>> DAVID GROSS: All right, we're going to begin. We've got a very rich and full agenda for the next 90 minutes or so. Appreciate everyone coming. Across the hall, they're talking about net neutrality and all sorts of esoteric things, which is true for many of the sessions. We are actually going to talk about things that matter to people's lives very directly. It's going to be how, and the best ways, and a variety of good ways of actually getting internet access to people around the world.
And we're very honored and pleased to have, to begin our discussion, we're going to have a scene‑setting, quasi‑keynote. That makes it sound very, very substantial. I hope you're prepared to give some remarks about an initiative announced by the Secretary of State of the United States, Secretary Kerry. Even though this is being broadcast, and we'll have this in the record forever, everyone should know that it's not so much Secretary Kerry, it's Manu that is the architect and the majordomo behind this extraordinarily important multistakeholder initiative. If you could give us an overview, we can use that as a jumping‑off place for the rest of the panels.
>> MANU BHARDWAJ: Thank you. It's so great to be doing the session with you. I was reflected upon a session we did in January, and we were asked, I think, at that panel to give our predictions for how the year would shape up. And what's ‑‑ something that I didn't expect, even though I'm so personally committed and passionate about internet connectivity, how much was going to happen this year on this issue. And all the different dimensions that it's happening. Whether it's WEF that is an Internet for All initiative, whether it's the World Bank releasing their report, the U.S. State Department announcing Global Connect, U.S. companies or NGOs.
It's remarkable to me how much the discussion has changed, maybe in a very positive, constructive way, where everyone is trying to think about what they can contribute as stakeholders, what they can contribute from the technical community in particular, which will have an important role to play, in really bridging the divide. And, you know, I have been at the state department now for about 4 1/2, five years. And it felt to me that the State Department and the U.S. government, and like‑minded countries and partners should be setting forth a very positive vision for connectivity, at the very highest levels.
Because these issues are being discussed at levels of head of state, whether it's internet governance, data privacy, connectivity, internet economy. But there was no sense that we have a same prioritization for internet for development. And so, three weeks ago, we launched Global Connect. We were joined by the Presidents of Estonia, Tanzania, USCID, overseas project investment corporation, issued statements of support. We were very pleased to see NGOs and others all coming around the idea that we should redouble our development efforts and try to connect an additional 1.5 billion people by 2020.
Through Global Connect, we have priority pillars. The first is to mainstream the view that the internet, and internet connectivity and internet infrastructure, is just as important as traditional infrastructure. That the internet now, for everyone country's economy, is just as important as electricity, energy, highways, ports, water, and we should be treating it as such in our domestic development strategies, and also on the international development agenda.
The second key component is that each government's policies are critical for unlocking digital growth. I'm excited that Garland has put this panel together to think about how we can advise governments and showcase certain countries, like Colombia and others, that have taken smart approaches and transformed their digital economy. And you know the third part of our initiative is really showcasing innovative industry solutions in a technology‑neutral way, satellite, mobile, fiber.
Industry is doing so much in trying to connect the rest of the world. And it's really good to try to partner with them and understand, kind of, what types of technologies are currently available to provide connectivity to remote areas, and how we can all explore best leveraging them for everyone's benefit. This is a very important discussion today. It's important to note we are looking forward to our next event at the WSIS high‑level event, December 15th, where we will showcase the growing coalition of countries, stakeholders, and industry around the broad objectives of Global Connect and the vision for the future in terms of what role we are hoping to play in extending connectivity and its benefits, and what role we hope the U.S. development organizations play, in partnership with others, with industry.
It's great to have this conversation at the IGF. When we first thought about this initiative, we went to the IGF‑USA first. And we consulted about whether or not this was important enough to raise to the level of our foreign minister, of our senior officials. And we were pleased to see the very positive response there. It features very prominently on the IGF‑USA agenda. Similarly, we're coming, after our launch, to the global IGF and asking the same questions to all stakeholders, looking for ideas, ways to partner, things we haven't thought of, and trying to strengthen the initiative before the very important next phase, which, again, will just be in a few weeks. Thank you, David, for the opportunity. It's great to be here with you.
>> Thank you very much. That was terrific. If I could ask a couple of questions. Can you describe what Global Connect is going to do? I know some people in our audience are very aware, but perhaps others and our TV‑watching group on the web around the world may not be fully aware of what Global Connect plans to do, and how to do it.
>> To get more granular, one key message, right, is mainstreaming the view that internet infrastructure is just as important as traditional infrastructure and should be prioritized by development agencies. We're taking that message in‑house. We've been talking with overseas private investment corporation. Since the Secretary of State previewed the initiative, OPEC announced a loan of $250 million to Myanmar for equipment. They're in talks, it's public, with ‑‑ doing a similar project in Kenya with Mawingu networks, a whitespace project.
The way that OPEC works is, they are listening to where is there need for low‑interest loans, political risk assurance. They can do things to scale through financing that may be limited through grants. USCID is also in the stages of thinking about how to focus on digital web in terms of both digital literacy. It's not just access. That's one of the messages I have to emphasize. I think I saw a stat, 15% of the world is illiterate. That's a key demographic that is struggling to get online.
But through their programs, teaching digital literacy, the broadband infrastructure efforts, other efforts, what can USCID do, especially in Africa, to help connected world? The final organization is the Learning Challenge Corporation. We have strong leadership at MCC. They have five‑year development compacts with countries. They're looking to see how they can continue to incorporate and deploy ICT‑related projects related to connectivity. So, this kind of gives you a general overview.
But the point is we want to partner with others. We want to showcase industry efforts. We want to encourage other countries to also join, and consider pledging, similarly, to redouble their efforts to connect 1.5 billion by 2020. We understand that the technical community is going to have a huge role to play, and there are all these different technologies. The key thing, maybe, for us as the U.S. government and others is to encourage and advise countries on what they should be doing with respect to policies and practices to take advantage of some of this technology for their citizens.
This is why the panel today is going to be so great.
>> One last question, and then maybe we can open it up for a couple of questions, if anybody has any before we lose you. How do people contact the organization, this new entity, if they want to play? What's the approach? Companies want to participate, governments want to participate, individuals have ideas. How best to approach?
>> This week, we have a strong U.S. delegation here. I guess, you're not supposed to call it a delegation, but we have a strong U.S. presence here. And anyone ‑‑ don't hesitate to talk to anybody here. Talk to myself. Let us know that you're interested in hearing more. Tell us about your ideas. Again, we came to the IGF for a reason. We wanted to consult with everybody this week, consult broadly. We were very excited about the work that the IGF was doing with respect to connecting the next billion, which I've been involved in personally.
I'm excited about the policy options they've developed. But, all of these activities are in synergy. And so answer your question briefly, don't hesitate to come up to me directly. Talk to David, talk to other people from the U.S. We look forward to hearing your ideas, and thinking about how we can work together.
>> Terrific. Thank you very much. We have very little time. I like the applause. Let's give applause.
>> There's one or two quick questions. He can probably answer those, or we can do it afterwards. As he says, he's very approachable. Well, not seeing any immediate call for questions, which I am grateful for, at least for this ‑‑ be ready for your questions for the first panel, there is required audience participation. So, thank you very much, Manu, and we're going to call up our first panel. Thank you. So, Matt, you're up to bat.
>> We're going to have a brief, couple of minute presentation by Jorge. And he's going to talk for a couple minutes. Then we're going to go to Matt. He's going to talk for a couple minutes. Then we're going to go immediately to you all for both questions, comments, and the like. The focus of this panel is discussing revenue generation as a necessary collective action. I have no idea what that means, but I assume it means making money and using that money to do something that is socially and otherwise productive. Jorge, am I right?
>> JORGE INFANTE: Correct, correct. The money. From operators. Market actors. So, good afternoon, everybody. My name is Jorge Infante. I'm working at the OECD, and I'm involved in an ambitious project. It's a broadband policy for the Latino American, and Caribbean. We are noticing a lot of issues, of course, with these issues, the regulatory framework, management, actions, etc. So, I think that in the Latin American region, all the issues on broadband and internet use, and expansion, and integration of people, are especially important, relevant, and demanding, okay.
So, all the positions you will hear from me is personal views, of course, based on OECD views. I think if there's anything that we all agree here in the room, it's about the economy on promoting growth, productivity, sufficient participation, and on the stagnalities you have from the sectors of the economy. That means there is a clear justification for an active, very proactive, I would say, role of the administration in trying to expand broadband access, to increase use by policies, etc.
So, action, and spending funds, and money, I think that we can clearly justify, okay. So, what can governments do to increase that broadband penetration and use, etc.? Well, the first thing, and the first recommendation is to facilitate competition, because it's amazing what you can do with competition. And many times, you can get more than you were expecting, and even save resources. If you are really keen on promoting competition. So, the first issue is about revenues taken from operators, etc.
All that fees and permits, and things like that that you have to do to start to operate and to deploy infrastructure. For example, license fees is something that should be kept as minimal as possible, and to be as simple and quick to obtain as possible. Many countries are moving, in fact ‑‑ most OECD companies now is very simple, except that you have to use a spectrum. It's much more complex. But there is no spectrum involved. It should be as simple as notification and so on.
And many countries in the region are moving in that direction. Just not, of course, covering the coast. But this is minimal. Another issue that is important also in that line of promoting competition and deployment of networks is right of ways. That many times, permits and right of ways are not only expensive, they're also complex to be obtained. And they have different fields, etc. So it's an issue where areas should get as low as possible, and generally it's not a good idea to set high fees, because really, you are harming that infrastructure deployment.
So, that's another important recommendation. Because if you are able to involve small players, large players, etc., make things simple for competition, you can get many results. Say, for example, the case of prepaid mobile. It was introduced by new entrants in mobile telephone, that they were able to reach to segments of the population that really couldn't afford mobile telephony. But, how do you get it? Just letting them come and deploy, okay.
So that's one issue. Another issue is about taxation, speaking about revenues, okay. That in general, it was perfect. Telecommunications, broadband access, internet, and also, they have applications using that infrastructure. It's very similar to water or electricity. So, the fiscal ‑‑ you must be very cautious with fiscal treatment, for this kind of work, because consumption is very sensitive. And demand is very elastic. And also, in countries ‑‑ many countries in Latin America, I mean, there are a lot of people with very low affordability.
So really, yes, adding that taxes, may be the difference in getting internet or not. So, in general, of course, you must apply taxes, because for water and electricity, you also have taxes. But trying to keep it ‑‑ just for taxes ‑‑ for basic goods and avoid applying luxury taxes, because really, this is not a luxury today in the 21st century. And there are interesting experiences in that, for example, in Colombia, once more, they have an interesting experience.
When you buy a smartphone or a tablet, that they have defined an exception from the value‑added tax for devices below $600. Okay. So, high‑end devices, okay, you pay luxury tax. But it's important to allow room for low‑end devices to be bought by people with programs with affordability. So, you can do things like that and the OECD tried to avoid specific taxes for telecommunication services, specifically for broadband, because it harms a lot.
Even if you are using them for ‑‑ in the sector to address issues in the sector, etc., it may harm a lot. If you are applying, just use it for the sector. For example, the sector is now in Pakistan region, they are discussing and applying 20% additional taxes for broadband access. This could really kill ‑‑ (chuckling) ‑‑ especially in a country with low penetration. There are other cases.
I mean, there are still many cases. For example, recently, El Salvador is also discussing about applying a 5% additional tax on telecommunications, on mobile, and cable, for security. Security is completely different. I understand that's a real problem there. And it is simple to charge telecommunication, but, it's at the same time, harming something that is key for this.
So, having said that about taxes, okay, what more the government can do? Because they should do things better, because there are things that cannot be covered by the market itself. So you need collective action for that. So for that, in general, the best practice, when possible, is to use the national budget, because this is important enough to do so.
>> DAVID GROSS: I want to make sure we have enough time. If I understand correctly, keep prices down. Particularly be sensitive about taxation, which I assume is not on the VAT and sales taxes, but also customs duties which often are very high on these, as well.
>> PANELIST: Yes.
>> DAVID GROSS: Does that include sensitivity in terms of taxation on the providers of these services, as well? In other words, not just the equipment, but also ‑‑ in the United States, the wireless ‑‑ the tax on wireless services is something on the order of 18% plus, depending on which state you're in. I assume your recommendation is keep those taxes down to keep affordability up, is that correct?
>> PANELIST: That's correct. Sometimes, really, they don't transfer the taxes to people. But you cannot be sure.
>> DAVID GROSS: Often they don't, in my experience.
>> PANELIST: That's fair to them. So, perhaps, one ‑‑ it's about the universal service, that it's a mechanism when you don't have in that budget just to cover what you need, it can make sense, it's preferable, yes, to use the national budget to collect money from market actors. It is in many countries, in Zambia, the universal circumstance, there are small levies around 1, 2% to be charged to operators based on revenue, okay. That it's better, and tax specific services.
>> DAVID GROSS: There are, in many countries, two types of universal services. There's the universal service funds that are used to help subsidize access, the actual construction of facilities to areas that would otherwise be unserved, because the economics are not supported. And there's also universal service funds that lower ‑‑ that subsidize the actual services being provided for people who might otherwise be too poor to afford those services.
>> PANELIST: Universal service funds, in the Latin American region, is different than in, for example, in Europe. In Europe, it's completely focused on that basic services in areas, etc. But in Latin America, they are using ‑‑ for many different purposes, even on the demand side. So, really, it's a general fund that is used to different issues.
>> DAVID GROSS: Terrific. Now, are these issues that are going to be explored? I'm trying to give you an advertisement, the OECD ministerial that will be held in Mexico next year?
>> JORGE INFANTE: Of course they will be. We will present ‑‑ we have specific chapters about it.
>> DAVID GROSS: Fabulous reports are going to come out for that, correct?
>> JORGE INFANTE: Yeah.
>> DAVID GROSS: I want to make sure you know, more to come.
>> PANELIST: No need for taxes.
>> DAVID GROSS: Be available hopefully, for free, on the website, for those who already have access. Terrific. Matt, you're a senior official with one of the great largest companies in the world, largest particularly in terms of servicing ‑‑ what is it now, 1.5 billion people around the world use your services? These issues are obviously very close to your heart, and to the heart of Facebook. Can you talk to us a little bit about how you see this globally?
>> MATTHEW PERAULT: You said a slogan that a ripe for t‑shirt manufacturing, taxes down, affordability up. We could all wear that across the front of our chest. So, the headline here that we're skirting around in the conversation about revenue generation is, what are the things that we can do to unlock the value of the internet? It's wonderful to be at a forum that believes that's a core principle, such a core principle we don't have to mention it explicitly.
A while ago I had a discussion with a minister of communications. He said he repeatedly got into communications with the minister of finance about generating revenue. The minister of finance said, I have this revenue target I need to hit. I have this growth target I need to hit. As a result, I am going to look to impose significant tax on the internet sector, because that's going to help me hit my revenue targets.
The minister of communications would say, I know how you can get to the same result by different means, lower taxes on this sector, or don't impose additional taxes, because the revenue generation that you will see as a result of the growth of the sector, as a result of the value they'll provide to the people in your economy, will be so significant that you'll hit your growth targets, you'll hit your revenue targets, and do it while unlocking the value of the internet in your nation.
There are significant lessons there. We hope many ministers of communication will have those conversations with ministers of finance throughout the world. A study we did recently showed if you brought connectivity in developing countries up to the level of it in developed countries, you would create 140 million additional job, reduce child mortality by 7%, and increase access to educational resources for children by over 600 million children.
So, obviously, I think there's a tremendous amount, not just of economic value, but also social value as a result of realizing the potential of this sector. The question, how do you get there? What's the policy road map to get there? One of the really encouraging aspects of being a part of this forum this week is seeing to many different constituencies are coalescing around aspects of the agenda. There are differences many people have. There have been robust debates throughout the week. But I think there also has been a coalescing around some of the core principles that we might all agree to about the means for getting from where we are to a more connected world.
So, a few different ones. So, free and open internet, promoting the free flow of information across borders, ensuring information can flow without resistance, everything from import export duties to surveillance regimes. We need to think specifically about how we can encourage the free flow of information across boundaries. Second, connectivity taxes, which is if you look at taxes up and down the value chain in terms of the taxes that are imposed between a device getting to someone and someone actually being able to use it, there are an enormous number of points in that value chain where taxes are imposed.
Import duties, sales taxes of devices, sales taxes on the purchase of data plans. Any number of different taxes that I think probably are a restraint on connectivity as opposed to a driver of connectivity. Typically, you tax things you want less of. If you want more connectivity and you're imposing additional taxes, or you want more affordability and you're imposing additional taxes, that's a hindrance, not something that helps to facilitate what you're trying to achieve.
I also think it's really important to bring down data costs. Obviously, as you described, the tax regime can be one way to achieve it, but there are other ways to achieve lower data costs as well. And to address affordability barriers to bringing people online. And lots of conversations we've had this week, including some people sitting in the front row, awareness barriers have come up as a key barrier to connectivity. Even if you bring affordability down, it's important to demonstrate the value of coming online.
That can be a driver to connectivity. A conversation about sustainable access, it's important to talk about revenue generation. It's important that companies look not just to connect people as part of their corporate social responsibility practices, but also as part of their business practices. So, also as part of a way to improve their bottom line, and that's a way to achieve connectivity that is sustainable.
As many of you know who have followed issues related to internet.org, I think there's been a lot of controversy we've faced in the last year of the program. And I think we've learned a tremendous amount from those conversations. In our own initiative, our program is much stronger than in the past. We have never charged for people to ‑‑ we have never charged or paid operators for offering a service, or charged or paid content providers to be included in the service.
It's never been an exclusive partnership, but we have made changes that have made it a much stronger initiative in the last year. We changed the name of the specific service that we were running with operators from internet.org to free basics, which I think represents the program more effectively. We moved from a more limited platform to an open platform, where anyone can submit a service for inclusion.
And as long as it meets a narrow set of technical guidelines, that service will be included. We've learned a tremendous amount. It's really great for me. This is my first IGF. Yes, it is. Yeah. I had the same feeling. Thank you. And it's great to see ‑‑ I hear the world multistakeholder all the time. It's great to see that play out in practice. It reflects the journey we've been on over the past year. We've gotten a tremendous amount of feedback from a range of different constituencies, from civil society, but also from governments around the world.
We've had robust dialogues with the U.S. government, but also with many governments in the ‑‑ two dozen countries, and learned a tremendous amount. So I'm really looking forward to continuing the dialogue with you, and thank you for the dialogue we've had over the last year.
>> DAVID GROSS: Thank you so much, Matt. Let me follow up on one point. If you want, we have a microphone that seems to be pointing in the wrong direction, but, is, in fact, for your use. Feel free to come up here if you have some questions. Matt, you talked about the tension between the minister of communications in some unnamed country. We can all guess and basically be right. Almost all the tensions are almost universal. And the minister of finance as to the role of taxation and the like. How is that getting resolved? And do ministers of finance, are they beginning to understand that this is somewhat different in the sense that you pointed out, if it's treated right, it grows the economy, grows the tax base? It's not the same as a lot of other things. Or is there a lot of education still to be done?
>> MATTHEW PERAULT: I think both. It does seem to me like there are reasons to be optimistic, that people are seeing as the internet ‑‑ as connectivity continues to expand, I think more and more people are seeing the value of it. When you see the value of it, that makes it more likely that you'll be willing to adopt policy initiatives that will help to spur the development of the sector as opposed to restrain it.
There is a lot more education to be done. Plenty of people in the audience deal with this on a day‑to‑day basis and can probably tell me how they are resolving. The amount of pressure we still see on these issues globally means that they're probably not being resolved perfectly from our standpoint.
>> DAVID GROSS: Perfect. Any questions from the floor? Clovis, you have to come up to the microphone. Here, I can help. Is this working? It is. Clovis, I was trying to keep you anonymous, but, apparently not.
>> AUDIENCE: Thank you very much. It's a question for Matt in regards to internet.org. Could you please explain in detail the business model of internet.org? You mentioned that you have operators, content providers, on an open platform. And if you could also explain the demand road blocks you are facing in the Americas region and the world, thank you.
>> MATTHEW PERAULT: So that's a great question. And thank you very much for asking it. So, we think of this program as focused on sustainable connectivity. And sustainable means that the various different players in the ecosystem have to see value from it. And so really, the core ‑‑ I think, the core proposition at the center ofinternet.org, and the center of the free basics program, is trying to figure out a way to give away some internet for free that is revenue positive for operators.
So, this is not ‑‑ the idea is not to convince operators that as part of their CSR initiatives, that they should give away internet for free and they'll never see return. The idea is to figure out how can we give people some basic services for free in a way that has long‑run value for operators. The core program design that is matched with that program goal is trying to create a mechanism for an on ramp out of the free, basic system.
When people say, you're just a walled garden, actually, the interesting thing about that accusation is, if the free basics program is only a walled garden, the program will not succeed. And it will not succeed for a variety of different reasons. Obviously, there will be frustrations from a lot of communities about that. But the proposition is that this is a good program for operators, and it's not a good program for operators if they don't see any positive revenue return.
So, if we were paying operators to offer free basics, then that could be a revenue model in itself, right, because they could be content for people to stay within the walled garden, because in the walled garden they would be making money when we're paying them. That's not the way the program is designed. It's not the way we've seen the program work in practice so far. So, because people ‑‑ because operators are not being compensated, we need to create a mechanism for them to move out of that free zone as quickly as possible.
So the primary means of doing that is, first of all, by providing a limited set of services. Obviously, people have interest in a broader set of services. But those services also have to meet the technical requirements of the program. And that means basically, fairly limited functionality, limited efficiency such that it's not a significant drain on operator resources, and so that people will seek more rich internet experiences outside of the free basics experience.
>> DAVID GROSS: We've run out of time for this panel. Everyone will be available ‑‑ one last thing.
>> MATTHEW PERAULT: An advertisement for me, too?
>> DAVID GROSS: (Off mic.) The statistic I heard that ‑‑ 50% of free basics subscribers turn into full subscribers.
>> MATTHEW PERAULT: Yeah. So 50% of people who come into ‑‑ who are coming into the internet through the experience are purchasing data outside of free basics within 30 days. And that's the statistics that I think reflect that our initial results from the program ‑‑ and, again, it's the early days of the program and we're waiting to see how it will unfold ‑‑ but I think that shows it's working in line with the objective, which is create a way for people to come online, to understand a little bit about what the internet has to offer, to develop digital skills, to connect to basic resources, and then to move on to the full internet.
>> DAVID GROSS: Terrific. To taste the internet is to want the internet, I guess.
>> MATTHEW PERAULT: Another t‑shirt.
>> DAVID GROSS: Thank you very much.
>> DAVID GROSS: While we're clapping, if we could have our next panel come up. We're doing this sort of seriatim. Anema, Natasha, Ellen. If you could come up with your cards here. While they're coming up here, let me just ‑‑ and we're apparently not very gender balanced on each and every one of these. If you look at the third panel, you'll see it's also not gender ‑‑ we're doing okay on regions, but not so good on gender. The IGF learns over a long period of time, I guess.
This panel will give examples of revenue regimes. I also don't know what that means. But it does refer to the good, the bad, and the ugly. So I guess this is going to be a movie. We're going to have three, sort of, quick presentations. We've got different geographies involved, and different perspectives. Anema, why don't you start off, particularly with, I think, your African‑focused perspective?
>> PANELIST: Thank you very much, David, and good afternoon, everyone. My name is Nena, I come from the internet, like I always say. We work with the web foundation. And one of our key programs is the aligned affordable internet, which is the largest multistakeholder alliance whose main task is to reduce the cost of internet access. And, yes, we have had great support from the U.S. State Department. And we are hoping that Global Connect will be even more global.
And there are quite a number of these going on. And, of course, as someone from the internet, I cannot not be happy that there are so much interest in lowering the cost of internet access. I would like to share with us first what we call one area network. Anybody here has heard of one area network in Africa? Okay. It's very simple. it's removing roaming. For people who stay in the EU, in the Euro zone, it's easy. But Africa, we have 54 countries, and it's a whole continent.
Last year, during the summit, the summit of the African union heads of state, they agreed that we need to get our technology growing. And there was another summit of eastern African heads of states which said, yes, we don't have all infrastructure. Yes, we may not have all that we need. But there are some things we can do that does not really require investment. And thanks to President Kagame, he said, one of those, let's try the northern corridor, it's called.
Let's begin removing roaming charges between Uganda, Kenya, Rwanda, and let's see what's going to happen. So, by October of 2014, October 8th, if I recall clearly, the One Area Network got functional. Three weeks ago, on the 21st of October, 2015, that is about one year on, we now know that between Uganda and Rwanda alone, calls have increased by 800%. So, where you have half a million calls, you now have 2 million, 3 million, and every single month there is increased number of calls.
And what have we seen? The One Area Network is moving beyond the initial even Kenya, because now, south Sudan has joined. And if we know the complexity of south Sudan, if we have followed migratory flux of south Sudan, you will understand why removing roaming charges is very key to people from south Sudan. So, the minister of south Sudan was ecstatic, because, he says, I can go around east Africa and not have to pay more.
As Africans begin to move more, as Africans begin to consume more, we know that this is one industry. And who are the people smiling to the banks? The telecoms operators, because more means also more revenue to them. So you lose a little, and then you gain more after all. Now, what we are thinking of doing in Africa ‑‑ because the way the African union has divided Africa is in zones. We have west Africa, and you have free movement in West Africa.
You have Eastern Africa, and you have free movement in Eastern Africa. And Northern Africa, South, and Central. The plan in 5‑10 years time, I hope that will come true, is with the Smart Africa initiative, we go from regional scrapping of roaming charges, West Africa will do this, Eastern Africa will do this, until we get to One Africa Network. So, that is what we are hoping to achieve, so people like myself who like to talk can really do that, and everyone will be happy with that revenue. Thank you for now.
>> DAVID GROSS: Thank you very much, that's very exciting. Members who have made that possible. So, Natasha.
>> NATASHA JACKSON: Okay. Thanks very much. Actually, what I want to talk about was actually getting more phones in the hands of people so they can make those calls.
>> PANELIST: Yeah, thanks.
>> NATASHA JACKSON: (Chuckling.) And I'm going to, sort of, build on what Jorge had spoken about earlier, particularly on the tax side. So, you mentioned the good, the bad, and the ugly. Here's the ugly. The trend is going the wrong way in tax. In 2014, we looked at 110 countries, the cost of the connection charges, call charges, SMS, and data. For the 110 countries, the average last year was 20.1%. So, in 2007, 17.4%. The trend is going the wrong way, it's been going up.
To put that in a country perspective, to give you a sense of what these taxes may be at, in Jordan last year, consumer taxes were more than 38% of the total cost of mobile phone ownership. Obviously, that's a huge burden on consumers. And it's disproportionately affected those in lower incomes, women, and young people. Not only is it affecting those disproportionately, but, it's discouraging investment from the industry.
In Turkey, the fees are 58% of operator revenues. If I'm an operator looking to invest in a market, you know, I'm not going to be looking there. I'm going to be looking to other markets. You've really got to think about this not just on the consumer, but also from the investment point of view. In developing markets, the picture is worse than in the others in terms of mobile tax versus other services. Again, this is something Jorge talked about. Sector‑specific tax being so much higher.
Other than in Greece, in the ten highest consumer tax countries, all of them are emerging economies. So this is really a developing economy issue. And, again, like Jorge, it's like you set me up for this. But we talked about the benefits that governments will get from this. So our research also talks, if you reduce taxes by 1%, you'll leap to a 1.8% increase in penetration, and that could translate into $.7 billion over five years of GDP. So really, you know, tax ‑‑ it's been said before on this panel, I'll say it again. It really is one of the things we need to look at.
The other issue is USS. as was mentioned before, they are ineffective mechanisms for getting coverage out there. Most of the funds that exist today have got unreleased funds in them. In Sub‑Saharan Africa, 19 out 23 funds have over $400 million sitting in them, waiting to be disbursed, in 2011, that is probably an under estimate, in many countries, there's transparency issues of what's really going on.
The underlying framework haven't been well‑thought out, they're not technology neutral, they're not keeping up with technologies, they're bureaucratic, they have limited oversight. The levies or taxes in which they are based is are usually not developed with any real analysis of what levels of investment are needed and where. They receive funds in excess of their needs or capabilities.
So, there were many alternative market‑led approaches that we can take. And you wanted the good in there along with the bad and the ugly. (Chuckling.) So, Bangladesh, telecom set up a phone a while ago. They set up a program called Village Phone. They providing micro‑leasing capabilities for people in the village to be able to resell mobile phones to their village. So they would make a small markup on it, as well.
Penetration, from the Village Phone project, from 6.4% to 46%. So, that's an example of a real market‑led initiative that's had very good impact. The other thing we need to think about, really, on the demand side, really look at where the demand is. So, in India, you have 50% coverage of mobile broadband, but only 20% are using the mobile internet. When we surveyed those who weren't included in our report last year, 60% of people said they didn't need to access the internet.
The issues are around local ‑‑ language and local content. So, these are some of the issues we really need to address as well, on the flip side. So, just to wrap up, I mean, we believe on USFs that governments should phase them out and stop collecting those levies. The money should be returned to operators and used to extend mobile to the remote areas where they need to be. And the governments should really start looking at more market‑based solutions, moving taxes, stimulating demand, and looking at perhaps public partnerships rather than USFs to get coverage out there.
>> DAVID GROSS: Thank you very much, Natasha. You referred to a number of studies. Are they available to the public, and if so, how do people download them?
>> NATASHA JACKSON: They are available on our website, GSMA.com. If you want to come and see me afterwards, I can get your email and we can send you direct copies. We have them in other languages, as well.
>> DAVID GROSS: I assume what you'd like to have people do is, if you're a government official, take them to heart. If you're not a government official, people should feel free to use them to advocate, so as to increase the amount of access and usage of both voice and internet services.
>> NATASHA JACKSON: Absolutely. Because we've covered so many countries, there's always going to be fairly local examples that people can use in their advocacy.
>> DAVID GROSS: She mentioned local content, which is usually something that Disney prides itself in. Ellen, do you want to talk a little bit about examples of revenue regimes? I know that, of course, the good, the bad, and the ugly is ‑‑ sounds like a Disney movie theme or something.
>> ELLEN BLACKLER: (Laughter.) A movie theme, maybe not Disney. Sure. So, I think it's actually a good subtitle for the panel, because on the revenue side, there is some good, and bad, and ugly. And I think one of the ugliest things is that there's no easy answer. There's a lot of flux in the market. And most people don't really know how to make money on the internet yet, reliably, sustainably over time, including significant companies like Disney.
So, you know, there's a handful ‑‑ in some ways, it's not rocket science. There's a handful of ways people make money on the internet. You get people to pay you for what you're doing. They subscribe to your service, read and want what you're providing, use the service you're providing. You support it with advertising, where the user is using the service for free and the provider of the service is collecting money from advertisers. Or, a lot of content on the internet is made available as not a revenue‑generating intent.
For our company, we have a big website, Disney.com, which I encourage you all to use, that has a lot of information about the company. There's games, there's movie trailers, there's, kind of, fun things to do. But that ‑‑ we don't view that as, really, so much of a revenue opportunity as much as your ability to engage with the company. And I think that's true, actually, of a lot of websites that people in developed economies who are using the internet every day use.
They're going to check the time something is open. They're going to see what is playing at the movie theater. They're not actually generating revenue by the exact thing they're doing online at that moment. There might be some advertising related to that, but really it's about doing their daily business that will then generate revenue down the line. So that's something we often lose sight of. And an important reason that many websites are created, for users to be able to access a company that then will lead to further revenue opportunities down the road.
And so, I'll just go back to the good. There's lots of interesting things happening on the revenue side. There's been a movement over time to understand that, maybe customers are willing to pay for content in some contexts. And you see a little bit of a shift towards that now with newspapers that were originally making only free services available today trying to figure out how they can have an enhanced service available by charging. So there's some amount of content that's available for free, but if you're a very heavy user, you maybe get a better experience if you pay.
But I will say, even in advanced ‑‑ people who are far up the chain of both developed economies and internet adoption, this is still very much a struggle. In our company, we've tried making it available for free. We've tried charging it. And I think we haven't really settled on the best answer. And I think it will be a mix. I mean, for our company, we make some available for free. We make some available if you have a paid television subscription, and some is available on other platforms like Netflix and Hulu. So it's very much in flux.
One of the things that goes maybe in the ugly category, it's complicated. And what is complicated about it is that it's its own little ecosystem. So we talked about, kind of, the things that are required to get broadband deployment and equipment in people's hands. If you look at what is required to get content online, it requires payment systems that are functional. Customers have to be able to buy something. If you want to get revenue for your product, they have to be able to buy it.
It requires an advertising ecosystem. So it requires businesses willing to put advertisements online. And then it requires a fairly elaborate system of payment of the advertising to the online provider. So you have to be able to measure. Advertisers want to advertise where people will see them. So they want data about which websites people are going to. And they don't want to take my word for it. They want independent data about where the customers are going to be.
So there is, kind of, a whole system of advertising measurement that has to be in place. So those are also, kind of, pieces of the ecosystem that have to be in place to get to a content creation ecosystem where businesses can be sustained by putting content online. And, of course, piracy continues to be a problem. And it is a problem in a couple ways. One is that it's very difficult to convince people that there's value in paying for content in they have access to a lot of content for free, because it's stolen.
And what we find happens is that obviously has an impact on my company, but our movies will probably get made, because we have a lot of financial resources. We have a big audience in developed countries that will pay for them and movies. We can finance those movies. What we see is, it has the biggest impact in countries where the content industry hasn't grown yet. That they are the ones who can't get financing. And they are the ones who can't find a market ‑‑ a paid market for the distribution of their films, or can't increase the quality of their films because they will only be able to make so little that they can never migrate to, you know, special effects kind of films.
So it has this really dampening effect on the growth of content industries that aren't already established. So, I think that's ugly. Bad. I'll put that in the bad category. And the other issue is a lot of data protection issues. We've talked a lot, I think, over the last year about issues related to government surveillance. But a rational regime for commercial data protection is also ‑‑ has a big influence on an advertising industry, as well as a company's ability to offer services across borders. So, I'll put that in the category of good, because we strive for an interoperable regulatory regime of data protection.
>> DAVID GROSS: Thank you very much. I'm pleased that there were a good number of goods in there. Any questions? Please, come to the microphone. If not, I've got an additional one for Ellen. On the local content side, you're very active globally in producing new movies and other entertainment using local content. Do you see an impact on that in terms of adoption rates for internet access in those countries?
>> ELLEN BLACKLER: I should've addressed that, so thank you for asking.
>> DAVID GROSS: That's my job, is to help you.
>> ELLEN BLACKLER: Yes, absolutely. We ‑‑ people don't buy a phone because they want to have an additional thing, they buy a phone because they want to do something with it. And one of the things that we have learned ‑‑ and I was reflecting on this when we were talking about the free basics service earlier, because Michael and I, who you will hear from later, years ago when we were children, worked at the FCC in the U.S., at the Federal Communications Commission.
When we were trying to promote broadband, people had dial‑up service, and we were trying to promote broadband. We were doing a lot of measurement of how many people had dial‑up service and how many people had broadband, and what was making them move from one to the other. And it was the content. When what they wanted to do couldn't be done easily with their dial‑up, that is when they were willing to pay for the broadband. So it was all about the content.
And the other thing we used to say back then is, no one ever tried the internet and decided it wasn't for them. So, quite literally, the data showed that no one ever had internet access and thought, you know what, I don't want that anymore. They sometimes could not longer afford it, but they never didn't want it anymore. And so this idea that people need to start, and will then see the value, I think, is important for us to keep in mind.
In a main session earlier today ‑‑ perhaps yesterday ‑‑ yesterday, I think ‑‑ one of the panelists was presenting data and saying that in Asia, where the affordability problem has been a little bit more ‑‑ less severe, the barrier is customers don't know what they would do with it. And so, I think it's the content that's really going to crack that barrier, as people see more and more local content, they'll give it a try. And from there, there's really no turning back. Once people try, they see the value of it.
>> DAVID GROSS: Thank you very much. I think a round of applause for a terrific panel. Thank you.
>> DAVID GROSS: And with that, the third panel, Michael and Clovis, if you could come up here. This is third panel, the title of the third panel is, Revenue Investment Options and Their Impact. Now, this actually is a title that I think I understand. But I suspect the panel will prove me wrong. So, all right. So, Michael, do you want to ‑‑ since you're already sitting down, and Clovis hasn't arrived yet, can you start us off with a brief presentation? You can start as a small child when you were at the FCC, or you could talk about your work at ISOC.
>> MICHAEL KENDE: I don't remember my childhood.
>> DAVID GROSS: Ellen does.
>> MICHAEL KENDE: Thanks, yeah. Just a brief few observations, and I'll really build on some of the comments that were already made here. So, recently, I think in September, the broadband commission came out with their report and noted that internet growth is slowing down. And that kind of means that, you know, the easy gains have been had. The people who can really afford it, really understand it, have the education, etc., have all taken it, and that we have some hard work left.
And that's kind of alarming, because only 40, 41% are online. We're not at 60, 70% where you would normally start expecting growth rates to taper off. Yep. All right. And it's particularly alarming because availability is higher than ever with mobile internet, you know, being available much broader. People don't have to wait for lines to come into their neighborhood. So on that basis, one area that I would really recommend looking at investing for a government is on better data.
And I heard a quote the other day by Lord Kelvin, who was the one who determined absolute 0, Kelvin. And he said, if you can't measure it, you can't improve it. And I think that really goes for this, that if you have this investment opportunity, you need to know where to put it, particularly given that, again, the low‑hanging fruit has all kind of been taken in adoption. And in Brazil, it provides a great example of gathering data. They have this CETIC, the Regional Center for Studies on the Development of the Information Society, that does an annual survey, since 2006.
The website is CETIC.br. They take a huge sample. They get all the demographics, age, gender, education, location, income, everything. And the particularly good thing that they do is they cover the non‑internet users, not just the internet users. That's expensive. You can't send them an online form, by definition, you have to go to them and interview them. But they get some great numbers. And this is based on 2013. I understand 2014 may have come out this week, or in a few weeks.
So they interviewed all the people that don't have access, which is just under 50% of the Brazilian population. They're allowed to answer more than one answer. So the numbers won't add up to 100%. So only 25% said they weren't online because it wasn't available to them, which is probably fairly accurate, because this is 25% of those who aren't online. Because 90% of the population lives within range of mobile broadband 3G. You wouldn't expect availability to be very high.
25% said cost was the barrier. And, again, that's pretty low and probably pretty accurate, because mobile band according to the ITU is 3% of average income, well under the broadband commission goal of 5%. So, that's not surprising. So, 70% said they don't have the skill to get online. They don't know how to get online. And 70% said it wasn't relevant. And I think that reflects what Natasha was saying, as well. They just didn't see it as relevant or interesting.
And so that suggests, really, if you look at the numbers, it's fascinating because you can look across all the age groups, across all the differences, and it's actually pretty consistent. The skills one depends on age and education as you'd expect, but the other ones are fairly consistent across all of the demographics. And that suggests that you should really start investing heavily on the demand side so that the adoption catches up to the availability.
And that's probably pretty hard stuff. I mean, you need to train people, online skills, digital literacy, e‑government content will help people get online, and, of course the local content, as Ellen had mentioned, needs to come online. And there's a lot of interesting things there about payments, about promoting entrepreneurs that will create more local content.
And I think, you know, these are starting to get into some trickier issues than just rolling out networks and deploying, and lowering taxes, that I think are fairly well‑understood, although not always obvious to get governments to understand. So I think, really, you need that kind of data to really know where intelligently to invest. Of course, other countries will have less coverage, and have other issues that need to be addressed. And I think data there is useful, as well, so you know where there's infrastructure and what can be done with it, and be able to identify if you need to invest, where to put it.
But I think I'll leave it at that in the interest of time. But, again, I think you should really start ‑‑ I think we should start to understand the data. And I know the ITU, and there's a whole partnership trying to develop better data, particularly for the non‑internet users. There was a big meeting in Geneva. This is important to know how to speed up, instead of letting growth rate slow down, we need to speed it up and get everyone as interested in the internet as we are. Thank you.
>> DAVID GROSS: Terrific. So, maybe, to summarize, you see an opportunity for a shift in focus by governments and by private sectors, and NGOs, and others, starting to be a way ‑‑ it's not a zero sum game, so one doesn't have to go at the expense of the other ‑‑ but away from incentives for infrastructure, but rather, to try to promote the use of it, both in terms of digital literacy, as it is sometimes referred to, and otherwise, it seems to me that that sort of fits nicely into the thing that Matt talked about.
Give people a taste ‑‑ Ellen talked about it, as well. If they try it, they'll like it and want more of it and keep it. Is that what you're suggesting?
>> MICHAEL KENDE: Absolutely. On our website we have maps. You can see numbers, every country, you can see 3G broadband availability is always higher than internet usage by varying scales. Before you start investing money or thinking about how to address the issue, you have to be able to answer the question, why is there a gap? Is it affordability, is it local content, is it the taxes? What is going on, how can we explain the gap, before you invest another dollar in infrastructure that may not be used because you haven't pushed up the demand side yet.
>> DAVID GROSS: The website you referred to?
>> MICHAEL KENDE: It's on the ISOC website, global internet maps. I think that would get it on a Google. Nobody uses URLs anymore.
>> DAVID GROSS: Terrific, thank you. Clovis, you've had the honor in leading the Americas in terms of telecoms and internet at CTEL, now you're in private practice, you have a global view, with a real focus here on the region.
>> CLOVIS BAPTISTA: Thank you very much, David. Good afternoon, everyone. Thanks for the invitation, for being here. I'd like to delve into something based upon my experience in identifying the needs of the various countries in the region. As you know, the Americas region is characterized by a lot of asymmetries, we have different economies, different market structures. But there is something in common. We need to expand internet coverage in the whole region.
So, I have given some thoughts on how to develop business models to ensure revenue investments and revenue streams. And I have been talking with some investment banks in New York. And there are some guys interested in investing in companies to deploy internet applications in the region. There is room for such a business. And basically, what I have been thinking about is, perhaps, a model with free or affordable access to internet, with some free minutes for voice communication for local or long distance calls.
And the company that would be providing such kind of service that could get revenues from the payments of value‑added services. I explain. I understand that a kind of model involving partnership among different market players could provide good solutions. And I can see, for example, government could be a partner. If you use the infrastructure to offer online government services to the population, health services is a tremendous need, health services. And education.
Education is, by default, a demand application. So, government, perhaps, could renumerate the operator for deploying an infrastructure that would enable governments ‑‑ I mean, central state governments and municipal governments to offer some services for free to the public. Also, I can see a space for mobile advertising, perhaps even low‑income people, they could get messages, and they can consume something. And this could generate some revenue streams for the operator, and for the advertising partners.
It's important, also, that we consider the offering of initial services to under‑serviced communities, low‑income population. And also, we could add another application. To me, that's very important, is e‑commerce. We have a lot of small and mid enterprise operate in several regions, in many localities with a very bad internet connection. And I'd like to mention also agriculture. There is a lot of interest in precision agriculture. And a lot of wealthy companies that have big farms deployed in Brazil and other countries, that they need to get technology to improve their process and reduce costs.
So, there is another opportunity to be considered. It is the local content production. Local content is another barrier for internet adoption in Latin America and the Caribbean. So, I think that there is a lot of possibilities, a lot of opportunities for startups in the development of local content. In regards to infrastructure, I think that the idea of using heterogeneous networks could be considered, considering different technologies, and also licensed spectrum, perhaps having Wi‑Fi spots covering small localities could be a good solution for lowering the cost of infrastructure.
So, all that, coupled with a tax exemption regime for terminals, as was discussed before, could enable a kind of ‑‑ could leverage the deployment of innovative solutions for people that do not yet have access to internets. For sure, this kind of idea would require a good understanding among governments, the private sector, and NGOs. But I do believe that there's room for improvement. There's a lot of things to do. A tremendous challenge before us.
And I do believe that in the Americas region, we can succeed in improving internet connectivity through the use of innovative business models. So, I think that there are opportunities, so let's seize them.
>> DAVID GROSS: Thank you very much, Clovis. Let me make sure I understand a little bit about some of these innovative revenue opportunities. So, I'm particularly intrigued with the idea of governments paying the private sector, since the theme of much of the conversation so far this afternoon has been lowering the amount ‑‑ or the massive amounts that are flowing from the private sector to governments. Are you suggesting that they're just going to write checks, or is this a way of offsetting amounts that would otherwise be owed by the carriers to the government?
>> CLOVIS BAPTISTA: Thank you. Oh, thank you. No, in fact, the idea is not governments paying the private sector. I think that governments could act as enablers, because if you are going to provide free access, governments, they could pay the provider for delivering health service to the population, education, e‑government services. So I see the government as one of the content providers.
>> DAVID GROSS: But not financing?
>> CLOVIS BAPTISTA: Yeah, not financing.
>> DAVID GROSS: So it's not an innovative revenue source then, for the company.
>> CLOVIS BAPTISTA: Yes, it's a way for companies to offset costs of the infrastructure.
>> DAVID GROSS: They would be paid by their subscribers to get the services.
>> CLOVIS BAPTISTA: Yes, but the subscribers could have free access and they should pay for the services that they opt for consuming, for example, entertainment services, mobile advertising. And you could have for free government services, citizens could have for free access to online portals and to do their transactions online. And perhaps governments that could help the operators pay something to subsidize this kind of service offered for free to the population.
>> DAVID GROSS: Michael, do you have a view?
>> MICHAEL KENDE: It sounds like a form of zero rating. Instead of the operator in the case of internet free basics that we just heard, the government effectively subsidizing the delivery of their services, so stepping in and paying for some of the important services to be delivered to the end users. And so it creates some demand for the e‑government services, the health services, and offsets the cost for the operators.
>> DAVID GROSS: Very good. Questions from the audience? Keep turning this thing off. One last question for the panel. Looking ahead, are you seeing new opportunities for revenue sources, or are we still going to be mining the same sorts of revenue streams that Ellen outlined, which is basically revenue coming from advertising, revenue that's coming from subscriptions and the like? Are there truly new innovative models, new revenue streams that can subsidize services to the public?
>> PANELIST: Certainly, ISOC isn't coming up with them. But, that's an interesting question. I mean, I think that it's definitely worth looking at others. And certainly trying to take away some of the taxes, and figure out other ways of paying for this, yeah. But I think, you know, there may be other examples in the audience.
>> DAVID GROSS: Clovis, do you see that diversity within the region, particularly, in terms of these types of revenue sources?
>> CLOVIS BAPTISTA: Yes, I see a lot of possibilities. I don't have any answer ready for you. But I have been talking with a lot of very smart businesspeople, and they are just willing to find a path to deploy services. Perhaps in the mobile advertising area, we could get some innovative applications that would enable low‑income people to consume. In the area of small and medium enterprise, perhaps they need some special applications that they don't have access to. And this could help them to sell the products in the local market and abroad.
So, companies operating in the region, selling oil or something, some sustainable products, they could leverage their sales and enhance these revenue opportunities. So, I think that there are a lot of options. And we should pursue innovative models for them.
>> DAVID GROSS: Terrific. We've come to the end, but we are not ending yet. We all owe a tremendous debt of gratitude to Garland McCoy, the person who actually put this all together. It's his blood, sweat, and tears that created this. And we owe him a great debt.
>> DAVID GROSS: And thank you to our panel, and to the previous panels, as well. Thank you very much. And we're on time. Coffee on them.
(End of Session, 15:30)