Partnership for Lebanon: Transforming Through Broadband Connectivity

2. Introduction: The Partnership for Lebanon Broadband Strategy

3. The commitment of the Partnership for Lebanon 5 companies, 5 workstreams, over 15 projects www.partnershipforlebanon.org

4. Education and knowledge into innovation Ingenuity and entrepreneurship into sustainable growth and wealth Its worldwide Diaspora into a connected global leading community Individualism and tradition into creative cultural diversity and social cohesion The Partnership Vision for Lebanon With the most advanced communications infrastructure of the Middle-East, Lebanon could transform

5. For social inclusion To boost productivity and economic growth For government efficiency and effectiveness OECD, UN, World Bank, WEF all recognize the power of broadband connectivity to accelerate economic growth and social inclusion • Education for all • Healthcare for all • Universal Connectivity • Increase competitiveness • Attract private investment • Generate Innovation • Reduce transaction costs • Better Services for citizens and businesses • Cost-savings • Security, safety and transparency

6. Connectivity is a need not a luxury • Insignificant costs compared to other infrastructures • For Lebanon the most powerful lever to leapfrog

7. Table extracted from the 2006 European Innovation Scoreboard

8. Broadband subscribers per 100 inhabitants, by technology (Source OECD, June 2007) Source: OECD

9. CRL* Team Government Affairs IBSG Consulting Engineering Peter Gruetter Distinguished Fellow Robert Pepper Director, Global Policy Monique Morrow Distinguished Engineer Nicola Villa Director, Public Sector Corporate Affairs Russ Gyurek Consulting Engineer George Akiki Program Director, Partnership 4 Leb Others Diogo Vasconcelos Distinguished Fellow Hosein Badran Robert Grossman (IBSG) Paolo Campoli (Business Dev) Selim Edde (BDM) Mawaheb Kabbara (SE Mgr) Michael Truskowski (CE) Salam Yamout Program Manager, Partnership 4 Leb Chris Reberger Manager, Solutions Center * Connected Republic of Lebanon

10. TRA

11. Regulatory and Market Framework

12. Roles for Public and Private Sectors in Technology Adoption % Adoption } Demand } Supply Closing the Gaps: Policies for Digital Inclusion Time • Government as Catalyst: • Market stimulation • Pre-commercial R&D

13. Connectivity in Lebanon today • Weak infrastructure No IP NGN backbone • Low speed 256 KBPS (recently introduced DSL maximum speed 2 Mbps) • International Bandwidth Limited • Coverage Limited • Expensive service $50 (urban, DSL) $200 - $400 (rural, leased) Sound regulatory framework and private investment are key to put Lebanon on the road towards pervasive broadband connectivity

14. Role for TRA • Telecom Regulatory Authority (TRA) • Establish regulatory framework • Issue licenses • Monitor, investigate, enforce • Alternative dispute resolution (ADR)

15. Role of Council of Ministers Council of Ministers decisions to support the regulatory and market framework for attracting investment in sustainable broadband infrastructure and fast deployment in urban areas: • Public ownership and access to ducts for licensed service providers • Unbundling of the local copper loop • Ducts in new buildings

16. Regulatory-Market Framework • Developed by Cisco’s “Connected Republic of Lebanon” team in consultation with the TRA • Based upon technical, market and regulatory analysis • Aims at attracting investment in sustainable broadband infrastructure for Lebanon in 2008 • Many ways to reach the goal. Philosophy of regulation: • simple • transparent / explicit • rely on the market wherever possible • narrowly targeted regulation

17. New Broadband Licenses (1) • Core Type License • Market could support up to three • Auction if competing applications • Coverage requirements / Nationwide service with 8 nodes • Option to construct international gateway • High level technical requirements for speed, latency, jitter, etc based on international standards. • 15 year license with presumption of renewal

18. New Broadband Licenses (2) • Metro/Access Type License • Issued upon application • No limitation on number • No build out requirement for new entrants • 10 year license with presumption of renewal • Technology neutral • Use or lose requirement for spectrum license • No restrictions on the applications that can be run on the network • Allows two-way satellite broadband directly to subscribers

19. Interconnection Requirements • Interconnection for Core licenses • New core licensees have access to international gateway at fair, reasonable rates • Allowed to interconnect at international gateway, national nodes, IXPs • Alternative dispute resolution at TRA if complaint • Interconnection for Metro/Access licenses • Metro/access license holders able to interconnect with Core networks on commercial basis • Interconnection of last resort with Ogero (Liban Telecom) metro/access network • Alternative dispute resolution at TRA if complaint

20. Additional Requirements • New fiber network investment • No initial local loop unbundling for metro/access licensees who deploy new fiber • Assessment to unbundle after 10 years • Legacy copper local network • Unbundled on fair and reasonable terms and conditions • TRA resolves complaints with ADR • “Duct Management Desk” • Guarantee equal access to ducts • Expedite and coordinate new duct construction • Establish and enforce duct standards • Maintenance and access of existing ducts

21. Network Architecture

22. Overall Network Architecture • Delivers a scalable hierarchical network • Network Components: IGW/IXC, Core, metro, access • Core: IPNG cores • Metro: Metro Ethernet connections • Access: xDSL, FTTx, Wi-Max, 3G/4G, Satellite

23. Architecture Details: Core Core Details • IP/NG core network • Each core will have a peering point to IXC • Eight core nodes connected via Redundant/protected 10GE links • High availability. Power back-up, redundant equipment architecture, ability to support variety of QoS parameters • Scalable architecture for much higher data rates per growth

24. Network Architecture: Core High Level Core Router Layout IP/MPLS Provider Routers Only n x 10-40 Gbps BEI 1 and BEI-2 fully BEI-1 and 2 Core meshed for redundancy Tr ip oli Aggregation Internet Gateways at BEI-1 Capability and BEI-2 also 10 Gbps WAN Capabilty BEI-2 J ou n ie h B eirut BEI-1 Z a h l e Sa i da 8 cities Na bat i y e h T yre Beirut Mount Lebanon Urban a r eas / should b e able to con n ect busi n ess es located here with 100MB P S on a per n eed b as is Metro / High density po p ulation / Intense Eco n omic Activity

25. Architecture Details: Metro/Access • Metro: Includes Business Parks & High Density population areas • Combination of rings and wireless coverage around major cities • IP Carrier class network • Meet minimum BB data rate (DS and US) • Suggested requirements: • No service manipulation • QoS to support Video • Availability (limited downtime) • Quad-play service capable

26. 3Km 5Km 300m CO Down: 25 – 50 Mb/s Up: 1 – 6 Mb/s Down: 1 – 8 Mb/s Up: 0.384 – 1 Mb/s Down: < 1.5 Mb/s Up: 0.122 - 0.384 Mb/s DSL Assumptions for metro/access

27. Not All Bits Are Created Equal“Speed” and Latency Telepresence High Voice Gaming (HD) Gaming (LD) Sensitive to Latency Streaming Audio Streaming Video HD-IPTV Download Video Email Low High Low Bandwidth

28. Architecture: What to Expect In Three Years (Conservative): • 3 competitive core networks. • Metro business parks and MDUs in dense populated regions to have a combination of DSL and Wi-Max coverage. Expect 40% availability of BB • Fiber rings around the eight large metro areas • Rural and less populated areas beginning to have DSL availability, potential for Wi-Max and 3G/4G. Expect 15% availability • Demand increasing, demand for Internet devices • SP plans to start FTTH

29. Architecture: What to Expect In Three Years (Optimistic): • 3 competitive core networks • Multiple Metro Fiber rings in major cities • In-band Video options, SDV, PPV, etc • Metro business parks are fibered: access to 100Mbps/1GE • Downtown coverage is upwards of 50% • Metro areas have Wi-Max blast • The major Rural CO’s equiped with DSL capability • SP deploying FTTH to “Greenfield” developments

30. Business Case

31. Broadband business case • Positioning the business case • Private sector outcomes without public support • Seen as a first step to connected Lebanon and precludes no developmental option • Delivers NGN-IP backbones, robust connections • Conservative bias in market forecast and player revenues • Macro economic model • New entrant is an integrated player competing nationally against 2 others • Application revenue excluded

32. Broadband business case • Total market and new entrant characteristics • With economic growth of 2.5% over next 10 years • Leads to a per capita GDP of ~$US 9,500 • Competitive stimulus to the market • 200,000 households subscribing in 2018. $US 40 month flat as speed increases (regression, check against HH income distribution) • 16,000 leased lines in 2018. Prices decreasing 15% a year, going to UK levels, normalised on GDP. • Numerous assumptions associated with churn, share of gross adds, long term equilibriums of 1/3 in core and access, take up curves, market sizing

33. Network Model Cost Assumptions • Architecture is based on current NG available equipment (competitive) • Costs are discounted to represent SP buying power • Estimate does not include “Services” (video servers, etc) • “Content” costs are not included • Model includes upgrades and scalability to equipment • Model includes maintenance expenses • Copper lease costs are included (Access) • Network exchange agreements are not included: handoff, Access to Metro agreements

34. Broadband business case • Consider one vertically integrated player • 10 year cumulative CAPEX/OPEX ~ $US 360 million • 10 year cumulative HH revenue ~ $US 342 million • 10 year cumulative Business revenue ~$US 90 million • NPV of ~ 6 million @ 15% (No TV) • Peak debt $US 52 million

36. Q & A