At a Glance
- Because the cost of building infrastructure and providing services to a small number of customers can be very high, ICT service provision in remote areas (where mines and onshore oil and gas projects are often located) remains a challenge for telecommunications companies.
- Creating ICT-extractive project-synergies through the latter industry’s demand for ICT services can be realized whether the extractive industry project builds its own infrastructure or not (the table and examples provided below detail the potential for ICT-extractive project synergies).
- In remote and sparsely populated locations, it is generally not economical for telecommunications companies to cover the area, so extractive companies often install radio signaling systems or fiber optic networks.
- In some cases, extractive companies not only allow access to their infrastructure but also add extra telecommunication capacity to the infrastructure.
- In contexts where government doesn’t have the budget to provide ICT infrastructure, as is often the case in developing countries, the telecommunications company and the extractive company can coordinate efforts to build infrastructure together.
ICT service provision in remote areas (where mines and onshore oil and gas projects are often located) is a challenge for telecommunications companies as the cost of building infrastructure and providing services to a small number of customers can be very high. Therefore, creating ICT- extractive project-synergies through the extractive industry project’s demand for ICT services becomes important. These synergies can be realized whether the extractive industry project builds its own infrastructure or not. The table and examples below detail the potential for ICT-extractive project synergies.
Potential ICT-Extractive Project Synergies
Below are brief explanations and key case studies for each of the synergies from the table above:
1. a) In remote and sparsely populated locations, it is not economical for telecommunications companies to cover the area, so extractive companies often install radio signaling systems or fiber optic networks along their grids, railroad tracks, or pipelines to improve the monitoring, efficiency, and safety of their ICT infrastructure. It then becomes economical for telecommunications companies to add telecommunication capacity to this infrastructure.
Key case study: In Peru, Compania Minera Antamina (Antamina) built a USD$2 million fiber optic network to carry information along its 304km copper and zinc concentrate slurry pipeline system to provide information and detect disturbances on the pipeline at every point along its length. Realizing that the optical fiber would make it easier to service the Huaylas and Conchucos areas with telecommunication services, Antamina partnered with Telefonica del Peru to provide ICT services to nearby communities at a reduced cost.
b) In some cases extractive companies not only allow access to their infrastructure but also add extra telecommunication capacity to the infrastructure. Upon adding telecommunication capacity, the extractive company leases it to a telecom company, adding another source of revenue.
Key case study: In Malaysia, the national oil company (Petronas) and the main telecommunications company of the country (Celcom), have built together the Celcom Petro Network to install a ﬁber optic network along the national gas pipeline to address the telecommunication needs of Petronas and lease the spare capacity to other mobile operators and corporate customers.
2. a) When there is an extractive operation in remote, sparsely populated and unconnected areas, the extractive project could provide enough guaranteed demand for ICT services to justify investment by telecommunications companies. Under this arrangement, extractive companies will sign a contract that will cover the telecommunication company’s costs of building and/or extending the requisite ICT infrastructure. The cost may be split among the companies with the percentage depending on the number of services being provided to the extractive company and the potential additional market for the telecommunication company in the area. This arrangement would enable the extractive company to receive essential ICT services and the telecommunication company to expand its subscriber base, all at a lower cost to both parties than if they had decided to do so on their own.
Key case study: In Mozambique, Ncondezi Coal entered into an agreement with Vodacom for the provision of mobile phone service around its site. Vodacom constructed a telecom tower and installed a satellite, based on minimum guaranteed demand from Ncondezi. This allowed Vodacom to expand its footprint in the area, enabling access to users in a 10km radius around the tower and has generated 3000 additional contracts with users who otherwise had extremely limited or no mobile phone coverage.
This anchor demand coming from the extractive project can also lead to a government program. In Australia, with its National Broadband Network program, the government is building ICT infrastructure across the country and selling wholesale services to internet and telephone providers. In particular, it is prioritizing the connection of remote areas where significant demand for extractive operations may attract service providers.
b) Given that a large part of the cost (70%-90%) of building a fiber optic network is related to civil works, joint infrastructure construction – such as laying ICT networks along railway tracks or water pipeline - can result in important savings for the telecommunications companies through economies of scope. In remote extractive areas, the cost savings of such infrastructure sharing may be significant enough to make telecommunication services economically viable.
Key case study: In Zambia, Copperbelt Energy Corporation (CEC), the power utility company serving the mines, installed 500 km of fiber optic cables on its power lines between 1997 and 2005 to increase the quality of its ICT infrastructure. Significant spare capacity existed on this network. As a result, in 2006 CEC asked for a license that allowed it to lease excess capacity to other entities. At the same time, Liquid Telecom, a wholesale network operator, sought to expand its business into Zambia and CEC was seeking a partner with telecommunications expertise and a customer portfolio. The two businesses formed a joint venture in 2011 and CEC transferred control of its existing telecommunications infrastructure to the joint venture, operating and maintaining the fiber optic network related to its power lines for an arm’s-length service fee.
c) In some contexts, the government doesn’t have the budget to provide ICT infrastructure, especially in developing countries. In addition, the timeframe of government investments in this sector might not be in line with that of the extractive companies, who may want to expedite the construction of the infrastructure necessary for the commencement of their operations. In this context, there is scope for the government, the telecommunications company and the extractive company to coordinate efforts to build the infrastructure together. This would enable the government to connect remote communities, an extractive company to connect its project, and a telecommunications company to expand its subscriber base at a lower cost to all parties than if they decided to do so on their own.
Key case study: In Australia, Telstra announced the completion of the Arhem Land Fiber Project in 2009. This AUS$34 million scheme received funding from the Australian Northern Territory Government (approximately AUS$6.8 million) and Rio Tinto Alcan. The completed project linked Jabiru to Nhulunbuy, where Rio Tinto owns a bauxite mine and an alumina refinery. On its way, it linked nine indigenous communities to the national fiber optic infrastructure, connecting a total of more than 10,000 people. Overall, the project involved laying over 990km of fiber optic cable and five radio systems.
 This section is adapted from Toledano et al., A Framework to Approach Shared Use of Mining-Related Infrastructure, (New York: Columbia Center on Sustainable Investment, 2014), 75-78
 Adapted from Perrine Toledano and Clara Roorda, Leveraging Mining Demand for Internet and Telecommunications Infrastructure for Broad Economic Development: Models, Opportunities and Challenges CCSI Policy Paper, (New York: Columbia Center on Sustainable Investment, 2014), 13