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EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

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Low mainline access levels help to explain the low internet uptake. For example, in<br />

the Solomon Islands, internet is only available to the seven main urban centers that<br />

have telephones. This accounts for less than 25% of the total population. Another<br />

constraint is the high cost of international connectivity 30 .<br />

Approximately a quarter of <strong>Pacific</strong> Islanders have access to internet through work,<br />

educational institutions and some public centers. All countries are served by<br />

monopoly Internet Service providers (ISPs) except Papua New Guinea, Samoa and<br />

Tonga, where there is competition between ISPs. Almost all internet users are<br />

located in capital cities. <strong>The</strong> Philippines represents the most significant departure<br />

from the trend line. Despite a relatively low level of GDP per capita, this country has<br />

managed to attain high internet penetration. This is described in Box A.3.<br />

Box A.3: Telecommunications and Internet Access in the Philippines<br />

<strong>The</strong> current Philippine telecommunications market is one of the most competitive<br />

in the world with five companies providing mobile services, eleven international<br />

gateway providers and at least two operators that are allowed to provide fixed<br />

service in each region throughout the country. Mobiles are ubiquitous in the<br />

Philippines, which was one of the first countries to see mobiles surpass fixed line<br />

penetration levels.<br />

<strong>The</strong> Philippines is one of the few countries in the world where telecommunications<br />

services have been historically operated by private entities. Innovative regulatory<br />

requirements implemented in the mid-1990s called for mobile and international<br />

telecommunications operators to install a specific number of fixed lines. This was<br />

seen as a way of balancing the more lucrative opportunities in these markets<br />

against the less profitable requirements to roll out lines outside of the most densely<br />

populated centers.<br />

Each cellular operator was required to install 400,000 lines and reach 300,000<br />

international operator lines within five years. <strong>The</strong>se operators were assigned<br />

different regions of the country to ensure an even roll-out and had targets for the<br />

ratio of urban to rural lines installed to ensure that lines were not only installed in<br />

cities. Cross subsidies were allowed (e.g. from mobile or international operations)<br />

in order to ensure local rates stayed affordable and local exchange operators<br />

received access fees for use of their networks. Operators were required to put up<br />

performance bonds that could be forfeited if line installation targets were not met.<br />

<strong>The</strong> total number of lines called for under this initiative was eventually met, but<br />

many are not in service. At its inception, the popularity of mobile telephony had<br />

not been anticipated. In addition, many lines were installed in places where people<br />

couldn’t afford or did not want fixed line services. <strong>The</strong> high line rate of line<br />

installation therefore didn’t result in the biggest gain in service or penetration rate,<br />

but this did have a big impact on opening up the market and encouraging growth.<br />

<strong>The</strong>re is no official figure for the total number of ISPs operating in the Philippines.<br />

<strong>The</strong> National Telecommunications Commission (NTC) has registered over 150<br />

Value-Added Service (VAS) providers, but not all of these are ISPs and not all ISPs<br />

have registered with NTC. VAS providers must lease their transmission<br />

infrastructure from licensed telecommunications operators. Public<br />

telecommunication operators and almost all international telecom operators lease<br />

international internet bandwidth to downstream ISPs, which in turn often resell<br />

connectivity to smaller provincial ISPs.<br />

Because local calling is free in the Philippines, dial-up internet subscribers only<br />

pay the ISP charge. However, the relatively high monthly charges for land line<br />

ownership reduce the potential size of the dial up market. Because of this, pre-paid<br />

internet access has grown in popularity as pre-paid cards do not require the user to<br />

have a telephone line and they can be used at internet cafes. This has contributed<br />

to the high estimated levels of internet penetration in the country.<br />

Source: “Philippines Case Study” ITU, March 2002<br />

30 “<strong>Infrastructure</strong> in East Asia and the <strong>Pacific</strong> – <strong>The</strong> Way Forward” Telecommunications Case<br />

Studies, John Ure, July 2004<br />

79

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