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THE ROAD TO BROADBAND DEVELOPMENT IN DEVELOPING COUNTRIES IS THROUGH COMPETITION DRIVEN BY WIRELESS AND VOIP Francisco J Proenza FAO Investment Centre Paper prepared for the workshop Wireless Communication and Development A Global Perspective Annenberg Research Network on International Communication October 7 8 2005 The author gratefully acknowledges valuable comments from Carlos S nchez OSIPTEL Peru Marcel Silva Subtel Chile Ermanno Pietrosemoli U de los Andes Venezuela Juan Belt USAID David W Mendoza USAID Bernard Merzer USAID Chat Garcia Ramilo APC Bona Simanjuntak Center for ICT Studies Indonesia and Rose Maria Bonello Telecom Italia The views expressed in this document are those of the author and not necessarily reflect the official position of the FAO Table of Contents Introduction 1 Significance of VoIP and Wireless for Low Income People 1 VoIP 1 Wireless 3 Bandwidth Requirements of Low Income Rural Communities 3 Cost Scalability and Ability to Serve Disperse Populations at Low Cost 3 Local Networks Digital Literacy and Sustainability of Service 3 The Regulatory Challenge 7 VoIP 7 Wireless 10 Licensing 10 Interconnection 10 Broadband Development 11 Korea An Urban Model 11 South American Experience with Reverse Subsidy Auctions 13 Contest Design and Risk Management 13 Technology Neutral Contests Favor Wireless for Rural Areas 17 Incumbents do not Like Reverse Subsidy Auctions 17 Risks Remain High 18 Nibbling at the Edges 18 India s Chiraag 18 Indonesia s WiFi Networks 20 Strategic Considerations for Rural Broadband Development 20 Institutions and Instruments 20 Effectiveness of Select Instruments 22 Reverse Subsidy Auctions 22 Effecting Change in Regulation 23 Buildup of Participation and Monitoring Capacity of Stakeholders 23 Concluding Remarks 24 THE ROAD TO BROADBAND DEVELOPMENT IN DEVELOPING COUNTRIES IS THROUGH COMPETITION DRIVEN BY WIRELESS AND VOIP Introduction Internet telephony VoIP and Wireless technologies are radically transforming the



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