In an attempt to close the gap on more developed nations, Papua New Guinea is pressing forward with major infrastructures projects while investing heavily in its bandwidth capabilities. Prior to the arrival of international competition in 2007, PNG relied almost entirely on dial-up internet connections. In 2017, after a decade of major infrastructure rollouts, the internet landscape of PNG has been transformed, and to the sector’s credit, many people in urban areas have access to high-speed internet, albeit at an excessive cost. In spite of major private sector investment, the country’s bandwidth capabilities are still behind regional norms.
However, with an increase in strategic partnerships and major projects in the pipeline, affordability and access is set to vastly improve. Even though increased investments in telecoms have improved internet capacity, only 11.7% of Papua New Guineans were connected to the web in the first quarter of 2016. While the country’s many hard to reach rural communities partly explain this meagre figure, another factor contributing to the country’s low penetration rates is the cost of data, which ranks among the highest in the world.
Market Players
For the time being Telikom PNG is the primary provider of wholesale internet services in PNG, at least until DataCo takes over its assets as part of the Kumul Telekom merger. As of the second quarter of 2017 no confirmed date of the transfer had been made official. While most internet service providers purchase bandwidth directly from Telikom and then sell to the market, others choose to bypass the state-run company and use international satellite operators instead, which come at an even higher cost but offers a sturdier connection. On the retail side, the main players include Digicel, Bmobile, SpeedCast, Datec, Global, Daltron, and Digitec (PNG), as well as Telikom PNG which has resulted in a vertical price structure, with Telikom PNG offering the cheapest internet service provider (ISP) rates, although Digicel remains the dominant player with 90% of traffic conducted on its network.
The Numbers
While the rollout of Digicel’s network has connected millions of previously disconnected Papua New Guineans, many more remain without access to the internet. As of the first quarter of 2017 more than 50% of the population had access to a mobile telephone, with approximately 85% connected to a 2G capable service. However, only a small fraction of those with devices have smartphone capabilities that allow its users to connect to the web. While the adoption of smartphones is rapidly on the rise, internet usage remains low due to extremely prohibitive costs. That said, the adoption of new technologies, such as the establishment of 4G networks by Digicel and Telikom have increased data consumption numbers.
As of April 2017 Digicel was offering LTE data plans at a cost of PGK49 ($16) for 800-MB entry packages or 80-GB maximum packages for PGK4096 ($1298) on a post-paid basis. At the same time, Telikom’s data bundles started at a cost of PGK2 ($0.63) for 60 MB, for a three-day package. The cost of internet usage in PNG is considerably higher than emerging market averages even though it has come down considerably in recent years. In terms of affordability PNG ranked 163rd out of 169 countries in 2013 according to the International Telecommunications Union. During the same year an entry level fixed-broadband package equated to 266% the size of gross national income (GNI) per capita, according to a discussion paper released by the National Research Institute in partnership with Deloitte entitled “Why Are Internet Prices High in PNG?.”
As of early 2017, 1 GB of data was estimated to cost around 10% of GNI per capita. While this is a significant improvement, which has been driven by improved competition and regulatory factors, PNG still ranks lower on the affordability scale than its neighbours. A study by Network Strategies of New Zealand, found that 2 GB of fixed-broadband data per month costs more than the average monthly income in PNG, while 2 GB in Fiji costs around only 10.8% of the monthly average income.
Aside from steep maintenance and capital costs of key infrastructure, a major contributor to the country’s high internet fees are its wholesale costs. According to the National Research Institute (NRI), Telikom PNG pays approximately $22.5 per Mbps for bandwidth on the country’s subsea cables, then on-sells this bandwidth to ISPs at a rate of approximately $600 Mbps. Again, this is a significant decrease from 2013 when 1 Mbps cost approximately PGK6000 ($1902). While the NRI discussion paper noted that Telikom PNG still had a range of costs to incur to provide wholesale services, which represents in some part its high fees, it also mentioned that there is a lack of clarity when it comes to the cost structure of the wholesale access market. However, with DataCo expected to take over Telikom PNG’s wholesale duties, the equation is likely to be altered, as Telikom PNG will focus solely on retail.
Although industry experts believe that the formation of Kumul Telikom will remove the vertically integrated pricing scenario that Telikom functioned under, there is still a need for regulatory reform. How the cost structure unfolds under Kumul Telikom will be a significant determinant of internet penetration rates.
According to DataCo, if it were to acquire the aforementioned subsea cables, it would be able to reduce the wholesale rate by nearly $300 per Mbps, effectively cutting the existing costs in half.
Technology
In terms of connectivity, PNG has relied on two main subsea cables connecting it to Australia, namely the PIPE Pacific Cable-1 (PPC-1) and Australia PNG-2 (APNG2). In terms of design capacity, APNG-2 has 1.1 Gbps whereas PPC-1 has 2.6 Tbps although, Telikom only has a purchase capacity of 10 Gbps.
The use of satellite connections comes at an even higher cost, while offering users a more reliable connection, though mainly businesses use this avenue of connection as individuals cannot afford its lofty price tag. There is also a growing trend for very small aperture terminal (VSAT) technology, as once the initial equipment is installed and investments made, bandwidth can be significantly cheaper than traditional satellite connections. One notable entrance in the VSAT space is that of ABS Global Satellite Limited (AGSL), which was granted a network, applications and gateway operator licence in December 2016. O3b is another example of the country’s reliance on satellite technology. The firms low flying satellites translate into quicker speeds and stronger signals that are currently being used by Digicel as well as SpeedCast. Aside from physical cables and orbiting satellites, PNG also makes use of microwave connections, which can also be costly. Under the National Transmission Network (NTN) plan, Telikom PNG spent a reported PGK53m ($16.7m) on connecting Lae and Port Moresby to other parts of the country.
On The Rise
With the support of a World Bank rural communications project aimed at improving telecoms infrastructure and services in remote areas, internet user numbers are expected to increase to 1.2m by the end of 2017. Under the World Bank financed project more than 500,000 previously underserved remote villagers will receive access to telecoms services, and will for the first time be able to connect to the internet through their mobile devices. The project has financed the installation of 59 mobile base stations across the country and is also providing technical assistance to the National Information and Communications Technology Authority to help with regulatory changes as well as aid the Department of Communication and Information in ICT policy development.
The World Bank initiative is just one of a host of strategic partnerships that will aid in the government’s objective to provide affordable ICT services across the island. Measures are also under way to construct the country’s first internet exchange point, while authorities have employed the services of Huawei Marine to construct PNG’s backbone fibre network under the NTN. In addition, Digicel has plans to bolster international capacity by connecting the country to Australia through a new subsea cable.
Furthermore, a diverse range of technologies including VSAT connections, 4G networks and virtual networks are set to strengthen the nation’s internet capacity, and as such will lead to a hefty reduction in fees, which will translate into the next wave of technological development for PNG.
Aside from a few cases, the major drawback for the ICT sector in recent years was its ability to create a balanced marketplace. While there remain significant imbalances, particularly on the retail side, times are changing, and a growing number of players are entering the market to participate. According to NICTA, as of November 2016 there were 60 individual network licences issued, as well as 58 class operator licences, 40 individual content licences, 37 individual application licences and 22 individual network gateway licences.“The sky is the limit,” Scott Tipping, country manager in PNG for Hong Kong-based SpeedCast, told OBG. “While much of the heavy lifting still needs to take place, the ICT sector in general has a lot of room to grow if regulators can nurture the investment climate.”
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