Papua New Guinea’s ICT market is in the midst of a dynamic restructuring. Over the last decade the sector has experienced significant growth. However, despite advancements, pockets of isolated communities remain unconnected. As a result, the government has set out to expand the National Transmission Network (NTN), and along with the amalgamation of key state entities expected to encourage competition, the cost and availability of ICT services are set to briskly improve. Since the arrival of international competition in 2007, PNG has experienced a major shift in communication technology. Nevertheless, affordability remains a pressing issue and mobile adoption lags behind regional penetration rates, with PNG’s penetration rate representing one of the lowest in the South Pacific region. However, investments in ICT infrastructure have seen the nation gain significant ground in terms of network coverage in recent years, and with more funds being deployed into technological advancements, the digital gap continues to narrow as more people gain access to the internet.
PNG had a mobile penetration rate of around 54.2%, with a total of 3.96m subscribers as of mid-2016, according to the UN’s International Telecommunication Union (ITU). While PNG’s telecoms sector still has a great deal of growth potential, the expansion of network infrastructure remains costly due to the challenging conditions of isolated rural communities and a below par national electricity grid. In addition, the majority of the subscriber base is unable to afford services, a major hindrance to penetration targets. In spite of these hurdles, the sector continues to progress in PNG, with mobile coverage accessibility rates increasing from just 3% of the population in 2006 to 80% by early 2016.
Time To Blosson
For the most part, PNG’s IT evolution got off to a slow start because previous governments did not appreciate its economic and social importance. While countries around the world adopted new technologies, PNG’s IT landscape stagnated. Currently, however, priorities have been altered and the nation’s ICT framework is benefiting as a result: telecoms and IT development is included in all of the major pillars of the country’s infrastructure development strategy. Despite a change in mindset, PNG has a lot of catching up to do; even so, there is undeniable potential to use technology to accelerate economic development.
As a result of the previous regimes’ oversight, the costs of voice and data services for the end user remain above average. “There are still significant price gaps, with affordability remaining a serious issue, and while prices have fallen dramatically in recent years, rural communities struggle to afford current rates,” Scott Tipping, country manager in PNG for SpeedCast, a Hong Kong-based satellite provider, told OBG. “However, the intention to reduce costs is a clear objective of the National Information and Communications Technology Authority (NICTA), the country’s regulator.” To address this issue, the government continues to collaborate with the ITU and other international organisations in an attempt to lower market prices.
Framework
From a structural perspective, the telecoms market has undergone major legislative and institutional reform in recent times. PNG’s telecoms revolution began in 2005, when the decision was made by the National Executive Council (NEC) to open the segment to international competition. By 2007 Jamaica-based Digicel received the first international telecoms operator licence, and with it, PNG’s technological evolution shifted into a new gear. At the same time, Indonesian-owned Green Communications was also awarded a mobile network licence, which was later revoked after the company fell short of required benchmarks for operation. Prior to the entry of Digicel, the telecoms market was dominated by state-owned Telikom PNG, during which time the industry was characterised by inconsistent service and high costs. The arrival of the Jamaican player brought about rapid change, and led to many locals abandoning fixed-line terrestrial connections in favour of mobile handsets.
In With The New
By early 2009 the NEC adopted a new NICTA Act that was implemented the following year. The act replaced the outdated 1996 Telecommunications Act and Radio Spectrum Act, along with parts of the 2002 Independent Consumer and Competition Commission (ICCC) Act. The ICCC previously served alongside the PNG Radio Communications and Telecommunications Technical Authority (PANGTEL) as the principal regulators of telecoms. Under the NICTA Act, PANGTEL was incorporated under NICTA, the industry’s primary regulatory body and sole licensing authority.
In addition, NICTA also addresses consumer issues that were previously dealt with by the ICCC. One example of NICTA’s intervention came in 2011, when it placed a five-year 40% margin cap on Digicels in- and out-of-network calls after it received requests to investigate the amount consumers were paying for calls from Digicel to the state run Bmobile.
As it stands, PNG hosts three mobile operators: Digicel, Telikom PNG’s Citifon and Bmobile (Bmobile-Vodafone), alongside a growing number of domestic ICT service providers, including the state-run PNG DataCo, which was the builder of the NTN and provider of wholesale non-discriminatory telecoms network transmission services using government-owned assets. In January 2017 NICTA approved the release of some 10m SIM cards; Digicel received 6m with Telikom PNG and Bmobile receiving 2m each. Users are required to register their new SIM cards by January 2019. The new SIM cards brings the total number of cards in PNG to 20m.
In addition to the three existing telecoms operators, ABS Global Satellite Limited (AGSL) was granted a network, applications and gateway operator licence in December 2016. AGSL initially entered into a partnership with NICTA in 2008 by providing access to a number of orbital satellites. The three individual operator licences are technology neutral and now give AGSL the right to compete within PNG’s ICT market. With internet penetration at only 10%, the increased competition is expected to lower prices and increase online activity. AGSL will first set up a teleport in Port Moresby, which will provide connectivity to its ABS-6 satellite (V-SAT). According to a 2016 market intelligence report by BuddeComm, telecoms consultancy firm, penetration rates for fixed-line telephony stood at 2%, fixed-internet users were at 10.3% and mobile SIM penetration was at 49%, suggesting ample room for growth.
Fusion
In an effort to reduce costs and improve competitiveness through the sharing of resources and infrastructure, it was announced in February 2017 that DataCo, Bmobile and Telikom PNG would be merged to form Kumul Telikom. According to a statement released by Kumul Consolidated Holdings (KCH), the authority for all state-owned assets and enterprises, Telikom PNG will remain a 100% subsidiary of KCH and be renamed Kumul Telikom. Bmobile and DataCo will become subsidiaries of the new brand. Essentially, all three organisations will remain intact under a new board of directors, which will be comprised of members from each of the three entities. This new board will be chaired by Mahesh Patel, who holds the reciprocal position (at the time of the announcement) with Telikom PNG, while a transition management team is under the direction of the current CEO of Telikom PNG, Michael Donnelly.
Speaking with local media, Charles Abel, minister of national planning and monitoring, said, “A simple example of efficiency is that the three companies will share basic infrastructure, such as towers, throughout the country. It means we can roll out more towers to the greater benefit of all, providing more services at a lower cost to more people in PNG.” A tower-sharing initiative is viewed as a critical change to an industry that has lacked collaboration, particularly when it comes to co-hosting infrastructure. He added, “Telikom’s ongoing rollout of 3G and 4G throughout the country will also allow Bmobile, in the new entity, to harness the synergy and continue its successful development.” If successfully harnessed, the sharing of key assets could reduce operating costs and promote efficiency. “Given PNG’s logistical dynamics, it is not economically viable for everyone to have their own assets on the ground,” Michael Murphy, CEO of Digicel Pacific, told OBG.
Under the new arrangement, Kumul Telikom will become an integrated retail and wholesale operator through its individual business units, which should improve access to an affordable ICT network. While most industry insiders have spoken in favour of the merger, given the current technology demands of consumers, Kumul Telikom will need external expertise and capital if it is to successfully compete with Digicel.
NTN
In an attempt to foster development of the national broadband backbone, PNG DataCo was established in early 2014 and tasked with building and operating the NTN, with the primary goal of providing nationwide high-speed internet through fibre-optic cabling assets. After the official incorporation of DataCo, Telikom PNG was expected to transfer its wholesale business to DataCo under the instructions of KCH, which will include its revenue generated from subsea cables PPC-1 and APNG-2, as well as various satellite gateways. However, according to industry insiders, the transfer of Telikom’s wholesale assets would strip the company of its cash generating ability and potentially jeopardise the survival of the organisation. How this unfolds under the new Kumul Telikom structure will be a major determinant of the merger’s success.
Under the NTN project, DataCo sells bandwidth on the optical fibre cable from Port Moresby to Hides. Other domestic services include Port Moresby-Caution, Bay-Kopi, Lae-Yonki-Madang, and Lae-Bulolo-Hidden Valley. According to DataCo, the minimum bandwidth offered is 10 Mbps, while customers seeking lower bandwidths are aggregated in multiples of 2 Mbps/E1s.
A primary objective of DataCo is also to manage international assets that connect PNG to outside countries. Currently, PNG is connected by two main international subsea cables. The first is the Australia PNG-2 (APNG2) cable, which has been in service since late 2006 and connects Port Moresby to Sydney. The cable runs under the coral sea and is functioning at less than 80%, with some industry insiders suggesting less than 70%.
The second is the PIPE Pacific Cable 1 (PPC-1) cable, which spans 7000 km in length, starting in Australia and running all the way to Guam. However, the cable is considered to be underutilised, with Telikom acquiring 10 Gbps of the total design capacity of 2.56 Tbps. In addition to these assets, a third international fibre connection, the ICN-2 underwater cable, was scheduled to connect PNG through Honiara in Solomon Islands, Vanuatu and then Fiji by the end of 2016. However, the project has since been halted (see analysis).
Backbone
Another new submarine cable initiative is that of Huawei Marine, which has been contracted by the government of PNG to build a national backbone fibre network that will stretch more than 5400 km along the coastline of PNG, with a total design capacity of 8 Tbps. Once completed, the network will be under the management of DataCo, and will serve as PNG’s primary bandwidth connection. The subsea cable will connect 14 coastal areas and run to Jayapura in Indonesia, which will broaden PNG’s international capacity, while covering 55% of the local population and providing more than 70% of PNG’s domestic requirements, according to Huawei Marine’s recent estimates.
Satellites
PNG also relies heavily on various satellite and microwave connections for voice and data traffic. There are a number of satellite operators, including APT Satellite, AsiaSat, Intelsat, JSAT and SES World Skies, supplying PNG’s internet demands. Various initiatives are being undertaken to bolster PNG’s broadband network, including a significant investment to build a national backbone fibre network, as well as a new subsea cable to Australia, which is being spearheaded by Digicel in cooperation with the PNG government (see analysis). Additionally, in mid-2016 Digicel agreed to work with Channel Islands-based O3b Networks, a global satellite provider, to upgrade its existing contract. Under the new arrangement, Digicel has taken advantage of O3b Networks “medium earth orbit” satellite network, adding to the existing connection it had through O3bs “low earth orbit” satellites, which were originally inked in July 2013. Since its arrival in 2007 Digicel has spent heavily on expanding network coverage. Providing network access to a thinly spread population across a diverse terrain of mountains and forests has not been straightforward.
Obstacles
These hurdles are compounded by an extremely weak power grid; thus operators often rely on a hybrid power solution of diesel generators and solar power to support sites, further escalating operating costs. Despite these challenges, Digicel has managed to achieve a significant advantage over its competition in terms of network coverage and continues to advance its broadband capabilities through strategic partnerships. Since Digicel finished its last major rollout in the first quarter of 2016, their focus has been concentrated on raising service levels. “Our philosophy is that the level of service you get in PNG should be the same as you get in developed regions,” Murphy told OBG. “If you live in Alotau, there is no reason the quality of service should not match that in Australia. That is our intent; how we get there is slightly more complicated.”
4G
While global trends have seen a reduction in voice calls and an increase in data consumption, PNG’s infrastructure remains dominated by 2G technology, though the expansion of 4G networks are well under way. To boost data consumption and generate a new revenue stream, Telikom PNG began rolling out 4G LTE technology in selected areas of the country at the end of 2016.
Telikom PNG has been restructuring its network at a rapid pace, replacing its code division multiple access (CDMA) network that Citifon customers use with a 4G-capable network, investing in 200 new towers in 2016 alone at a cost of PGK400m ($126.8m). According to company statements, a total of PGK500m ($158.5m) had been spent on the company’s service migration from CDMA to a 4G LTE network by December 2016, which will translate into faster internet speeds and less latency. Telikom PNG’s radical restructuring was also accompanied with hard hitting marketing tactics such as the 4G LTE Mobile “SIM swap” promotion in the commercial centre of Lae, in which customers received a new Huawei Y330 handset with their 4G LTE SIM card in replacement for their old Citifon SIMs and devices. Customers that missed out on the free devices were able to purchase SIMs ranging from PGK5 ($1.59) to PGK20 ($6.34), with the latter offering 5 GB of data.
The decision to migrate to 4G LTE technology has been viewed as a necessary step to narrow the dominant position Digicel has over the market, which initially switched on 10 4G LTE sites in March 2014, and has since invested heavily in broadening its network coverage. As of the end of 2016 the Jamaican firm had invested around $800m in PNG.
Cybersecurity
In the past, PNG lacked both the intent and finance needed to foster the infrastructure requirements of a robust ICT sector. However, since the liberalisation of the mobile telephony market more than a decade ago, large sums of capital have been poured into ICT development. As a result, the country is closing gaps in cybersecurity, while promoting cloud computing and e-commerce activity.
In the final quarter of 2016 the government released the comprehensive Cybercrime Code Act, which covers a range of issues like hacking, unlawful advertising and defamation of character. While the topic of cybercrime had been addressed in the National ICT policy of 2008 and the NICTA Act of 2009, neither provided a great deal of substance in combating the crimes. With the new comprehensive act in place, the government will be in a better position to prevent illicit online activity while creating an environment that encourages e-commerce. However, a major challenge of implementing the new legislation will be its ability to complement laws governing other segments of the economy. An interesting implication of the new act is that it is now possible to submit evidence derived from mobile phones at a court hearing, which was previously restricted under the narrow definition of “computerised information”.
Due to the global rise in cyberattacks in late 2016, NICTA set in motion a major cybersecurity project to protect critical ICT infrastructure in the country from potential online intrusions. Speaking with local media in February 2017, Charles Punaha, CEO of NICTA, declared that NICTA had employed international experts to assist with the drafting of a cybersecurity policy, with one of the main objectives being to provide a safety net to all the critical service providers in the country.
Outlook
The ICT industry of PNG is gearing up for a major restructuring, but whether the new state-run telecoms structure will succeed in reducing the cost of accessibility remains to be seen. Nevertheless, the reinvention of state entities is a welcome change that should assist the development of the sector as whole. Given the gaps in the telecoms market, there is substantial growth potential. It is likely that costs will continue to fall and connectivity speeds will amplify as new players enter the market. Likewise, with 3G and 4G coverage on the rise, coupled with major infrastructure efforts to bolster the country’s network backbone, internet penetration rates will continue to increase, which bodes well for the country’s economic development.
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