indonesia rural connectivity pilot final report · 2015-05-13 · msme micro, small, and medium...

March 2015 This publication was produced for review by the United States Agency for International Development. It was prepared by Integra Government Services International LLC.

INDONESIA RURAL CONNECTIVITY PILOT

FINAL REPORT MARCH 2015

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

INDONESIA RURAL CONENCTIVITY PILOT

FINAL REPORT

MARCH 2015

Indonesia Rural Connectivity Pilot

FINAL REPORT i

CONTENTS ACRONYM LIST III!

EXECUTIVE SUMMARY 4!

INTRODUCTION 5!

APPROACH AND METHODS 6!

1.1! PARTNERSHIP 6!

1.2! PILOT ARCHITECTURE 7!

1.3! TIMELINE 8!

1.4! APPROACH TO THE TECHNICAL EVALUATION 9!

1.5! APPROACH TO FINANCIAL EVALUATION 10!

1.6! APPROACH TO SOCIAL AND ECONOMIC IMPACT EVALUATIONS 10!

1.6.1!EVALUATION OF THE AGRIBUSINESS 10!

1.6.2!EVALUATION OF THE SCHOOL 11!

1.6.3!EVALUATION OF THE HEALTH CLINIC 11!

1.7! APPROACH TO ASSESSMENT OF REGULATORY OPTIONS 12!

RESULTS 13!

2.1! RESULTS OF TECHNICAL EVALUATION 13!

2.2! RESULTS OF FINANCIAL EVALUATION 14!


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2.3! RESULTS OF ASSESSMENT OF THE AGRIBUSINESS 15!

2.4! RESULTS OF ASSESSMENT OF SCHOOL 16!

2.5! RESULTS OF ASSESSMENT OF HEALTH CLINIC 16!

2.6! RESULTS OF THE ASSESSMENT OF REGULATORY OPTIONS 17!

DISCUSSION 19!

CONCLUSION 19!


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ACRONYM LIST ARPU Average Revenue Per User ASEAN Association of South East Asian Nations BP3TI Indonesian Universal Service Obligation Fund DB Gigabytes DBI Global Broadband Innovations FCC Federal Communications Commission GDP Gross Domestic Product Ghz Gigahertz IBP Indonesia Broadband Plan ICT Information Communications Technology IDR Indonesian Rupiah IEEE Institute of Electrical and Electronics Engineers ISP Internet Service Provider ITU International Telecommunications Union JMN Jogja Media Net kBps Kilobytes per second KMS Kartu Menuju Sejahtera Mbps Megabits per second MCIT Ministry of Communications and Information Technology Mhz Megahertz MSME Micro, Small, and Medium sized Enterprises NLOS Non-line-of-sight PUSTRAL UGM Center for Transportation and Logistics Studies, Universitas Gadjah Mada SIMS Sarana Insan Muda Selaras SLA Service Level Agreement SME Small and Medium Enterprise UHF Ultra high frequency USAID United States Agency for International Development USO Universal Service Obligation VHF Very high frequency WRAN Wireless Regional Access Network


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EXECUTIVE SUMMARY Despite its status as a dynamic emerging economy, Indonesia remains behind many of its neighbors in internet use. Slightly more than 15% of Indonesians are online, compared to 37% Philippine citizens, 28% of Thais, and nearly two-thirds of Malaysians (ITU). In rural areas of Indonesia, the internet access gap is particularly severe. To help combat this problem, the Government of Indonesia’s recently launched 2015-2019 Indonesia Broadband Plan (IBP) includes a focus on investigating various technologies that could provide terrestrial wireless broadband connectivity to rural areas.

Under the auspices of the IBP, and with the support of USAID, Microsoft, Hitachi, and the Government of Japan, the Indonesia Ministry of Communications and Information Technology (MCIT) set out to conduct a pilot deployment leveraging the assets of the airways and unutilized spectrum to provide a cost-effective technological solution to overcome one of the barriers of low Internet penetration. This Institute of Electrical and Electronic Engineers (IEEE) 802.22 standard is part of a class of technologies called “Wireless Regional Access Networks” (WRAN) that operate in empty, or “white” space in what is sometime called the TV band. It is interesting to MCIT because it uses advanced techniques to successfully operate in a crowded segment of the frequency spectrum with good radio propagation characteristics (less than 800 MHz). Broadcast TV often uses this spectrum band. However, the 802.22 technology can operate in unused channels as well as “guard bands” between TV signals.

The pilot deployment of WRAN technology took place in the Yogyakarta region of Indonesia between early 2014 and March of 2015. Two links were established, and each one was shared between beneficiaries. Rural terrestrial wireless broadband connectivity via WRAN was provided to a school, a health clinic, a public internet center, and a small agribusiness. The pilot evaluation team tested the technical performance of the radios, assessed whether they would be cost effective for an operator to install as part of their network, and looked at the social and economic impact of the links where they were established. The pilot coincided with a partner initiative of MCIT to consider WRAN’s legal and regulatory implications.

The results of the pilot show several things. First, there is a clear indication that it is both technologically and financially feasible to meet IBP targets using WRAN technology. The evaluation of technical feasibility shows that both links offered the speeds necessary (8.5 and 9 Mbps respectively) for use as distribution networks, as well as local access networks in certain rural areas. The financial evaluation shows that there is at least one possible architecture that allows all IBP targets to be met while maintaining sufficient financial flows to the network operator. The two links deployed also demonstrate a strong socio-economic impact, which is often valued at several times the cost of providing the connectivity. Similarly, it reveals that MCIT’s investments in subsidizing rural connectivity through the Indonesian Universal Service Fund (BP3TI) provided a good return. Lastly, the ongoing regulatory discussion involves the highest levels of government, and has defined potential regulatory options that remain under consideration.

The Indonesia WRAN pilot program was a strong success in that it sparked an ongoing dialogue around WRAN technology. The necessary process to authorize the use of the technology is underway, and MCIT is continuing to allocate resources towards investigating this question. This is an outcome that would not have been achieved without the pilot.


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INTRODUCTION In Indonesia, broadband internet access is either unavailable or unaffordable for many citizens. Difficulties of access are particularly acute for rural citizens, who are also frequently poorer and less equipped with digital literacy skills. This lack of access is the result of systematic limitations in the broadband environment: inadequate technology and infrastructure, policy and regulatory hurdles, and the costs associated with the business models currently being used by internet companies.

In 2013 and 2014, the Government of Indonesia, with support from USAID under the Global Broadband and Innovations (GBI) program, undertook an effort to develop and adopt the comprehensive “Indonesia Broadband Plan” (IBP). Launched in October 2014 as Presidential Decree No. 96/2014, the IBP became the guiding document for all ICT development policy in Indonesia for the five-year period from 2014-2019. The IBP defines “broadband” as an always on, always available connection that in rural areas provides a minimum speed of 2 Megabits per second (Mbps) over fixed-line connections and 1 Mbps over mobile connections.

The IBP sets goals for service and affordability. Regarding fixed lines, the goal is to provide service to 6% of rural individuals, and then 49% of rural households, by 2019. The target speed for connections into rural households is 10 Mbps (based on an average household size of 5, and the need to provide 2 Mbps to each member). The annual price of the connection should not be more than 5% of per capita GDP. Further, mobile broadband service should be available to 52% of rural residents if they choose to purchase it.1

The IBP includes six flagship programs. These focus on fiber optic cable infrastructure provision, rural terrestrial wireless broadband solutions, reform of Indonesia’s Universal Service Obligation (USO), infrastructure sharing (especially ducting), government networks and data centers, and digital literacy and the ICT industry.

The second flagship program, on rural terrestrial wireless broadband, focuses on understanding the potential benefit of a new class of technologies to facilitate meeting the IBP’s usage and affordability targets, and also on the implications of potentially adopting such technologies broadly. Of particular interest under this flagship program are technologies that operate in unused, or “white,” spectrum space in the frequency band below 800 MHz. Currently, such technologies are not authorized for deployment in Indonesia. However, based on their potential ability to cheaply provide high-speed connectivity to remote villages, especially via non-line-of-sight (NLOS) links, the Government of Indonesia feels that the technologies are worth evaluating.

1 Republic of Indonesia, National Development Planning Agency (BAPPENAS). Indonesia Broadband Plan 2014-2019, or RENCANA PITALEBAR INDONESIA 2014 – 2019. Page 6.

This report has two principle authors: Mr. Eric White - Managing Associate, Integra LLC Mr. Arif Wismadi - Board of Researchers for Telematics and Information Systems, Center for Transport and Logistic Studies, Universitas Gadjah Mada and Consultant, Integra LLC


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There are several questions that need to be explored with regard to terrestrial wireless broadband technologies before they can be considered for potential authorization in Indonesia. These include:

• Are they technologically capable of providing sufficient broadband capacity to a standard Indonesia village to allow IBP targets to be met?

• Would it be financially viable for private network operators to provide connectivity via new rural terrestrial wireless broadband technologies?

• What economic and social benefits could potentially be obtained by authorizing these technologies?

• What would be the policy and regulatory implications of adopting such technologies, and if Indonesia were to authorize them what sort of governance regime should it establish?

One specific technology that is under consideration is the IEEE 802.22 Wireless Regional Access Network (WRAN) standard.2 The 802.22 WRAN standard, hereafter referred to simply as “WRAN,” operates in white space in the frequency spectrum below 800 MHz. It allows operation at a medium range (specifications suggest up to 30km) and employs cognitive radio techniques, which allow dynamic access to unassinged broadcast frequencies. This makes it possible for radios to share spectrum space without interfering with each other.

In the spring of 2014, as the final program of the forthcoming IBP became apparent, the Indonesian Ministry of Communications and Information Technology (MCIT) established a special cross-directorate task force to oversee a pilot deployment of WRAN technology in the Special District of Yogyakarta. In doing so they received support from USAID, Microsoft Corporation, and Hitachi Kokusai Ltd of Japan. Hitachi received funding to participate in the pilot from the Government of Japan.

This document provides a final report on the Yogyakarta WRAN pilot, hereinafter simply referred to as “the pilot.”

APPROACH AND METHODS 1.1 PARTNERSHIP

The pilot was led by MCIT, who authorized, implemented, and provided oversight of the work. USAID, through funding provided by both the GBI and the ASEAN Connectivity through Trade and Investment (ACTI) programs, supported the design of the pilot and its evaluation. MCIT contracted the Center for Transport and Logistic Studies at the Universitas Gadjah Mada (PUSTRAL UGM) in Yogyakarta to implement the study. This included arranging logistics with site locations, supporting the implementing

2 When this pilot was originally conceived, we aimed to test the 802.11af standard. The difference between 802.11af and 802.22 is range (802.22 is longer), and when radios operating on that standard became available we decided it would be in the pilot’s better interest to test the 802.22 standard instead.


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Internet Service Provider (ISP), and providing enumeration services for the evaluation. The implementing ISP was Jogja Media Net (JMN), a private company providing cable pay TV and internet services to households, individuals, and business in the Yogyakarta area. JMN is a subsidiary of a firm called PT Sarana Insan Muda Selaras (or SIMS), that has a contract with the Indonesia USO fund (BP3TI) to provide subsidized internet access for over 100 rural communities near Yogyakarta. For the pilot, JMN installed and operated the WRAN radio links.

One set of radios for the pilot was provided by Microsoft, through their partner 6Harmonics, a Canadian manufacturer. The other set of radios was provided by Hitachi Kokusai Ltd, the Japanese electronics manufacturer.

1.2 PILOT ARCHITECTURE

To effectively conduct this evaluation, the project partners established two wireless terrestrial broadband links in rural areas using WRAN technology. It was decided that, in the interest of obtaining the highest degree of objectivity, each link would be deployed using radios manufactured by different companies. It was also decided to operate one link in the UHF band and one link in the VHF band.

The first link was established from a fiber termination node at a local government office (KPDE Bantul) to an internet center supported by Indonesia’s USO fund, called a PLIK, in a village in the sub-district of Bambanglipuro. This nine kilometer, Line of Sight link was established on 550-558 MHz (UHF) using a radio manufactured by 6Harmonics and loaned to the pilot by Microsoft. From the PLIK, the project partners established a 700 meter Wi-Fi link to the workshop of a small local agribusiness.

The second link was established from Jogja Media Net’s base station in Godean (which is connected to JMN’s home office in Yogyakarta via a 5Ghz wireless link) to the Sedayu village Senior High School. This 6.3km, Line of Sight link was established on 197.5-202.5 MHz (VHF) using radios manufactured and loaned to the pilot by Hitachi. From Sedayu Senior High School, a less than 1 kilometer Wi-Fi point-to-point link was established to the Sedayu Health Clinic (or Puskesmas in Indonesian).


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Figure 1 – Pilot Architecture

The architecture of the pilot was based on the assumption that WRAN might best be considered as a backhaul, or distribution line rather than a last mile, technology. This means that WRAN could provide the single link into a small village, from where a signal could then be distributed over a short range to many individual users. To demonstrate this, in the pilot we established two WRAN links but four points of presence: at the PLIK, the agribusiness, the high school, and the clinic. The map in figure 1 shows the location of each link in the area of Yogyakarta, Indonesia.

1.3 TIMELINE

Work on the design of the pilot began in early 2014, when MCIT made the final decision to pursue it. By May of 2014 the partnership arrangements with all the stakeholders had been established, and a specific design of the field evaluation began to be developed. The first set of radios arrived from Microsoft in late May 2014, but the radios from Hitachi were not available until October.

After the finalization of the pilot design and the transportation of the radios from Microsoft to Yogyakarta, laboratory testing of the radios began in late summer 2014. Outdoor testing encountered technical problems, and there were delays until a senior technician from Canada could arrive to resolve them. He also conducted training with JMN staff on how to install and operate the radios. This highlights the need, discussed later in this paper, to ensure proper training of operators on such technologies if they are to be adopted by government connectivity programs in Indonesia.


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Both WRAN links went live in November 2014, and operated continuously until March 2015. The radios loaned by Hitachi were taken down and returned to Japan on March 10th, 2015, while the 6Harmonics radios are still in operation on site.

1.4 APPROACH TO THE TECHNICAL EVALUATION

The technical evaluation of WRAN followed three steps. First, the implementing ISP JMN conducted laboratory tests on the radios to ensure functionality and to test for interference.

Second, the team conducted a test for range. This was done by mounting the Hitachi radio at JMN’s Godean base station, and mounting a smaller Hitachi WRAN radio to the roof of a car. The car drove away from the fixed position radio and determined the maximum distance at which a connection could be maintained.

Third, the pilot measured the throughput speed of the links, once mounted, and calculated if they offered sufficient trunk capacity to meet IBP goals for rural connectivity. This meant calculating whether observed WRAN speeds would allow the targeted number of users to have an experience of always-on 1-2 Mbps connection. Two links were necessary for this test to ensure that the technical performance results were robust. The following approach was used in the evaluation.

The team assumed that the average size of a village was 1000 people and that an internet-use-day consisted of 18 hours. With the 18-hour day assumption, we calculated that a connection with a speed of 1 Mbps can supply a total volume of 243 GigaBytes (GB) of data per month.3 Based on average traffic intensity in Erlangs, we estimated that we need to provide the individual with only 6% of this total amount of data in order meet their demand.4 This means that to meet IBP targets for broadband speed, we must provide a rural user with a total of 14.58 GB of data per month.

This is more data than they are likely to demand. Based on conservative assumptions, this is approximately equal to 1.4 million emails, 120,000 web page views, or 14 HD downloaded movies. To further illustrate how this IBP requirement is larger than actual demand, the largest wireless broadband plan currently available in Indonesia offers 12 GB of data per month. Nevertheless, this 14.58 GB/person/month threshold will the standard against which we evaluate WRAN. To provide 14.58 GB/month, a data connection must have a speed of 60 kilobits per second (kbps). If we assume that a village consists of 1000 people, meeting the IBP target of 6% penetration requires 60 subscribers. To meet the needs of 60 subscribers each requiring a 60kbps connection, we must offer a trunk speed of 3.6 Mbps down. In this way, if the trunk speed was greater than 3.6 Mbps down, it could be said that the technology was capable of providing a 1Mbps broadband connection to 6% of the population of a village. For a 2Mbps connection (the requirement for fixed lines) the required trunk capacity is doubled, to 7.2 Mbps.

3 1 Mbps = 1000 kbps. Since 1 Byte (B) = 8 bits (b), 1000 kbps = 125 kBps. Then, to calculate the data volume in GigaBytes we multiplied 125kBps x 60 sec/min x 60 min/hr x 18 hr/day x 30 day/mo = 243,000,000 Bytes, or 243 GigaBytes (GB). 4 Gagnaire, Maurice. Broadband Local Loops for High Speed Internet Access. Norwood, MA: Artech, 2013, Print. Pg 53. The author explains that “it is generally admitted that traffic intensity on a subscriber line is between 0.03 and 0.1 Erlangs.” We chose .06 as it is in the middle of this range and consistent with JMN experience.


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1.5 APPROACH TO FINANCIAL EVALUATION

To determine whether or not it would be feasible for a service provider to offer connectivity using WRAN technology, and whether or not this would require a Universal Service subsidy, the pilot sought to identify the costs and expected revenues to an ISP from offering the service.

Expected revenues were calculated based on the IBP, which sets a target of offering broadband access to rural users at 5% of GDP per capita. In the Special Region of Yogyakarta, where the pilot is taking place, monthly GDP per capita is 1,498,333 IDR, equivalent to about US$114. This means that under IBP goals, a broadband connection should be offered for about 75,000 Rupiah per month, which is roughly equivalent to $5.68.

To meet IBP goals, ISPs focusing on rural users in Yogyakarta should therefore aim to be able to profitably provide service for an Average Revenue Per User (ARPU) of $5.68. This is low by the normal standards of many operators, but is well within the range of the possible when using USO subsidies or innovative, low cost rural solutions. We assumed that the number of users paying the ARPU amount would be equal to the various usage targets outlined in the IBP.

To calculate costs, we worked with the operating partner, JMN, to determine how much they would need to earn per month to provide various configurations of WRAN architecture. This was done based on their experience operating the two pilot links for five months. We then compared their monthly costs for various configurations with the revenues they could expect to earn from meeting IBP uptake and affordability targets.

1.6 APPROACH TO SOCIAL AND ECONOMIC IMPACT EVALUATIONS

Because a decision to authorize WRAN technology would imply that the Government of Indonesia would have to include it as eligible for Universal Service subsidies, the pilot defined economic impact as the effect that subsidizing the deployment of WRAN technology would have on the government’s bottom line. Economic impact questions are therefore specifically about cost and benefit to Indonesia’s public sector and its development programs.

Socio-economic impact includes all the benefits that WRAN can provide beyond the private cost-savings accrued to the government. This includes increased economic activity brought about by affordable broadband access and better social outcomes achieved through more efficient public services (such as schools and health clinics) and strengthening outcomes for key social groups.

The pilot examined both social and economic impact in the context of a small agribusiness (representing SMEs in Indonesia), a school, and a health clinic.

1.6.1 EVALUATION OF THE AGRIBUSINESS

When it was selected to participate in the pilot in early 2014, the Al-Barik chip factory made fried snacks from banana roots in a two room stone house about 1 kilometer from the Bambanglipuro PLIK.


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For a modest operation, it was already successful and well known. It sold chips to some local grocers, and the proprietor, Pak Bibit, ran a Facebook page where he could advertise and receive orders. He would access the Facebook page at the Bambanglipuro PLIK, checking the page once per day.

By replacing the existing iinternet connection at the PLIK, which was based on long distance Wi-Fi, with a WRAN connection, the capacity was able to be increased such that it was feasible to install a short distance point-to-point link from the PLIK to the Al-Barik factory.

The assessment consisted of interviewing Pak Bibit about his sales before the installation of the broadband access point at his factory, and again after. Further, we asked him about his sales growth as a result of having access to the Bambanglipuro PLIK in the first place, which opened in 2011. This gave an indication of the effect of moving from a situation of having no internet access to having internet access, and then from a situation of having internet access to one of having in-business broadband access. If differences in sales were recorded, he would be asked what caused the increase in sales. Any increase in profits would be recorded as social benefit. Economic benefit would be calculated as the additional amount of tax paid by Al-Barik based on the additional sales. Both numbers would be compared to the monthly Universal Service subsidy required to provide connectivity to the factory.

1.6.2 EVALUATION OF THE SCHOOL

In schools, computers are used not just for teaching, but for performing the administrative tasks required of teachers and administrators. With slow connections, these tasks can become burdensome. Teacher salaries are set by the Government of Indonesia based on an 8-hour day. This means that the implicit value of one hour of a teacher’s time is the daily salary divided by eight. If an ICT technology can allow a teacher to perform their work more quickly and gain additional time, those hours can be given a monetary value based on this salary.

The approach taken with the school was to supply WRAN connectivity, and then interview ten teachers about how much time they saved on completing their administrative tasks, given the faster connection.

To assess economic impact, these hours were then monetized, according the approach described above, and compared to the cost of providing connectivity to the school. To assess social impact, the pilot sought to determine the value of the additional hours of instruction made available to the most needy students. To identify the most needy students, we used the proxy of eligibility for the national school fee subsidization program for poor students (known by its Indonesian acronym KMS –Kartu Menuju Sejahtera). We made the assumption that additional teacher hours were spread evenly across all students in the school.

1.6.3 EVALUATION OF THE HEALTH CLINIC

The social and economic evaluations of the health clinic focused on the impact of connectivity on payments made under the new public health insurance scheme, BPJS (for Badan Penyelenggara Jaminan Sosial). The argument for economic impact is simple to make. The BPJS makes two kinds of payments to health clinics. One is a “capitation” tariff, paid monthly for operating costs based on the number of citizens within the area of coverage of the clinic. The other is a reimbursement mechanism for more complex procedures that are not covered by the capitation tariff. Because the BPJS relies on information sharing to be effective, the system works more effectively if health clinics are connected to the


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broadband. Because of this, the Ministry of Health offers higher “capitation” tariffs to clinics with a functioning broadband connection. From the perspective of the Ministry of Communications and Information Technology, any subsidy made to connect a clinic leverages this additional payment from the Ministry of Health. We count this ability to leverage resources from other ministries as an economic benefit to MCIT. Economic benefit is given as the amount of additional capitation payment received by the clinic compared to the cost of providing the connectivity.

To assess social feasibility, we asked 10 randomly selected patients at the clinic at Sedayu to compare the costs per visit that they were required to pay after the installation of broadband to those they were required to pay before. Specifically, we asked each patient how many times they had visited the clinic in the year prior to broadband being installed, and the average cost per visit. Then, we asked the cost per visit after broadband connectivity, and assumed the same number of visits would be made in the full year after connectivity was provided.

The rationale for why payments would be reduced after the provision of broadband connectivity is that a functioning health insurance scheme means that doctors are more comfortable relying on it for payments.

1.7 APPROACH TO ASSESSMENT OF REGULATORY OPTIONS

If the Government of Indonesia were to authorize the use of WRAN technology, appropriate regulations would need to be developed. Existing regulations would need to be modified because the frequency band in which the technology operates is currently authorized for broadcast television use. Further, the cognitive radio capability of WRAN represents an innovation that may require a different approach to frequency spectrum management.

As part of its contract with MCIT, PUSTRAL UGM conducted research into the current legislative framework governing frequency use, existing frequency allocations, and how other countries have approached WRAN technology. They identified three possible licensing regimes for WRAN (fully licensed, shared-license, and unlicensed), and examined the strengths and weaknesses of each. To assist with this work, PUSTRAL hosted, on behalf of MCIT, two workshops in November and December 2014. The first was an international workshop, designed to expose Indonesian policy makers to an international perspective on WRAN regulation. The second was a national workshop to discuss initial pilot results and start preparing an Indonesian regulatory framework.

Outcomes of these workshops are described in the section under results.


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RESULTS In this section, results for each of the five assessments and evaluations are presented in turn. Results are presented as a bulleted list, and in tables. Discussion of results is held until the final section of this report, on Discussion and Next Steps.

2.1 RESULTS OF TECHNICAL EVALUATION

• Both laboratory and fields tests of the equipment confirmed that signal emitted from the radios stayed within the 5-6 MHz band listed on their specifications, and that they would not (and did not) interfere with other radio broadcasts.

• The maximum range of the VHF-band Hitachi Radios was found to be 12.7 kilometers.

• There were no service interruptions on either of the VHF (Hitachi) and UHF (6 Harmonics) links during their several months of operations.

• The average throughput of the VHF link from Godean to Sedayu was 8.5 Mbps down and 1.98 Mbps up, with 84ms average latency. The UHF link from Bantul to Bambang Lipuro performed at an average of 9 Mbps down and 4.1 Mbps up, with 286.6ms average latency.5

• Based upon these throughput figures, both radios are capable of sustaining a trunk line with sufficient speed for a village to meet the IBP target of providing a fixed 2Mbps connection to 6% of the rural population at any given moment.

• Based on observed speeds, meeting the other IBP targets (49% of households with a 10 Mbps connection and 52% of individuals with a 1 Mbps mobile connection) with WRAN technology would require more than one link into a village. The table above shows how many links would be required to meet each target. A maximum of eight links could be required in each village to meet all IBP targets.

Table 1 – Results of Evaluation

5 This latency is acceptable: https://www.citycloud.com/city-cloud/some-interesting-bits-about-latency/

Nbr of radios needed to meet required capacityHitachi (8.5 Mbps) 6Harmonics (9 Mbps)

FIXED LINES - village of 1000 inhabitants6% of Individuals 60 2 7.2 0.8 0.849% of households 98 10 58.8 6.9 6.56 % individual and 49% households 550 2 66.0 7.8 7.3(households have 5 members)

MOBILE - Village of 1000 inhabitants52% of individuals 520 1 31.2 3.7 3.5

IBP Targets Users Target speed (Mbps)

Trunk capactiy required (Mbps)


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2.2 RESULTS OF FINANCIAL EVALUATION

The results are presented in the table below. The table suggests five possible types of network architecture for a village. The most simple architecture offers only one access point in the village, likely in a PLIK. This is represented by the heading “1x,” indicating the architecture gives only one broadband point of presence. The table presents scenarios for 1, 3, 12, 60, or 98 points of presence in a village. For cost purposes the individual points of presence are assumed to be Wi-Fi. All cost figures (in IDR) were provided by JMN based on their experience installing and operating the pilot network links.

As in the technical evaluation, we assumed an average village included 1000 inhabitants, divided into 200 five-person households. The various IBP goals are listed on the left, and figures for expected revenue and “number of WRAN radios required” were changed for each goal. The expected revenue was taken as the expected ARPU (5% of per capita GDP) times the target number of users. The number of radios required was taken from the results of the technical evaluation. The higher speed household links (10 Mbps) were priced at 10% of per capita GDP, as the demographic assumptions state that they will be shared by two adults.

Table 2 – Results of Financial Evaluation

The ratios provided are the revenue to cost ratio. Any number greater than 1 is listed in green and shows profitability. Any number less than 1 is listed in red and shows a subsidy is required. Some architecture types are not applicable to certain situations. For example, it would be unreasonable to

Scenarios*based*on*IBP*targets 1x 3x 12x 60x 98xScenario*13*6%*of*rural*population*using*broadband

1,762,500.33 4,370,833.33 16,108,333.33 13,020,833.33 18,499,166.672.55-------------- 1.03-------------- 0.28---------------- 0.35---------------- N/A

Total-Number-of-Connections 60Average-Revenue-per-User-(5%-of-GDP/capita) 74,916.67---------

Total-Revenue-per-Village-(IDR/Month) 4,495,000.00----Number-of-WRAN-links-required 1

Scenario*2*3*49%*of*rural*households*with*a*broadband*connection1,762,500.33 4,370,833.33 16,108,333.33 14,395,833.33 19,874,166.67

N/A N/A N/A 1.02---------------- 0.74----------------Total-Number-of-Connections 98

Average-Revenue-per-Connection 149,833.33-------Total-Revenue-per-Village 14,683,666.67-

Number-of-WRAN-links-required 7

Scenario*3*3*both*6%*of*population*&*49%*of*households1,762,500.33 4,370,833.33 16,108,333.33 14,625,000.00 20,103,333.33N/A N/A N/A 1.31 0.95

Total-number-of-connections 158Average-Revenue-per-Connection 121,383.97

Total-Revenue-per-Village 19178666.67Number-of-WRAN-links-required 8

Scenario*4*3*52%*of*individuals*with*mobile*connection1,762,500.33 4,370,833.33 16,108,333.33 13,708,333.33 19,186,666.67N/A N/A N/A 2.84---------------- 2.03----------------

Total-number-of-connections 520Average-Revenue-per-Connection 74,916.67---------

Total-Revenue-per-Village 38,956,666.67-Number-of-WRAN-links-required 4

Cost-Benefit-Ratio-of-Each-Architecture-Type:

Monthly-Cost-of-Architecture-Type-(IDR):Monthly-Cost-of-Architecture-Type-(IDR):

Architecture*Type

Monthly0Cost0of0Architecture0Type0(IDR):Cost-Benefit-Ratio-of-Each-Architecture-Type:

Cost-Benefit-Ratio-of-Each-Architecture-Type:Monthly-Cost-of-Architecture-Type-(IDR):

Monthly-Cost-of-Architecture-Type-(IDR):


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establish 98 points of presence to meet only the 6% target, which provides access to only 60 individuals. These cells are marked N/A.

The results of the table can be read as follows. For scenario 1 – it is cost-effective to meet the IBP goal of providing 6% of the rural population with broadband access through several possible architectures. If the operator were simply to establish one point of presence, say in an internet café, that was used by 60 people paying 5% of per capita GDP, revenues earned would be 2.55 times cost. If this goal were to be met by providing each of these 60 individuals a Wi-Fi point of presence in their home, the business would not be profitable and would require a subsidy. The 3x scenario, where three public Wi-Fi points are established in the village, would give access to the 60 individuals in a way that remains affordable, yet offers more flexible use.

For each of the four scenarios, there is at least one reasonable architecture type that allows the operator to profitably provide the required level of broadband service. The overall suite of financial results suggests profitability for the WRAN concept, given its technical specification.

2.3 RESULTS OF ASSESSMENT OF THE AGRIBUSINESS

• Since the Bambanglipuro PLIK was connected to the internet in 2011, Al-Barik’s revenue has increased from $307 per month to $1,919 per month, a 525% increase. About $240 per month of this increase has occurred since November of 2014, when the company acquired on-premises broadband through this pilot project. This means that since November 2014 revenues have increased approximately 15%.

• The proprietor of Al-Barik, Pak Bibit, explained that the recent $240 increase in monthly revenue resulted from his successful recruitment of four new distributors. He was able to find and reach them and convince them to come for an on-site demo because he was able to spend significantly more time online than he had in the past.

• Pak Bibit credits a significant portion of his increased business over the last four years to the Bambanglipuro PLIK, where he was able to first reach markets beyond his local community through a Facebook page.

• The Government of Indonesia is principally interested in the impact of providing broadband connectivity to villages without any internet connectivity at all. Given this, the most relevant growth from the Indonesian Government’s perspective is from 2011 to present.

• Based on the assumption that each PLIK connects four small businesses on average, the subsidy cost for connecting each business is assumed to be 500,000 IDR ($38.50) per month. This is based on ISP reports of typical locations in Yogyakarta and actual revenue received from BP3TI.

• Since the Bambanglipuro PLIK was established in 2011, Pak Bibit has increased his monthly earnings by 21,000,000 IDR ($1,612) and earned an additional $6,930,911 IDR ($532) per month in profit. Because this profit has accrued to a social group important to Indonesia’s development plans, rural Micro, Small, and Medium sized Enterprises (MSMEs), it is considered social impact. This means that the social return on the government’s investment of the $38.50 subsidy is 1,386%. Looking at only the months since establishment of broadband in November 2014, his profit was an additional $80/month, for a return of 208%.


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• Given the increased revenue, Pak Bibit paid an additional 2,310,000 IDR ($177) per month in taxes per month. This means that the economic return on the government’s investment of $38.50 per month is 459%. In the months since acquiring broadband services in November 2014, Pak Bibit paid an additional $26/month in taxes. While this does not cover the $38.50 subsidy, sales are likely to grow further as he continues to recruit new distributors.

2.4 RESULTS OF ASSESSMENT OF SCHOOL

• In our surveys, teachers reported significant time-savings in administrative tasks due to having access to WRAN connectivity. The tasks for which efficiency was most improved included developing lesson plans, searching for appropriate videos, developing PowerPoint materials, and fact checking lesson and student reports.

• On average, the teachers interviewed reported a 55% time-savings across all of their tasks.

• Based on the salaries of the various teachers surveyed, on a monthly basis this time-savings was valued at 1,675,758 IDR ($124.85) per teacher.

• Assuming that an average of 10 teachers per school use broadband, the total monthly savings are $1,248.50.

• The monthly cost to provide connectivity to the school using WRAN technology is 2,000,000 IDR ($153.24). For that investment, the government earns a return of $1,248.50 in increased teacher time. This represents a 814% return on investment. This makes up the economic impact of WRAN technology at the school.

• Of all the students at the school, the share that qualify for the KMS (subsidized school fee) program is 16.97%.

• If we assume that the average time saved per teacher is distributed equally across all students, then the value of time additional time devoted to KMS students because of WRAN connectivity is $211.87. ($1248.50 x 16.97%). This gives a social return on the $153.24 connectivity per month of 38.2%

2.5 RESULTS OF ASSESSMENT OF HEALTH CLINIC

• Without broadband connectivity, the Sedayu health clinic (Puskesmas) reported receiving a total monthly “capitation” payment of 6,836,438 IDR ($525.28) from the local government health office. After receiving broadband connectivity, they reported receiving 7,575,000 IDR ($582.60).

• Comparing the additional $57.32 received per month to the cost of connecting the clinic, 500,000 IDR per month ($38.46), we see a ratio of 1.48. This 48% return on MCIT investment counts as part of the economic impact of WRAN connectivity.

• The ten patients interviewed at the Sedayu health clinic reported saving an average of 105,158 IDR ($8.05) per month in health costs given broadband connectivity provided for the insurance service.


FINAL REPORT 17

• According to interviews with the administrators of the Puskesmas, approximately 5% of the savings accrued to patients can be attributed to broadband connectivity, and 95% to transitioning to the new social health insurance scheme BPJS, which happened concurrently with the addition of connectivity. Five percent of the average savings per patient ($8.05) is therefore the social benefit per patient. This value is 8.05 x 0.05 = $0.4025. The Puskesmas has 1,263 patients, so the total social benefit is 0.4025 $ per patient x 1,263 patients = $508.36. The Puskesmas would pay $105.53 per month for connectivity, giving a social return of 490%.

2.6 RESULTS OF THE ASSESSMENT OF REGULATORY OPTIONS

The highlights of the two workshops investigating regulatory options for WRAN technology can be summarized as follows.

• There are two principal ways in which WRAN technology can be used – on empty frequencies or within guard bands between frequency channels. Because the frequency band in which WRAN should be used is also valuable to TV broadcasters, the regime for licensing and spectrum management was the most discussed aspect of regulation.

• International experience shows that there are three possible licensing regimes for WRAN technology. They are:

o Licensed: meaning that any broadcaster would need a license for a specific frequency, and then only the license holder would be allowed to broadcast on it.

o Shared License: meaning that the owner of a license may share it by selling or giving use rights to another emitter. One use case of this regime would be if a TV broadcaster with license to a specific frequency were allowed to sell access to that frequency to internet providers, who would then be authorized to operate under the broadcaster’s license. Another would be if the holder of the primary license were the USO fund, who then authorized the ISPs it subsidizes to use the licensed spectrum in a shared way.

o Unlicensed: meaning that any entity may freely broadcast at any time on the frequency band. This would be comparable to the current way the 2.4 GHz band is used for unlicensed Wi-Fi.

• Several countries are considering unlicensed WRAN regimes, often using a geospatial database-driven approach where devices can dynamically access unassigned or otherwise unused frequencies, upon request, based on a database that has knowledge of which frequencies are available and which are not in any given geographical area. The UK released initial rules in 2012 that take such an approach. The US FCC freed 288 MHz of spectrum for license-exempt operation in 2010, and the EU is currently testing such a regime. Canada and Singapore also recently enabled unlicensed WRAN regimes. Several other countries (including India, Brazil, and Japan) are exploring various WRAN licensing regimes.

• Pilot sponsor Microsoft expressed a strong desire to see a license-exempt regime adopted in Indonesia, as they believe this is the best way to ensure that connectivity is provided to the widest possible group of Indonesians. They emphasized that unlicensed access can give way to licensed access. In other words, an unlicensed regime allows spectrum to be put to good use today and the regulator has the flexibility to license that spectrum in the future.


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• The workshop participants summarized the advantages and disadvantages of various licensing regimes as follows:

o Licensed

! Advantages: The government can guarantee and enforce quality of service (via Service Level Agreements (SLAs)), and can guarantee spectrum space for USO operators.

! Disadvantages: Significant spectrum resources potentially left idle, added cost via monopoly rights and license fees, and limited ability to take advantage of economies of scale.

o Shared License

! Advantages: overcomes some of the limitations of licensed regimes with regards to unused spectrum, while maintaining the ability of the government to enforce SLAs.

! Disadvantages: A special legal mechanism would need to be created as license sharing is currently illegal in Indonesia. If licenses are shared among competitor, may require a legal mechanism to force license sharing.

o Unlicensed

! Advantages: Lower cost as no license fee required. Could lead to fast deployment of networks and gains from economies of scale in radio production.

! Disadvantages: requires operator cooperation and/or managed access via a geospatial database. The government would not be able to provide service level guarantees or protection to any operator.

• No matter the regime chosen, new regulations would have to be made. These would include those for dynamic frequency access for unlicensed regimes or shared licensed regimes, legal sharing mechanisms for shared license regimes, or new frequency allocations and assignments for licensed regimes. For all regimes, new hardware standards would need to be made, although some are already in place.

• Limits on the power that WRAN transmitters will be authorized to use need to be considered. During testing, the Hitachi radios received interference in the first harmonic from motorcycle engines in the Yogyakarta area. This could be overcome by providing additional power, but the 10W that would have been required to overcome it exceeds the 5W limit for such radios that was adopted by Japan. This is an area for further regulatory consideration.

• The workshop recommended continued exploration of all options, but suggested that shared licensed regimes with specific frequency assignments to the USO fund showed particular promise. Pilot team member Microsoft expressed preference for an unlicensed regime. The workshop recommended further study of dynamic spectrum allocation. It also suggested that it would be important to make sure that there are sufficient controls placed around broadcasting in the areas of international borders, especially if other countries adopt different regimes.


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DISCUSSION The results of the pilot can be taken to show several things. First, there is a clear indication that it is both technologically and financially feasible to meet IBP targets using WRAN technology. The evaluation of technical feasibility shows that VHF and UHF technologies could be used for distribution networks, as well as local access networks in rural areas where there are few inhabitants disbursed over across a sizable area. The financial evaluation shows that there is at least one possible architecture that allows all IBP targets to be met while maintaining sufficient financial flows to the network operator.

Further, the cost of providing service over WRAN is likely to fall significantly as the use of the technology expands. Current radio costs reflect the fact that for most manufacturers these are still prototypes. When scale is achieved, the price per radio is likely to fall sharply, making WRAN networks even more cost effective. While the price of radios falls, the technology will continue to be improved and performance stands to further increase. In the coming months, technological adaptations such as channel binding and dynamic power control will contribute to increase capacity of WRAN devices.

Beyond this indication, there are several lessons learned from the pilot. These include.

1. WRAN technologies are not a panacea. Both the VHF and UHF options are likely to need to be paired with other technologies, such as wireless backbone, Wi-Fi, or LAN, in order to create sustainable rural terrestrial wireless broadband networks. A particular strength of WRAN may lie in its NLOS capacity, which was only tested in this pilot during the distance trial for the Hitachi radio.

2. Attention clearly needs to be paid to developing the skills needed to operate WRAN networks, and in particular to solve equipment problems if and when they arise. The technology will be new to several operators, and creating the precise alignment required to make a connection may be a skill that they need to develop.

3. Universal Service funding is likely to be an important component in the launch of rural terrestrial wireless broadband technologies. By incorporating the Universal Service operator in the pilot (through MCIT’s involvement), important perspectives were able to be considered.

CONCLUSION The pilot showed that WRAN technology can provide the technical capacity to meet IBP targets within a price range that will make it an attractive option to several operators, in particular operators that receive USO funding. It also gave initial indications that the economic return to the government and the social benefit to the citizenry of deploying WRAN technology is high. Lastly, discussions held in conjunction with the pilot established the framework within which regulatory options will be discussed in Indonesia, and moved forward the idea of adapting regulatory regimes to fit the needs of WRAN.

There are two clear next steps along the path to adopting WRAN in Indonesia. The first is to develop a more robust understanding of the economic and social benefits of WRAN technologies. While the three experiments run under this pilot showed much promise, more robust examinations are needed. MCIT is


20 March 2015

currently redesigning its USO program to include other broadband-enabled services and has been asking various organizations in Indonesia to propose facilities to be connected. This is part of a plan to implement rural wireless broadband solutions, including WRAN, in various topographical and demographics characteristics before scaling up to about 35,000 villages across Indonesia in accordance with the IBP.

Secondly, additional discussions on regulatory regimes are needed, leading to the potential eventual promulgation of initial rules for WRAN. These discussions can include additional presence of international experts, including from the US FCC, as well as representatives from industry and government. An additional axis of discussion will be with the ASEAN Telecommunication Senior Officiers Meeting (TELSOM) and the ASEAN Telecommunications Regulatory Council (ATRC). Further, the Dynamic Spectrum Alliance (DSA) global forum will be held in the region, where the regional harmonization of WRAN regimes can be pursued.

Having made the case for WRAN technology as a potentially important contributor, the Government of Indonesia is now ready to take the next steps. This will involve giving fuller consideration to the implications of WRAN use.

Of particular interest is making sure that the appropriate licensing regime is adopted for the technology. The US government is in a strong position to offer assistance here. The FCC has been considering the issue of WRAN for at least five years, and has already issued and revised a set of initial rules. The Government of Indonesia would benefit greatly from this experience, and discussions are underway between the USAID GBI program, the Telecommunications Leadership Program (TLP), and Government of Indonesia to make such interaction a reality. Further, there exists significant experience with WRAN within ASEAN, particularly in Singapore. Opportunities should be taken to support learning and exchange of information at the regional level.

Beyond these accomplishments in setting the stage for futher exploration of WRAN technologies, the pilot made two other important contributions. First, it successfully integrated a government initiative with support from international donors, academia, local and international business, and the community. In doing so it has provided an example of a comprehensive approach for the introduction and assessment of a new technology, which will be shared by the Government of Indonesia through ASEAN channels. Second, it provided tangible benefit to specific beneficiaries. The village of Bambanglipuro in particular has seen a durable increase in economic activity that is the direct result of the pilot.

As the Government of Indonesia moves ahead with further pilots, USAID/Indonesia could benefit from participating. This would lead to positive outcomes both in terms of supporting rural broadband growth but also as a way of capturing the benefits of early wireless broadband connectivity for USAID beneficiaries.

indonesia rural connectivity pilot final report · 2015-05-13 · msme micro, small, and medium...

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