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Infrastructure sharing in energy and digital development: takeaways from cross-sectoral cooperation

Natalija Gelvanovska-Garcia's picture
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Photo: gui jun peng/Shutterstock.com

In many parts of the world, the sharing economy is ever-present for individuals, allowing them to use personal assets—for example, houses and cars—to their fullest potential. If you plan to be away for a period of time, why not rent your space for a few extra bucks?
 
Such a phenomenon exists in infrastructure economics, where the level of asset utilization matters for end-cost. As more consumers use the same infrastructure more frequently, the unit cost for all consumers goes down. Recent projects combining expertise from the World Bank’s digital development and energy teams demonstrate this.

Digital and electricity networks connect consumers in similar ways. Both require wide distribution networks, yet the cost to build or extend these networks is significant. By sharing networks and working together, these two sectors can help one another achieve access and service quality goals while sharing the costs.

While end users see digital connectivity moving towards wireless models, it’s worth highlighting there is a strong cable infrastructure behind all wireless connections. High-quality wireless services require speeds of light, only accessible through fiber optic cables behind the Wi-Fi transmitters. Coincidentally, today’s electricity grids use fiber optic cables for system supervision, grounding, control, and monitoring.  It’s standard practice for these fiber optic cables to run alongside energy transmission infrastructure (see the “cat ears” in the feature image).

Yet these cables often come with more capacity than needed by energy companies, which usually take around 10 percent. This means they have spare capacity to share (or rather sell) through commercial agreements to internet service providers (ISPs). It’s a good match—energy companies get a new revenue source for the same asset base and ISPs can expand their reach on the cheap. It also allows new, smaller ISPs to enter the market, improving overall sector competitiveness.

This concept is not new. It swept across highly developed countries since the advent of telecommunications. In lower-income countries, sharing passive equipment—like concrete towers, ducts, and masts—has taken off due to obligations imposed by electronic communications regulators to promote telecom sector development. However, sharing of active equipment like the spare fiber optic capacity of energy companies remains nascent.

That energy and telecom sectors are slow to embrace infrastructure sharing of active equipment stems from regulatory factors and lack of capacity and/or awareness: 

  • Regulatory barriers prevent energy companies, especially electricity transmission operators, from commercializing their telecom assets. On the other hand, insufficient regulatory stimuli can limit action in this direction.
  • Energy sector companies lack familiarity and knowledge of how to deal with the telecom sector and don’t have a full appreciation of the commercial and social returns of infrastructure sharing.
Through more than five years of work on this issue in the Western Balkans we have learned what it takes to encourage this match. In honor of “World Telecommunication and Information Society Day” we share three key takeaways:
  1. ISPs are natural allies; communicate with them often. ISPs benefit from infrastructure sharing activities through access to more fiber optic capacity. Energy transmission system operators (TSOs) seeking to develop an infrastructure sharing practice should understand the ISP market, surveying their demand for spare fiber-optic assets to determine the size of the potential opportunity. In parallel, ISPs should be consistently informed about the infrastructure sharing process: relevant policy and/or regulatory changes likely to be triggered or possible changes (for example, a  new business unit) within the TSO to handle this new service. 
  2. Stay focused on the bigger picture. It should come as little surprise that TSOs, which face challenging electricity supply issues daily, do no rush to engage in infrastructure sharing. For them, energy is their primary business and they are reluctant to move away from their comfort zone by venturing into telecom business. Any revenues from infrastructure sharing activities will likely be marginal in the first stages, compared to those from electricity provision. Therefore, any start-up persuasion strategy should pivot towards painting the larger picture on how infrastructure sharing may help bridge digital access gaps and support digital transformation. No country is immune to digital infrastructure gaps. 
  3. Better to show once than describe a hundred times. During 2014­–2016, supported by a grant from the Public-Private Infrastructure Advisory Facility (PPIAF), the World Bank provided consulting support to Kosovo’s TSO KOSTT J.S.C. to operationalize an approach for infrastructure sharing. The technical assistance achieved its goal: in 2017, KOSTT signed its first contract and the second followed within half a year. In total, close to 10 percent of its fiber-optic network, around 100 kilometers, has been commercialized since by four operators. As we now reflect on this success, the key was organizing a visit to two Dutch companies (Relined B.V. and Novec B.V.) to learn from their experience. Kosovar executives were impressed with how these companies engaged in infrastructure sharing as part of their social mission. Shortly thereafter, the KOSTT Board took a strategic decision to make the company the first Kosovar public utility to offer dark fiber services in the telecommunications market. 
Once understood, the benefits of infrastructure sharing are evident to all parties. Energy companies improve their overall financial performance by opening a new line of business using existing assets. This fresh flow of cash can be used to subsidize energy access to new customers or improve services to existing ones. Telecom operators benefit through significantly decreased network deployment costs, allowing them to reach previously cost-prohibitive areas. Finally, citizens benefit by getting better broadband connectivity and, in some cases, lower electricity tariffs.

For more information on cross-sector infrastructure sharing, see these resources:

Comments

Submitted by Rajaraman on

India's mobile Telecom companies have taken it further by hiving off tower assets to tower companies which provide them tower services at a fraction of the costs they were incurring on their own towers...
Shared economy principles are getting very important for survival in the infra sector.... necessary but not sufficient!

Submitted by Fred Amonya PhD on

Good piece. However, do not attempt to ‘replicate’ (see preamble). PPP environments are complex dynamical spaces. However, the present project can be used to assess existing frames (not models).

Submitted by Naeem ulfateh on

A lot more can be done. However, bureaucratic hurdles and complex regulations are the obstacles to move ahead in true financial shared economy. Without constant and reliable income by sharing economy across cultures, prosperity is a day dreaming.

Excellent piece of writing.
Muhammad Naeem ul Fateh

Submitted by Anna Kele on

Sharing economy should not be replaced by the circumvention of the IPRs ! When somebody gets great new ideas while the other person has sufficient capacity to further develop them, the cooperation should be close in research (cost shareing) between the partners. The new ideas (new methods) are regularly the products of the human brain(s) what should be better protected by laws and regulations when more than one persons are involved as the result of the shareing process.

Submitted by Adji Krisbandono on

Nice article! Indonesia has also started to implement the concept in water sector. Dams and reservoirs are not only built for irrigation and water supply, but also for hydropower. Recent regulations enable private investors to build hydropower (or even mini hydropower) nearby the existing dams and reservoirs.

Submitted by Dr. Mohamed Taher Abdelrazik Hamada, Ph.D on

Individuals in any nation can share benefits of the economy of this nation , if there is fair distribution
of income among these individuals . Infrastructure projects are valid examples of such share , costs must be divided among individuals according to their wealth and abilities and also the volume of their usage and utilization .
Inspite of the widespread of digital and electricity network , there are still societies that are deprived of these vital services not because of the lack of funds but because of the lack of putting priorities for the infrastructure projects in a fair way .
The World Bank and other world agencies are trying hard to extend their vital services in the field
of digital and electricity networks for the remote areas of the globe that may lack the right means of
transportation and modern means of technology .
Through competition between the private sectors and the public sectors within the framework of PPPS , we all can achieve such goals , this process maybe hard at the beginning ,but once it is started
within the cooperation of all interested agencies , it will get it's benefits and fruits and we have so many
successful examples similar to such cases.
Yours Very Respectfully,
Dr. Mohamed Taher Abdelrazik Hamada, Ph.D
Senior American Citizen
Retired Professor at Strayer University,USA

Submitted by Sally Hall on

Please help small business with great ideas so that the world can go on all I get is blown off by fools e.g. No new ideas I say aqueducts around 2000+ years and still working is this too new
Water out of the sea how do you do it ( I nearly said 50,000 ladies with buckets on heads) instead said now days we use pumps. We need to think out of the box with the 4th industrial revolution. Injectable contraceptives for 5 or more years to bring the population down so no African or South American spring with too many unemployed young men.

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