlikely that they will be common in developing countries for some time to come. 

Until recently, there has been a sharp distinction between the operational and business models used in the United States and those adopted by municipal governments in Europe and Japan.  Most of the local access networks in the U.S. were deployed by municipal utilities and were closed systems with the local utility providing a range of telecommunications services directly to the public and often in competition with the local operators.  In contrast, the European model is one based on open access where the network is owned and controlled independently of any service or content that runs over it.   This affords anyone connected to the network with total freedom to contract with the service and content provider(s) of their choice and to switch and change service provider on the terms and conditions of that service provider without having to change the underlying network. In once sense, an open local access network can be regarded as a public utility in that it is available for use by any party located within the community it serves: public and private, business and residential. 

This open access model is now receiving greater acceptance in the U.S. and many of the new municipal initiatives, as evidenced by a review of recent Request for Proposals, are moving towards ensuring that even if they are not true open access models, they at least provide wholesale access to other suppliers.  There is also an increasing trend towards the use of public-partnerships and an adoption of a variety of operational and business models that are more focussed on local governments supporting the deployment of infrastructure and away from becoming a service provider. 

The developments that have been observed in municipal initiatives in developing countries have tended to be based on a public-partnership model with local governments acting as anchor tenants and encouraging at least wholesale if not full open access.  The level of technological sophistication and the business models being adopted, as evidenced by the case studies from developing and developed countries reviewed in this study, indicate that there are few differences.  The major divergences relate to differences in the socio-economic demographics of the populations served and the types of services that can be supported based on demand and market conditions.  Communities in developed economies that are deploying local access networks using fibre to the home have the advantage of demographics that can support this type of expenditure.  However, even in developed countries, the vast majority of new deployments in cities will be based on wireless. The challenges and issues will be similar to those faced by all local governments and this common ground will undoubtedly lead to municipal governments in both developing and developed economies learning from each other.

Understanding the attitudes and goals of the incumbent operator (telecoms or cable) and their likely response towards the possible independent development of a Local Open Access Network in any situation is absolutely critical. There is no single universal message or "process" that should be adopted and the position will vary from country to country and region to region. Enlightened and innovative incumbent operators could regard the emergence of such a local open access infrastructure as an opportunity for the development and retailing of new broadband services. A defensive incumbent will consider such a development as a threat. Where the Government still owns the incumbent operator or has a large stake in a privatised entity, then substantial political considerations are likely to impact the development of alternative ‘open access’ infrastructure, albeit at the local level. These may prove to be hazardous and fraught with difficulty.

This study is divided into 8 Chapters.

Chapter 1 focuses on the development of open local access networks describing the basic characteristics and the trends that are being observed throughout the world in the deployment of these networks by governments, voluntary groups and other organisations.

Chapter 2 provides more detailed information on studies that have demonstrated the economic impact of broadband deployment at the national, regional and local level and the role of local open access networks.  It also deals with the impact of broadband deployment and adoption on the issues of social benefit and inclusion.

Chapter 3 provides an overview of the rationale and drivers that are leading to the deployment of an increasing number of local open access networks in municipalities and regions around the world.

Chapter 4 focuses on the process of developing local open access networks from the initial concept to full implementation.

Chapter 5 is devoted to an examination of the financial issues and the business models used in the deployment and operation of local access networks both by governments and voluntary organisations.

Chapter 6 examines the impact that government policies, regulation and legislation on the deployment of local open access networks.

Chapter 7 provides a technical overview of the six major technologies that are used to provide high-speed access to the Internet, namely optical fibre, wireless, BPL (Broadband over Power Line), DSL (Digital Subscriber Line), cable modem and satellite.

Chapter 8 draws on extensive experience in deploying local open access networks to provide a road map to assist grass root organisations and local authorities through the process.

The basic conclusions of this project are:

1. The deployment of local access networks on both a municipal and regional basis by local governments, voluntary organisations, co-operatives, housing authorities, and private organizations from outside the current telecommunications industry is becoming a worldwide phenomenon and in the absence of restrictions or changes in the current incumbent industry business model, it is likely to show an exponential growth over the foreseeable future.  As noted in a recent study by Visiongain:

“As of Q1 2006, there were over 100 operational city and regional wireless broadband networks worldwide, more than 40 of which were in the US. At least 300 US cities are in the planning stages with wireless networks, and the number will double in 2006 and accelerate further, making Muni broadband a very real and significant trend beyond mere hype.”[iii]

Although deployments may be more numerous in the U.S., it mirrors developments around the world.

2.  The main driver for the development of these local access networks in both developing and developed countries is the fundamental belief in the importance of ubiquitous and affordable broadband access to the economic and social development of the community served. 

3.  The involvement of local governments and other groups in the deployment of these networks is being driven worldwide by the view that the incumbent service providers are not responding to the needs of the local community and in the absence of that commitment, new local networks will be deployed that can better respond to that need.

4.  The municipal deployments that are occurring in developing countries, as witnessed particularly from the experiences of cities in South Africa, such as Knysna, Cape Town, Johannesburg and Tshwane, are as sophisticated in the use of technologies and business models as those for similar cities in developed economies.

5.   Increasingly, the standard business model for these municipal local access networks being adopted around the world is one based on local governments supporting the deployment of a common infrastructure through public private partnerships allowing for wholesale if not full open access to all suppliers.