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8/2/2019 IFNB Access Whitepaper A4 B30100437WP2009071EN 0
1/20
Affordable access:The first step to mass internet use
in emerging markets
White paper
8/2/2019 IFNB Access Whitepaper A4 B30100437WP2009071EN 0
2/20
Affordable access: The first step to mass internet use in emerging markets2
Contents
3 Executive Summary:
A wider internet is emerging
4 The lure of the internet
4 Access part of the affordability challenge
5 Voice to data, urban to rural
6 Access to data, from shared to personal
7 Solving the affordability versus profitability conundrum
9 The affordability challenge in rural regions
9 Deploying and running mobile infrastructure
10 Tower reducing the number of sites required10 Power efficiency is the key
10 Backhaul the importance of technology selection
12 The emergence of network sharing
13 Adopting innovative business models
15 Innovation in marketing to rural customers
15 The dual-market urban strategy
16 Mobile internet access provides ultimate affordability
17 Shaping the individual communications experience
18 Conclusion:
The internet without restrictions
19 References
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Affordable access: The first step to mass internet use in emerging markets 3
Executive Summary:A wider internet is emerging
In mature markets, using the internet
has become as much a part ofeveryday life as watching television
or listening to the radio. While there
may be dark sides to the internet,
its advantages for individuals and for
national economic development are
overwhelming.
The internet holds untold benefits for
billions of potential users in emerging
markets. Affordable internet access
can change the lives of people in these
countries as much as, and probably
more deeply, than the rapid spreadof mobile voice communications is
doing today. A recent World Bank
Group report says that for every
10 percentage-point increase in high
speed Internet connections, there is
an increase in economic growth of
1.3 percentage points.1)
Yet first must come affordable access.
Consumers must be able to reach the
internet at a price level and with a tariff
structure that matches their spending
power before they can see the benefitsfor themselves and invest time and
money in developing their online skills.
There is huge future business
potential for communications service
providers (CSP) that invest in
deploying affordable access to the
mass populations of emerging
markets. Success will take innovation
new technologies, novel business
models, flexible regulation and fresh
marketing concepts.
Shared access is already a well-proven
and popular business with internetcafs catering for millions of users.
By leveraging mobile technologies to
provide personal access to the
internet, we will see simply huge
growth. The sheer volume of users
will be profitable for CSPs despite the
lesser revenues that lower income
users in rural and urban areas will
generate.
On the technology side, the latest low
power, flexible base station site and
backhaul solutions are helping CSPsto build mobile network coverage
with significantly lower capital and
operational costs than has been
possible before. Costs can be cut
further with new practices such as
network infrastructure sharing and by
the advent of flexible regulation that
allows the use of frequency bands
that can provide highly cost effective
coverage.
On the business side, involving local
communities and enthusiasticentrepreneurs in the running of rural
mobile networks can bring down
costs even further through better site
security and by the outsourcing of
key aspects of network operations.
Innovative funding schemes also hold
potential for helping CSPs to benefit
from capital-intensive renewable
energy developments.
Ultimately, the success of any
strategy for providing widespreadinternet access in emerging markets
will depend on matching the services
that are provided with the needs of
consumers, both in terms of cost and
in terms of providing the right
information that people can use to
improve their lives.
All the right conditions are in place
today and we already see the early
signs of how CSPs can win substantial
new business and how consumers can
enter the internet age.
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Affordable access: The first step to mass internet use in emerging markets4
The lure ofthe internet
In mature markets, internet access
has spread widely, touching the livesof almost everyone. Using the internet
has become as familiar to many
people as watching TV or listening to
the radio.
In many emerging markets, though,
internet access remains the preserve
of the few, predominantly businesses
and higher income consumers in
urban areas. Yet providing the right
conditions are in place, there is no
reason to believe that accessing the
internet on a daily basis will notbecome as common in these markets
as it is elsewhere.
There are one and a half billion
internet users globally, but more than
4 billion mobile users. There is clearly
a vast untapped resource of people
who are already familiar with basic
communications technology but who
are starved of internet access.
There are already signs of the
potential growth in emerging markets.Mobile internet connections in Chile
jumped by 315 percent in 2008.2)
Meanwhile, in early April 2009 it was
reported3) that China Telecom had
gained more than 10,000 registered
users in just one week during a free
trial launch of 3G mobile services in
Jiangsu province.
An April 2009 report4) predicts that
mobile broadband adoption in Africaand the Middle East will grow faster
than the global average over the next
five years, with the subscriber total
increasing at a CAGR of 33 percent to
reach 32.2 million by 2014.
Access part of the
affordability challenge
Of course, people must first be able to
reach the internet. The infrastructure
must be in place and accessible toenable first-time internet users to
experience the possibilities of online
services. The right consumer devices
must also be made available. With the
vast bulk of users accessing
communications via mobile phones
and with a lack of fixed infrastructure
across large swathes of emerging
markets, it is likely that most users will
access the internet from their mobile
devices or via shared devices.
Even a simple browsing capability will
bring benefits. A growing market willstimulate the development of local
content and services and the entire
internet ecosystem will start to
blossom in that market. In turn, this
will create greater demand for access
and a growing source of revenue for
communications service providers
(CSP), supplementing their existing
voice and SMS business. As markets
mature, experience shows that CSPs
become more focused on hunting out
new revenue sources to offset declining
voice ARPU (Average Revenue perUser) and to control churn.
3G mobile internet services will constitute
the majority of African broadband growth in
the coming years. Mobile broadband will
account for more than half of the continents
broadband subscriber base by 2012.
Source: ITNewsAfrica5)
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Affordable access: The first step to mass internet use in emerging markets 5
In this white paper we explore how
internet access can be brought to themass population in emerging markets.
Access is one part of the jigsaw.
Affordability, motivation and
competence are the other key issues
as shown in figure 1. Together these
elements make up the key challenges
to consider when offering internet
services once the access barrier has
been addressed. Another Nokia
Siemens Networks paper6) discusses
the four key elements that need to
be considered when launching
sustainable services in emergingmarkets, while a third7) looks in detail
at competence and motivation.
Voice to data, urban to rural
In most emerging markets, recent years
have seen phenomenal growth in the
mass adoption of communications.
China alone added nearly 94 million
subscribers in 20088). Even this rate of
growth is outstripped by India which
added 15.41 million mobile users inJanuary 2009 the nations biggest
monthly growth9).
With basic affordable voice connectivity
being established, these high growth
rate markets are the most likely
candidates to see accelerating
consumer demand for data services
and internet access.
Competence
Affordability
Access
Motivation
Figure 1. The four key challenges to widespread internet use in
facing emerging markets are affordability, access, competence and
motivation. Source: Marja-Liisa V iher 1999 (adapted).
Getting in ahead of competitors by
providing affordable internet access is
vital for CSPs, enabling them to learnfrom consumer behavior and translate
this knowledge into new and profitable
service offerings that will grow market
share and revenue. Being early also
helps to build brand reputation,
strengthening presence in the
business segment and opening up
opportunities to provide managed
services and other innovations to
enterprises.
Indeed, it is these business users,
as well as higher income consumers,
that traditionally spearhead the roll outof internet access and broadband
connectivity. To make the most of the
opportunity, CSPs may adopt a dual
market strategy. This entails providing
high-speed, high-value access in
urban areas for higher income users,
while at the same time deploying more
affordable access in both urban and
rural areas to permeate access to
lower income users, thus capturing the
high volume market.
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Affordable access: The first step to mass internet use in emerging markets6
Access to data, from shared
to personal
Most emerging markets follow a
familiar pattern of growth with the first
voice services being used by several
consumers sharing a fixed or mobile
device. As the affordability of services
comes within their buying reach,
individual consumers opt for their own
device and subscription. This switch
from shared to personal access is the
phase of strongest growth and the one
that we are currently experiencing with
mobile voice in many markets.
The same pattern of adoption is likely
with internet access. The first data
experiences are happening on shared
access, such as internet kiosks and
internet cafs. When consumers
become sure of the value of internet
access, feel comfortable using the
technology and find them to be priced
to suit their available spending power,
they will then commit to personal
subscription as illustrated in figure 2.
This intermediate step of shared
access will therefore be necessary to
move the market from personal voice
services to personal internet access,
and it is in this phase of moving from
shared to personal internet access
that the highest rates of growth will be
experienced.
Colombia evolves personal internet
access
The internet subscriber base in Colombia grew
by 13.63 percent in the first quarter of 2009,
reaching 2.47 million users. The government
estimates the total internet user base at over18.23 million from Colombias overall
population of 44.97 million inhabitants.
Source: Colombian Telecommunications
Regulatory Commission10)
By the end of 2008, South Africa had
1.35 million internet subscribers.
794,000 of these were wireless internet
subscribers and 588,000 were ADSL
subscribers. there are more mobile
internet subscribers than fixed.
Source: Balancing Act11)
Figure 2. Rapid growth will be achieved when users switch from shared to personal internet access.
Voice
Voic
e+da
ta
Productivityincrease
Time
1) Building basicvoice connectivitytoday.
2) Adopting internetservices with sharedaccess first before...
3) ...moving topersonal internet.
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Affordable access: The first step to mass internet use in emerging markets 7
Providing internet access at affordable
rates for the mass populations ofemerging markets is the key challenge
for CSPs. Tariffs must be driven down
to within the buying capabilities of
lower income consumers who survive
on just a few US dollars per day and
who can afford less than ten percent
of this income for communications.
Yet the CSP must ensure that these
lower prices are still profitable.
Innovation will provide the answer.
Not just deploying the latest
technology, but creating innovativebusiness models, marketing and
business operations. In this respect,
emerging market CSPs are not
burdened by cumbersome legacy
systems and processes, which can
put them in a better position to adopt
new ideas than some of their mature
market counterparts.
The ultra-rapid spread of voice
services across emerging markets is
almost completely due to the adoption
by CSPs of mobile technologies,as well as mobile markets that are
much more open to competition than
fixed-line markets, as shown in
figure 3. In rural areas, deploying
fixed infrastructure across wide
geographic regions is prohibitively
expensive. It is unlikely that this will
change and we do not foresee any
significant investment in fixed access
for rural areas in emerging markets.
Solving the affordabilityversus profitability conundrum
Figure 3. Percentage of markets open to competition, mobile and fixed, worldwide,
2008. Source: ITU, World Telecommunication Regulatory Database; based on World
Bank classification of economies.
A. Developing countries, mobile
C. Developing countries, fixed,international long distance
B. Developed countries, mobile
D. Developed countries, fixed,international long distance
10%
90%
42%
58%
16%
84%
13%
Monopoly
Competitive
87%
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Affordable access: The first step to mass internet use in emerging markets8
In urban areas too, although many
fixed lines are in place, it is the easeand cost-effectiveness of mobile
coverage brings that makes it
attractive to CSPs looking to offer
services to more people. Existing fixed
infrastructure can be developed to
provide more advanced data services
to corporate customers and high end
consumers.
Consequently, there exists a fast
growing base of users who are familiar
with mobile devices. CSPs that have
bought into mobile infrastructure overthe years are best placed to re-use
much of their investment by adopting
3G technologies as the means of
offering internet access to their
customers.
Currently, about 100 million 3G
subscribers (21 percent of global 3G
subscriptions) come from emerging
markets. In 2013 Nokia Siemens
Networks expects this to rise tenfold to
about 1 billion emerging market 3G
subscribers (48 percent of the globalnumber). However, in the context of
population levels, with emerging
markets having 70 to 80 percent of the
world population, 3G penetration of
emerging markets will remain far lower
than in mature markets. (Figure 4)
Deploying 3G services using
UMTS900 may create 70 percent
CAPEX and OPEX savings for
mobile operators, says a recent
case study on the experience ofElisa Corporation of Finland,
released by the Global Mobile
Suppliers Association. Widely
used by GSM systems throughout
Asia Pacific, the Middle East,
Africa and Europe, the use of the
900 MHz band lowers the number
of cell sites needed to cover rural
and suburban areas.
Source: LIRNEasia13)
Figure 4. WCDMA subscriptions are predicted to show the fastest growth rates in emerging markets.12)
Figure 5. Significant cost savings can be achieved by using the 900 MHz band compared to using the
2100 MHz band.
Emerging markets
Mature markets
World
2500
0
500
1000
1500
2000
Subscribers in millions
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cost of rural/suburban coverage(CAPEX & OPEX)
UMTS2100 UMTS900
50% 70%reduction
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Affordable access: The first step to mass internet use in emerging markets 9
Other 6.5%
Supportfunctions 12.7%
Marketing &sales 16.5%
Cost of goodssold 4.8%
Dealercommissions
16.9%
Customerservice 7.5%
Bad debt0.5%
IT 3.0%
Networks 31.6%
In India, the government is keen to
remove the digital divide (rural Indiahas almost 75 percent of the
countrys total population), and to
achieve this end, it is giving high
priority consideration to broadband
penetration in the rural areas to extend
services such as Tele-education,
Tele-medicine, and e-governance.
Deploying and running
mobile infrastructure
Nokia Siemens Networks operationalefficiency benchmarking studies
show that in emerging markets over
30 percent of a CSPs OPEX is
accounted for by the network, with
close to 40 percent coming from
marketing and sales, including the cost
of goods sold (Figure 6). On the other
hand, the main capital costs for a CSP
are in tower, power and backhaul.
Clearly, these three costs tower,
power, backhaul are key to achieving
more affordable access for end users.Lowering these costs will take
innovation at the network level, at the
site level and at the equipment level.
The affordability challenge
in rural regions
Achieving viable affordability in rural
areas takes a combination of low-cost
infrastructure deployment, new
business models, and innovative
marketing strategies.
The move into rural areas by CSPs is
being encouraged by governments
and regulators. In Brazil, for example,
the telecoms regulators licensing
tender for voice telephony and
broadband internet services will favorCSPs that pledge to deliver broadband
internet services in rural areas.
Meanwhile the Indonesian government
is aiming to encourage more of the
private sector to become involved in
the development of ICT in the country.
In addition, licensing obligations for
mobile CSPs in Brazil look at reducing
the cost of new frequency licensing,
but require 2G coverage in all
municipalities and 3G coverage in
60 percent of them within three years.
In another example, an OECD Rural
Policy Review reports that Chinese
public expenditure for rural areas has
been increasing in line with a stronger
focus on territorial imbalances.
Expenditure on rural areas almost
doubled in nominal terms between
2004 and 2007.
Through our ICT Policy, the government
seeks to build an ICT-driven nation revolving
around the idea of a knowledge-based society.
I firmly believe that the ICT Policy will allow
the development of ICT infrastructure hence
improving citizens access to information.
Kemal Stamboel, Vice Chairman, Executive
Team, Indonesian National ICT Council
Figure 6. Overview of operational costs for emerging market CSPs14)
Figure 7. Breakdown of site capital costs in mature markets.
Source: Powerwave
Civil works43%
Base station34%
Antennaequipment 9%
Coaxialcable 8%
Powersupply 6%
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Affordable access: The first step to mass internet use in emerging markets10
Tower reducing the number
of sites required
In rural areas, base stations need to
cover huge areas and often there is
no existing site development that can
be built on. The difficulties of acquiring
suitable sites can be eased by
accurate network planning and the
latest base station technology that
together can reduce the number of
required sites by 2530 percent. This
can cut the CSPs capital and
operational costs (CAPEX and OPEX)
significantly.
Equipment also needs to be robust to
withstand often harsh environmental
conditions to avoid unnecessary
maintenance costs, particularly
important when a maintenance
engineer needs to travel for days in
difficult terrain just to reach a site.
Power efficiency is the key
With many sites built off-grid, beyondthe reach of the national electricity
grid, it is vital that base station
equipment is as energy efficient as
possible. The GSM Association
estimates that 75,000 new off-grid
sites will be deployed yearly from 2009
to 2012 as CSPs move increasingly
into rural areas. Sub-Saharan Africa
alone is expected to see year-on-year
growth of 17 percent in base stations,
with 70 percent being off-grid.
Innovative equipment designs canreduce base station site energy
consumption by as much as 70 percent.
We estimate that 86 percent of a
CSPs overall energy bill is accounted
for by the network, with 65 percent
being consumed by base station
sites. Extreme energy efficiency at the
site level, coupled with fewer overall
sites, can therefore reduce the CSPs
direct energy costs enormously.
Furthermore, because many sites are
powered by diesel generator sets,
less frequent refueling can reduce sitesupport costs dramatically.
Backhaul the importance of
technology selection
Backhaul is the third significant cost.
Rural areas will not have copper
transmission lines available and rely
on microwave radios for the backhaul.
Creating an effective mobile backhaul
requires a deep understanding of both
the radio and transport layers and
how they interact, particularly with
regard to optimizing the use of IP and
Ethernet technologies across the
backhaul layers. Multilayer optimization
enables services to be transported inthe most efficient layer, helping to
reduce network complexity and cutting
capital and operational costs. Such
optimization requires cross-functional
skills and experience spanning all
technologies, which realistically can
only be achieved by vendors that offer
a full portfolio of access and
aggregation technologies, including
microwave radio, fiber and copper in
the access network; as well as Carrier
Ethernet and IP/MPLS in the
aggregation and core networks.
Table 1. Tower, power, backhaul how innovation reduces the total cost of ownership for CSPs. Source: Nokia Siemens Networks, 2009.
Network impact Site impact
Tower: Cost of
construction
Fewer sites through
intelligent network
planning
Backhaul technology can have a huge impact on the site
construction cost. For example, using point to multipoint
IP based backhauling allows sites to be built on a pole or a
house in a village
Outdoor and self-cooling cabinets help to avoid shelters and
air conditioning
Power: Cost of
electrification
Fewer sites reduces
overall energy costs
Latest generation base station equipment reduces power
consumption substantially
Reducing or eliminating of air conditioning reduces the power
consumption per site
Innovative business models such as Power as a Service
reduce CAPEX and provide fixed monthly OPEX that is
independent of fluctuating energy prices
Backhaul: Cost of
backhaul
Fewer sites reduces the
number of hubs required,
improving backhaul
efficiency
Research shows that most voice traffic is generated within
villages. Most internet traffic is likely to be between the
internet gateway and the village. Therefore, local voice
routing frees up backhaul capacity for data trafficProxy servers can improve the customer experience by
caching functionality
In general, IP backhauling provides the best efficiency for
remote sites.
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Affordable access: The first step to mass internet use in emerging markets 11
Innovating at the base station site
Providing affordable access demands base station sites with low
CAPEX and OPEX. Nokia Siemens Networks Smart Site solution
brings innovation to all aspects of the site, including site planning and
design, active base station and transmission equipment, passive
equipment and the power system.
Flexible and cost-effective site design
Outdoor site design eliminates CAPEX items such as shelters
and air conditioning and reduces site running costs
Tower top sites for maximum RF coverage saving up to 30
percent in network roll-out costs
Optimized passive elements
Three legged tubular tower is up to 45 percent lighter for the
same height than traditional four legged angular tower
30 percent fewer carbon emissions because less steel, concrete
and transportation are needed
Wide coverage with Flexi Base Station
Nokia Siemens Networks Flexi Base Station supports multiple
installation options in outdoor and indoor environment
Lowest power consumption on the market
Suits a broad range of climatic conditions
Integrated transmission and transmission efficiency enhancement
Effective power systems
The latest technology helps to maintain constant optimal
temperature to extend battery life considerably in hot or cold
climates
Significantly lower power consumption can be achieved compared
to air conditioned outdoor power cabinets
Minimal power consumption reduces CO2
footprint
Renewable Energy Solutions Autonomous Sites
A range of renewable energy options with one or more power
sources including solar, wind and generator
All autonomous sites are equipped with an integrated battery bank
to provide power when solar generation is unavailable.
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Affordable access: The first step to mass internet use in emerging markets12
The emergence of network sharing
Network sharing, in which CSPscome to a commercial agreement to
share physical network resources,
is becoming an increasingly important
way of reducing costs. Sharing can
be passive, in which only the site is
shared, or active, in which base station
and backhaul equipment are also
shared.
Both passive and active sharing are
seen by regulators as a fruitful way of
fostering investment and growth in
the ICT sector by offering incentives,including financial subsidies, for service
providers who share infrastructure.
The potential cost savings are
enormous. There are estimates that
CSPs in the Middle East & Africa
region could save USD 8 billion over
the next five years, by sharing their
towers.15)
Infrastructure sharing is a concept
that is being encouraged by several
authorities around the world. In 2008,
the Indian authorities relaxed their
restrictions on infrastructure sharing,
allowing the sharing of active and
passive infrastructure except spectrum.
The guidelines are aimed to reducing
the input costs on telecom access
providers (and to aid) reduced tariffand increased tele-density in rural
areas, the telecoms ministry said in a
statement.16)
In China, the Ministry of Industry and
Information Technology (MIIT) and the
State-Owned Assets Supervision and
Administration Commission issued a
joint policy statement on infrastructure
sharing, which became effective on
1st October 2008. The regulations
mainly apply to 3G network
construction rather than 2G networksharing. According to one report,
Sharing is key to promoting ICTaccess at affordable prices in rural
areas. Operators will automatically
receive subsidies for the
deployment and management of
towers as long as operators
share the towers with three other
operators or service providers.
Nirpendra Misra, Chairman of the
Telecommunication Regulatory
Authority (TRAI), India
the move could lead to a reduction of
about 15 percent in the 3G CAPEX of
Chinas three operators: China Mobile,
China Unicom and China Telecom.17)
Consequently, sharing deals in
emerging markets are appearing.
For example, in April 2009 Zain Kenya
and Essar Telecom Kenya agreed to
share 300 base stations over 15 yearsin Kenya.18)
In Ghana, CSPs are working jointly to
enable more than one network to
share cell sites. Co-location is very
close to our hearts and we are getting
on very well with the other operators
in reaching co-location deals to enable
us to provide better services to our
teaming customers, said Brett
Goshen, CEO of MTN, Ghana.19)
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Affordable access: The first step to mass internet use in emerging markets 13
Adopting innovative business
models
Innovation needs to extend to
business operations. The challenges
specific to emerging markets are
sometimes best answered by adopting
business models that are unlikely to
be deployed in mature markets.
Take the example of theft from rural
base station sites, a problem that
many CSPs in emerging markets face.
This can be a significant operational
cost for the CSP, with repeatedmaintenance visits to repair base
station equipment or to replenish
stolen fuel supplies.
By involving local subscribers and their
social structures, responsibility for a
base stations security can be taken on
by the local community. For example,
positioning the base station in the
mayors or tribal eldests house, helps
to increase the populations
appreciation of the value of the service
and provides local protection.
Building relationships with local
entrepreneurs also brings down theCSPs total costs by effectively
outsourcing the management of
elements of the business to local
communities. Two prominent initiatives
in recent years that demonstrate the
possibilities are The Grameen
Foundations Village Phone project20)
and the Nokia Siemens Networks
Village Connection solution.
A further option lies in innovative
funding options, which create a new
category of payment model,overhauling conventional CAPEX and
OPEX structures. Nokia Siemens
Networks, for example, has been
exploring a leasing concept for
renewable energy solutions. The aim
is to help CSPs adopt renewable
energy solutions despite their high
upfront cost.
The concept of Power as a Service
entails a vendor financing and
installing a renewable energy solution
at sites and then offering power fora fixed monthly fee from the CSP.
The CSP can enjoy a CAPEX-free
installation and monthly fees (OPEX)
that are lower than the monthly cost of
diesel consumption. The model also
means that the renewable energy
assets do not appear in the CSPs
financial records, enabling it to retain
its financial flexibility to invest in its
core business, which is connectivity.
Internet-style services without
the internet
A key challenge for CSPs in addressing
rural users lies in building their
competence and motivation to use
data services. An innovative and
rapidly-deployable way of delivering
data services into these markets using
SMS technologies has been developed
by Nokia.
Nokia Life Tools is a range ofagriculture and education services
aimed at rural consumers. The services
use an icon-based, graphically-rich
user interface that is supplied with
information via SMS that can be
accessed using standard mobile
phones.
Using SMS makes information services
available and affordable, while meeting
the two other areas crucial for emerging
market success motivation and
competence.
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Affordable access: The first step to mass internet use in emerging markets14
Different approaches to
innovating operations
In recent years novel business models have
emerged to bring connectivity to remote villages.
Village Phone
building the sharing model
Village Phone was pioneered in Bangladesh by
Grameen Telecom and it has now also been
replicated in Africa.
In rural villages, mobile phones with a coupled
external antenna are provided to low-income
women to operate a business by renting the use
of the mobile phone and selling prepaid airtime
to other villagers, thus providing vital
communications access. Equipped with an
external antenna, the phone is able to receive
GSM signal far outside the CSPs normal
coverage area. This enables Village Phone
ladies to work in areas where commercial GSM
phones with integrated antennas will not work20).
By leapfrogging fixed infrastructure andleveraging existing wireless infrastructure, Village
Phone offers a viable strategy for increasing
communications access and technology
business opportunities in emerging markets.
Village Phone CSPs often use the additional
income to improve their health, food and
childrens education. Many Village Phone CSPs
have used their new resources to develop other
services, such as healthcare and emergency
calls, transport and charging services that benefit
the wider community.
Vandalism cut by local involvement in Nigeria
Engaging with the local population is an important aspect of serving rural communities
and in May 2008 Zain Nigeria launched its innovative Rural Acquisition Initiative (RAI)
to help boost entrepreneurship. The scheme franchises out the basic maintenance
and security of rural BTS sites to local trade partners.
Revenue-sharing with these local entrepreneurs is based on the call records from
each site, so maintaining BTS availability is in their interests. With RAI, we have seen
utilization rise by 200 percent on 25 sites, largely through better security to reduce
vandalism. Community relations are a big part of our activities. We want to put
something back into the local community.
John Earley, Chief Technical Officer, Zain Nigeria.
Village Connection
encouraging local entrepreneurs
The Nokia Siemens Networks Village Connection
solution involves enterprising villagers in the
management and selling of local voice and data
access.
Village Connection combines a network
architecture based on standard off-the-shelf
GSM infrastructure with an innovative franchised
business model in which call management and
service is controlled by a village entrepreneur.
No site construction is needed and a village-
based GSM access point can be installed within
hours to handle local switching. Access points
are connected to regional Access Centers via a
native IP link, using transmission media such as
microwave radios, WiMAX or satellite
connectivity. This eliminates traditional network
hierarchies, allowing a rural network to be built at
a much lower CAPEX, as well as eliminating
considerable operational expenses.
A local entrepreneur runs the village network,either employed by the CSP or as part of a
franchise. Such an arrangement not only creates
income, but also helps to build villagers
competence in using information services.
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Affordable access: The first step to mass internet use in emerging markets 15
Innovation in marketing to
rural customers
The logistics of rural areas, many
lacking basic transport infrastructure,
can be a further barrier to rolling out
access to consumers. Furthermore,
CSPs face unique challenges in the
marketing of services to lower income
rural communities.
Such difficulties are best overcome by
a mix of technology and operational
innovations.
The cost of access must be matched
to the available spending power of
lower income prepaid consumers who
may never have a significant amount
of cash to hand to buy conventional
top ups of around 5 US dollars.
Electronic prepaid recharging
solutions based on SMS replace paper
vouchers with text messages and
reduce the cost of the prepaid process
by up to 70 percent, enabling CSPs to
offer small denomination prepaidrecharges profitably.
Conventional marketing techniques
based on mass media advertising are
not always appropriate for the rural
sector. Instead, adopting very local
marketing and distribution strategies,
underpinned by detailed research on
socio-cultural knowledge systems has
proved to be more effective. Such
local strategies are also considerably
less expensive than nationwide mass
media campaigns which also fail toreach the whole population.
The deployment of a rural distribution
network comprising town-based
distributors supplying village shops orlocal distributors will also help to
overcome physical distribution
challenges. A recent Nokia Siemens
Networks pilot scheme in China
rolled out eCommerce to local
entrepreneurs, enabling them to
expand their businesses, which are
often limited due to their shop size and
storage opportunities. The pilot
scheme showed that during a five-
month period business owners
generated online transactions equal
to the revenue they have raised fromtraditional business.21)
The dual-market urban strategy
More and more people are living in
cities. Its a trend that accelerated
during the 20th century and will
continue to transform the demographics
of most countries. According to the
United Nations, 49 percent of the
worlds population lived in cities in
2005. By 2030 this will have risen to60 percent, with 4.9 billion people
expected to be urban dwellers.
In emerging markets, providing data
access to this huge urban population
will take a different approach than thatfor rural regions.
A dual market strategy is needed,
with investment in higher speed and
higher quality access to cater for the
demand for advanced services from
enterprises and high-end consumers,
accompanied by providing affordable
access for the lower income urban
population.
Shared access is already a well-
proven and popular business withwidespread internet cafs catering for
the needs of millions of users. These
establishments succeed because they
sell access in affordable chunks of
time. The move towards personal
access to the internet via the mobile
phone will be underpinned by this
same charging model.
Instant provisioning solutions will enable
users to buy flat rate internet access
on their phones for short, affordable
periods of 30 minutes or one hour orlonger, with the cost being deducted
from a prepaid account bought from
an entrepreneurial-run distributorship.
The appeal of flat-rate pricing
The runaway success of flat-rate tariffs for mobile internet
access in mature markets provides invaluable experience
for installing instant provisioning solutions that provide
access on-the-fly for lower income segments. Flat-rate
pricing is proven to appeal to subscribers.
Users can be sure that costs will not go up even when
growing from initial low levels of use to higher usage.
Simple pricing increases peoples willingness to pay;
they do not want to be bothered with complex pricing.
Flat rates increase usage. Broadband CSPs have seen
use increase by 50 to 200 percent when users changetheir pricing plan from a metered to a flat rate model.
Source: Nokia Siemens Networks 200922)
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Affordable access: The first step to mass internet use in emerging markets16
Mobile internet accessprovides ultimate affordability
It has become clear that the sheer
cost and logistical difficulties ofproviding widespread data access with
fixed technologies is simply not viable.
In many countries the number of
mobile internet subscribers outstrips
the number of fixed access users.
According to analysts Informa and
Yankee group, 2009 will see the
number of mobile broadband customers
overtake fixed-line broadband users
globally.
The markets showing high growth for
voice services are clear candidates fortransformation to the internet and
multimedia world.
In these emerging markets the shift
from shared internet access topersonal internet access will be
enabled by a lower total cost of
ownership for the consumer,
underpinned by affordable access.
In Peru, for example, with a GDP per
head of less than USD 4000 a year,
in 2007 12.9 percent of the population
had access to a PC, but only 2.5
percent had internet access the cost
structure of mobile technologies can
rapidly unlock this potential.23)
The cost effectiveness of buildingand maintaining mobile networks for
CSPs is another key factor, and in
terms of the economies of scale it
brings, the front runner in mobile is
undoubtedly 3G. One prediction points
to more than 2.5 billion 3G subscribers
worldwide by 2013, with over one
billion in Asia alone.24) The success of
3G is largely down to its sheer scale,
making affordable access a reality for
lower income segments.
There are many examples of emergingmarket CSPs launching 3G services
and achieving rapid take up. When
TEF, Chiles most successful 3G CSP
deployed 3G technology, traffic
soared from 450 GB to 4 TB a day in
just 60 days, with the majority of this
new data traffic coming from outside
urban areas.
There has been an explosion in the use of
mobile internet access [in Mexico]. Mobility
plus data is what customers want and we
are seeing very good results with 3G.The internet is a necessity in the 21st century,
not a luxury.
Marco Quatorze,
Director of Value Added Services
for Amrica Mvil
The mobile handset is becoming
the most important means of
accessing the internet in Egypt.
Abdul Razzak,
Chief Technology Officer,
Etisalat, Egypt
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Affordable access: The first step to mass internet use in emerging markets 17
Shaping the individual
communications experience
The selection of technology will
depend on an analysis of many
factors, from frequency availability,
to license and regulatory conditions,
and the CSPs existing installed base.
An understanding of customer needs
is equally important as the consumer
market evolves from voice to data,
from urban to rural, and from shared
to personal access.
However, consumers are not concernedwith the technology that their CSPs
deploy. They want a communications
experience that satisfies their
individual needs. The quality of
service, their costs, reliability of
access and the relevance of services
all influence consumer adoption.
Nokia Siemens Networks focuses on
helping CSPs to understand the
context in which their customers find
themselves and then deliver the
services that excite their imaginationsand enrich their lives. The ultimate
vision is to enable a segment of one
whereby the service experience is
defined for each individual. Such an
individual communications
experience is the highest value that
any CSP can deliver to its customers,
whether people or businesses.
The route to this vision lies in providing
the lowest total cost of ownership for
networks and their operation and
enabling CSPs to create the bestexperience for their customers.
The importance of excellent customer
experience
A strong focus on customer experience is characterizing
the transformation of CSPs in mature markets and
already we are seeing evidence of the impact network
quality and service in emerging markets. A Nokia
Siemens Networks study25) has found that in Indonesia,
19% percent of all subscribers who have churned have
decided to change CSP due to bad voice quality.
The study also shows that when markets mature, the
likelihood of mobile subscribers changing CSP increasesvastly. Some 87 percent and 79 percent of mobile
subscribers in Indonesia and Pakistan respectively have
never changed CSP, while the corresponding figure is
55 percent and 48 percent for Germany and the UK.
In times of hyper-growth, emerging market CSPs are
concerned mainly with acquiring market share rapidly.
The race for market share can be to the detriment of
network quality, but need not be.
One Indonesian CSP has confirmed to Nokia Siemens
Networks that network quality is a key acquisition driver
for its customers.
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Affordable access: The first step to mass internet use in emerging markets18
Conclusion:The internet without restrictions
This must change and it is. Internet
services can help people to buildbetter lives and to support nations as
they create greater economic
prosperity. The key that will unlock
these huge opportunities is affordable
access. Unless people can reach the
internet, the internet cannot help
people.
Innovation in technology, in business
and in policy-making can makeaffordable access a reality for ever
more people, further and further down
the income pyramid.
The communications industry is being
charged with the responsibility to
make the internet a possibility for all.
The joint effort of all players in the
industry is needed to provide the vital
innovation. However, it is certain that
the investments required will be repaid
many times over through the revenue
that will be generated by billions ofnew internet users.
Ultimately, nobody, whatever their
income, need be deprived of the
benefits of the internet, of the ability to
use information to improve their lives.
All the pieces of the affordable access
puzzle are available, we just need to
put them together correctly.
A minority of the worlds population
uses the internet today. Yet thepotential for good that the internet
offers is greatest for the billions of
people who do not yet use this wonder
of the information era.
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Affordable access: The first step to mass internet use in emerging markets 19
References
(1) http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:
22231347~pagePK:34370~piPK:34424~theSitePK:4607,00.html, July 3, 2009(2) Chilean Mobile Telephony association (Atelmo 2008)
(3) South China Morning Post, April 2009
(4) Pyramid Research, April 2009
(5) ITNewsAfrica, October 27th, 2008. http://www.itnewsafrica.com
(6) How the internet can enhance the lives of the next billion consumers,
Nokia Siemens Networks, 2008
(7) Information changes lives making the internet relevant in emerging markets,
Nokia Siemens Networks, 2009
(8) Chinas Ministry of Industry and Information Technology (MIIT), 2008
(9) Telecom Regulatory Authority of India, January 2009
(10) Colombian Telecommunications Regulatory Commission (CRT), 2009
(11) Balancing Act, May 2009, www.balancingact-africa.com
(12) Nokia Siemens Networks 2009, based on multiple analyst resources(13) Reports: 2G frequencies can make big savings on 3G deployment,
LIRNEasia, Sept 25, 2008
(14) Nokia Siemens Networks operational efficiency reference benchmark 2009,
1st update, i.e. not based on published reports
(15) Tower Sharing in the Middle East and Africa: Collaborating in competition,
Delta Partners, April 2009
(16) LIRNEasia, April 2008
(17) Informa Intelligence Centre, 16/10/2008
(18) Telecoms.com, http://www.telecoms.com Zain-essar-network-sharing-deal-is-
a-paradigm-shift-for-emerging-market-players, April 16, 2009
(19) Balancing Act Africa, issue 447, March 2009
(20) Grameenphone, http://www.grameenphone.com/index.php?id=79
(21) Nokia Siemens Networks Corporate Responsibility Report 2008(22) Opening Doors to the Next Billion People the Markets and Economics of
Connectivity White Paper, Nokia Siemens Networks 2009
(23) 3G for all. How 3G is set to transform communications across emerging
markets, Nokia Siemens Networks, 2009
(24) Parks Associates, http://newsroom.parksassociates.com/article_display.
cfm?article_id=5128, January 20, 2009
(25) Acquisition and Retention Study, Nokia Siemens Networks, 2009
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