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1 Terms of Reference: Consultancy Firm Selection # Support for Broadband Competitiveness Program in Eastern Europe, South Caucasus and Central Asia (ECA) Trust Fund: TF Creating Sustainable Businesses in the Knowledge Economy infodev, a donor-funded ICT for development agency hosted by the World Bank, has formed a public/private partnership with the Ministry of Foreign Affairs of the Government of Finland and Nokia to undertake a joint program on Creating Sustainable Businesses for the Knowledge Economy, worth some 13 million, that will run from These terms of reference (TOR) concern Track 1C of the program, on the Broadband Competitiveness Project for Eastern Europe and Central Asia. As the implementing agency for the program, infodev is looking to hire a qualified firm as a Consultant to support activities included in this program. The Consultant will be expected to provide high quality market research, policy analysis, and outreach services to the Program Management Team (PMT) of the BCP between December 2010 and September The countries covered are South Caucasus (Armenia, Azerbaijan, Georgia), Central Asian Republics (Kazakhstan, Kyrgyzstan, Turkmenistan, Tajikistan, Uzbekistan), and the Western CIS (Belarus, Moldova, Ukraine). 1 Background 1.1 The infodev/finland/nokia program infodev is a research, capacity building and advisory program, coordinated and served by an expert Secretariat housed in the Finance and Private Sector Development (FPD) Vice Presidency and working closely with the ICT Sector Unit of the World Bank Group. infodev helps developing countries and their international partners use innovation and information and communication technologies (ICT) effectively as tools for poverty reduction and sustainable social and economic development. infodev is a thought leader in ICT policy and technology-enabled small business incubation. From , infodev is implementing a program entitled Creating Sustainable Businesses in the Knowledge Economy. The overarching goal of the program is to increase the productive capacity of SMEs in developing countries to compete effectively in today's global knowledge economy and contribute to sustainable development. This program, jointly organized by infodev, the Government of Finland and Nokia, will undertake a range of activities that aim to encourage innovation and competitiveness among SMEs in the ICT and agribusiness sectors in particular. These Terms of Reference are for one of the various consultant firms and individual consultants that are being procured to help implement this program. 1.2 Context of the BCP Limited access to connectivity in some countries of the Eastern Europe and Central Asia (ECA) region limits the ability of small and medium-size enterprises (SMEs) to become fully competitive. SMEs are typically the most numerous part of private sector in these countries, but they often lack understanding of and its impact or cannot afford it. Less expensive and higher quality services, with good international connectivity, could improve SMEs prospects for 1

2 cross-border trade in new markets and for exploiting the growing business process outsourcing (BPO) and IT-enabled services (ITES) markets. Some countries in the region are among the highest penetrated markets in the world. For example, Estonia has a total fixed and mobile market penetration of 57 percent while Croatia is at 52 percent. 1 Equally, Romania and Latvia are in the top five countries worldwide for average connectivity speeds, outshining the US and most OECD countries. 2 However, countries in the Western CIS, the South Caucasus, and especially Central Asia generally lag (Figure 1). Figure 1: Broadband subscribers per capita 20% 16% 12% Fixed Mobile 8% 4% 0% Turkmenistan Azerbaijan Kyrgyzstan Uzbekistan Tajikistan Ukraine Kazakhstan Belarus Moldova Russia Georgia Armenia The lag among countries in Western CIS, the South Caucasus, and Central Asia equates to lost economic and social development opportunities in terms of private investment, job creation, and service exports. The World Bank estimates that if all CIS countries could grow their markets to cover 50 percent of the population (fixed plus mobile), the overall positive impact on GDP growth could be up to US$1 trillion, in the period up to The limited development of connectivity in many ECA countries stems from the lack of competition in the retail and wholesale markets (Table 1). Country Competition in 1 Mbps retail 3 Table 1: Competition and its impact on service uptake and adoption Affordability of 1 Mbps retail 4 International carriers Market penetration (as % of population) Fixed Mobile Armenia % 17.3% 6.2% Azerbaijan % 0.7% 28.2% Belarus % 2.1% 32.1% Georgia NA NA 6 4.2% 13.0% 23.8% Internet users (2008) 1 TeleGeography, Akamai (2010) State of the Internet Report, 1Q 2010, available at: registration required). Romania and Latvia are in 4 th and 5 th place respectively with a global average connection speed of 6.3 Mbit/s in 1Q 2010 (actual speed, not marketed speed). The Republic of Korea comes top with an average connection speed of 12 Mbit/s while the USA is in 16 th position with average speeds of 4.7 Mbit/s. 3 The number of ISPs offering 1 Mbps downstream (with unlimited download) subscription packages. 4 The number is a measure of affordability: the nominal GDP per capita divided by the average annual fee for 1 Mbps downstream (with unlimited download) subscription; the higher the measure, the more affordable the service. 2

3 Country Competition in 1 Mbps retail 3 Affordability of 1 Mbps retail 4 International carriers Market penetration (as % of population) Fixed Mobile Kazakhstan % 0.0% 10.9% Kyrgyzstan % 0.3% 16.1% Moldova % 5.1% 23.4% Russia % 4.6% 31.9% Tajikistan % 4.1% 8.8% Turkmenistan NA NA 1 0.0% 0.0% 1.5% Ukraine % 2.2% 10.5% Uzbekistan % 2.3% 9.0% Estonia % 27.9% 66% Croatia % 36.1% 50% Internet users (2008) In most of these countries, incumbents control a large portion of the wireline and wireless markets, limited competition in services at the retail level. Furthermore, barriers to entry for fixed-line infrastructure providers, slow licensing of wireless services (e.g., 3G mobile, WiMAX etc), impediments to the creation of domestic backbone networks, or other constraints on competitive service provision limit the potential for competition and even private sector participation. For example, these countries have been slow to adopt WiMAX and 3G mobile and have not yet started on long-term evolution LTE almost half of these networks are in the initial stages of implementation. The slow development of retail markets chills investment in regional and international connectivity, and vice versa. And most of the international networks in the Republics of the former Soviet Union are still structured around monopolistic international gateways and network architectures that are routed via Moscow. There is a lack of alternative routings or viable competitors. Consequently, market development will need governments to address two complementary factors: (1) Policy or regulatory impediments to the development of markets within these countries, and (2) Limited competition in the regional connectivity backbone market. 1.3 Objectives and outputs of the BCP The BCP will support ECA governments to identify opportunities to improve connectivity in target countries across the ECA region. BCP aims to improve wholesale (regional and national) and retail connectivity by (1) supporting relevant policy and regulatory reforms to enhance competition, (2) identifying and supporting the design of strategic infrastructure programs, and (3) supporting sustainable capacity building for ICT regulators and policymakers in the region. Improved connectivity should promote SME internationalization and competitiveness. The countries covered are in the South Caucasus (Armenia, Azerbaijan, Georgia), Western CIS (Belarus, Ukraine, Moldova), and Central Asia (Kazakhstan, Tajikistan, Uzbekistan, Turkmenistan, Kyrgyzstan). The activity aims to achieve this objective in three ways with associated outputs: (1) Specific policy and regulatory actions: Identify policy and regulatory reforms in these countries that will increase the supply, stimulate the demand, and reduce the cost of 5 Estonia and Croatia are provided as comparators. 3

4 communications at the regional, national, and local level through enhanced competition and private investment; Support ICT policy-makers and regulators to implement these reforms. (2) Strategic connectivity programs: Consult with key stakeholders in the public and private sectors (and especially in the SME segment) to identify strategic regional connectivity programs; Provide start up support to one of these identified programs, including design of investment mechanisms. (3) Sustained capacity building: Set up a regional initiative to provide sustainable ICT policy and regulatory capacity building support. The BCP will be managed by the PMT, which includes the infodev Finland Program Manager, a Task Team Leader (TTL), the Program Coordinator, and a Program Analyst. In addition, the other staff of infodev and the ICT Sector Unit, including ICT policy specialists, communications, financial management, administrative, operations, and procurement specialists, will assist the team. The Firm will work closely with the PMT and various other individuals and firms who will be separately hired as consultants to implement the BCP. 2 Scope of work for the Consultant The Consultant will be expected to provide a focused, action-oriented, and objective analysis that identifies the policy and regulatory options and possible strategic connectivity programs to spur competition in, the expansion of, and increased user adoption specifically among SMEs of services. 2.1 Analysis of the region s markets, identification of impediments and gaps The Consultant will prepare a report that includes a regional summary and country-specific analysis with the status of markets at three levels: the retail (wired and wireless) market in each country, the domestic wholesale market in each country, and the regional wholesale market. The report should include, for the region and each country, an analysis of policy, legal, and regulatory frameworks; strategic goals; market structure including information on service providers, levels of connectivity (e.g. network reach, availability, quality of service), level of competition in various markets, pricing structures for various products and services; level of adoption among various user groups with a focus on SMEs. The report should also include a country-specific forecast of growth of markets (fixed and mobile) up to 2015 including an assessment of the potential economic and social gains from improved use, with a focus on use of by SMEs. The report should focus on SMEs as users of, using a combination of formal and informal data collection methods to estimate demand on various dimensions and understand what impediments and possible demand-drivers might exist. Finally, the report should include an identification of the policy and regulatory impediments or infrastructural gaps that constrain the growth of wholesale and retail networks at the country and regional level. As noted above, preliminary analysis suggests that market growth at the domestic and retail level is constrained by inadequate policy or regulatory measures and by missing connectivity infrastructure programs to foster competition and enable private sector participation. The report should be a total of not more than 120 pages, with at most 10 pages per country covered, and a 20 page introduction that includes an executive summary with key findings and the regional-level analysis. 4

5 2.2 Identification of specific potential policy and regulatory reforms The Consultant will identify specific policy and regulatory reforms that will remove or mitigate the policy and regulatory impediments identified above. The proposed reforms should aim to increase competition, possibly increase private sector participation, and serve the purpose of improving adoption of among SMEs in the countries. The Consultant should identify these reforms through a consultation process that includes the governments, public and private sector firms, and SMEs. The reforms should be identified on a countryspecific and region-wide basis, taking into account the possibility of planned or in-deployment infrastructure programs (e.g. the Trans Eurasia Information Superhighway) and the potential to leverage cross-sector infrastructures or rights of way (e.g. use of optical ground wire network on electricity transmission systems, railway communication systems). Each policy and regulatory reform should be analyzed and prioritized in terms of its economic impact and implementation potential within a 12-month timeframe. The economic impact should be considered in terms of the ICT sector and the SME segment of the economy. 2.3 Identification of specific and strategic regional connectivity programs The Consultant should identify at least three specific and strategic regional connectivity programs that will enable competition in international and regional connectivity (and possibly domestic wholesale), improve the availability of services in the covered countries, and if possible, unlock potential private sector participation. The focus of the regional connectivity programs will be the South Caucasus, although all sub-regions should be considered. The Consultant will be expected to engage with stakeholders through a transparent consultation process to identify these programs. In identifying the possible connectivity programs, the Consultant should take into account those networks that are in the planning stage, have existing rights-of-way, or that represent expansions of existing networks. The connectivity programs could include regional inter-country segments or be domestic, including national backbone segments. The Consultant should identify the specific program and undertake a preliminary economic and financial analysis of the program to evaluate its impact and sustainability. The demand-side analysis should focus on the use of the improved connectivity by SMEs in the connected countries, including the program s potential to internationalize these SMEs and make them globally competitive. 2.4 Capacity building support and dissemination of results The Consultant will organize a one-day workshop towards the end of the assignment to present results of their work and build capacity among policymakers and regulators in the region on the implementation of reforms and support to connectivity programs identified in the activity. The Consultant will also be expected to work closely with other consultants identified by the PMT to provide documents, findings, and information gathered or developed during the period of this assignment. 5

6 3 Approach and methodology The Consultant is expected to use a combination of desk research and consultations with a wide range of stakeholders to complete this analysis. Stakeholders include government officials, agencies, and organizations, private and public sector organizations in the ICT and relevant sectors, regional agencies, infrastructure companies, SMEs and their associations, and civil society organizations. The Firm should, in particular, engage deeply with SMEs and their associations as a way to understand various aspects of demand for and possible impediments to its greater adoption in this user group. For this, the Firm should use a combination of surveys, focus groups, and informal consultations. The Consultant should conduct at least one regional workshop to identify policy and regulatory reforms and strategic connectivity programs. The Consultant should also conduct one capacity building workshop towards the end of the assignment. The venue, timing, and organization of these workshops should be planned with the PMT. The Consultant will also be expected to arrange its own resources for communications, translation, and workshops. 4 Deliverables The Consultant will provide the following deliverables, in English, to the PMT: (1) An inception report with proposed work plan, list of people the Consultant proposes to meet, plans for the consultation process; (2) A report for tasks described in 2.1 that includes the analysis of the region s markets and identifies the policy and regulatory impediments, and the infrastructural gaps constraining market development in the covered countries as well as the region; (3) A report for tasks described in 0 identifying policy and regulatory reforms in each country, and at the regional level if appropriate, that will improve competition in retail and wholesale markets, accelerate adoption of services among SMEs, and if possible, enable private sector participation in the various market segments; (4) A report for tasks described in 2.3 identifying at least three possible regional connectivity programs and opportunities to improve regional and domestic backbone networks, along with the preliminary economic and financial analysis; (5) A report (not more than 10 pages) on the results and findings of the consultation workshop with relevant stakeholders organized to assist in the identification of policy and regulatory reforms, and the connectivity programs, as indicated in tasks 0 and 2.3; (6) A report (not more than 5 pages) on the capacity building workshop organized as indicated in task

7 5 Timeline and payment schedule The Consultant is expected to apply a level of effort of up to 10 person-months over the period from December 2010 to September The delivery and payment schedule, subject to each milestone being formally accepted by the PMT, is as follows: Milestone Timeline (expected Payment schedule (% date of milestone) of total) Contract inception, delivery of inception report One month after 10% contract signature Delivery of report for tasks described in 2.1 Month 2 Delivery of report based on consultations Month 3 Delivery of report for tasks described in 0 Month 5 30% Delivery of report for tasks described in 2.3 (full Month 7 30% draft report) Delivery of final report Month 9 20% Delivery of report for tasks described in 2.4 TBD (no later than 10% month 10) TOTAL Dec 2010-Sept % 6 Qualifications The Firm will be selected through an international competitive selection process. The Firm is expected to: Demonstrate experience working the areas of telecommunications policy, law, regulation, engineering, economic and financial analysis, and network design, especially for international telecommunication traffic; Identify at least two key staff members each with at least ten years of experience working in these fields; Identify at least one key staff member with at least five years of experience in organizing, advising, working with, or with leadership roles in SMEs; Identify at least one key staff member with at least five years of experience in organizing policy and regulatory capacity building events, workshops, and conferences; Be familiar through experience at the Firm or key staff member level with the ECA region, with demonstrated ability to engage with the relevant stakeholders, i.e. senior government officials, ICT policymakers and regulators, private and public sector enterprises, and SMEs. 7 Evaluation criteria In evaluating the relative merits of consultant firms bidding for the project, the evaluation panel will take into account: Demonstrated experience and sample projects carried out in the field of study, as outlined above, and understanding of the terms of reference (20%) Demonstrated experience and sample projects carried out in the ECA region (20%) The quality of the proposed approach and methodology to be applied by the consultant, including proposed lists of interviewees and focus group discussions (30%) The quality and relevant experience of individual staff members proposed by the Consultant firm, including the leadership team (30%) 7

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