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Acknowledgement and Disclaimer

The report was jointly funded by infoDev and Alcatel, and prepared by consultants Peter Baldwin and Laurent Thomas. The reportwas supervised by Kerry McNamara and Seth Ayers from infoDev and Souheil Marine from Alcatel Digital Bridge Initiative depart-ment. The authors and the supervisors wish to acknowledge the efforts of the external and internal reviewers who read earlier draftsof this report and suggested many insightful improvements. Special thanks to Catherine Camus, Editor of the Alcatel Telecommuni-cations Review, who provided invaluable help during the final editing, translation, layout, and material production of this report.

The findings, interpretations, and conclusions expressed herein are entirely those of the author(s) and do not necessarily reflect theviews of Alcatel, infoDev, the Donors of infoDev , the International Bank for Reconstruction and Development / The World Bank andits affiliated organizations, the Board of Executive Directors of the World Bank or the governments they represent. The World Bankcannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shownon any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorse-ment or acceptance of such boundaries. The material in this publication is copyrighted. Copying or transmitting portions of this workmay be a violation of applicable law. The World Bank encourages dissemination of its work and normally will promptly grant permis-sion for use. For permission to copy or reprint any part of this work, please contact [email protected].

Copyright © 2005The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W.Washington, D.C. 20433, U.S.A.All rights reserved

Illustrations and layout by Atelier Antoine Maiffret (www.maiffret.net)Printed in France by: MACON Imprimerie22, rue du 134e Régiment d’Infanterie - 71000 Macon. FranceCover photos: © Alcatel and © Afrique Initiatives

TABLE of CONTENTS

Executive Summary 1

Introduction 4

Chapter 1: Case Studies 8

Chapter 2: Understanding Demand PatternsFor ICT In Developing Countries 21

Chapter 3: The Challenges of Serving Rural Areas 28

Chapter 4: Leveraging New Technologies and Existing InfrastructureTo Address ICT Needs of the Rural Poor 35

Chapter 5: Understanding the Value Chain 47

Chapter 6: Developing Sustainable Business Models For Rural Network Operators 53

Chapter 7: Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa 64

Chapter 8: Going Forward 71

Appendix A: Glossary of Terms 73

Appendix B: Possible Impediments to Regulatory Effectiveness 75

Bibliography 76

Foreword

Today, more than two billion people, or nearly a third of the population worldwide,subscribe to telecommunication services. However, despite the recent proliferationof mobile services, several billion people, primarily in developing countries, con-tinue to lack access to services that address their basic communication needs. Inaddition, although the digital divide between developed and developing countriesis shrinking, the digital divide within many developing countries is continuing toexpand. This challenge is particularly acute for many Sub-Saharan African coun-tries, which on average have rural populations that exceed 60% and, therefore,require innovative solutions for delivering localized applications and services,increasing infrastructure coverage, and realizing the market opportunities that exist.

infoDev and Alcatel have worked for many years to address this challenge, by help-ing key stakeholders to develop an enabling environment that supports the use ofICT as tools for poverty reduction and broad-based, sustainable development. Ourwork has focused on both the demand and supply for ICT-enabled services. Fromthe demand side, we have independently and collectively supported innovative pilotprojects to demonstrate the potential for scaling up localized, ICT-enabled servic-es, as well as addressing the policy and regulatory impediments to delivering theseservices. On the supply side, Alcatel has developed new business models that lever-age existing and new telecommunication infrastructure in innovative ways to pro-vide value-added services, particularly in rural and underserved areas.

In order to be more effective, it is clear that we need to understand better the gapbetween demand and supply, and to enable local actors to bridge this gap. Our jointwork on this study attempts to shed some light on these issues. We believe the poten-tial for bridging this gap is on the horizon, and that it will require harnessing inno-vative approaches to technologies, applications and services, developing sustain-able business models, and implementing policy and regulatory frameworks thatenable the delivery of ICT-enabled services to underserved areas. The private sec-tor will play a big role in bridging this gap, but it will also require innovative pub-lic and private partnership initiatives.

As a joint contribution to the second phase of the World Summit on InformationSociety, this study aims to highlight opportunities for achieving core developmentobjectives, by bridging the gap between demand and supply to meet the informa-tion and communication needs of rural and underserved communities in Sub-Saha-ran Africa.

Mostafa Terrab Thierry AlbrandInfoDev Program Manager Alcatel, Vice President Digital Bridge

The idea behind this collabora-tion was for infoDev to assessthe demand for informationand communication services,

with Alcatel addressing operator supply-side constraints, to produce a detailedpicture of the market for information andcommunication services in Sub-SaharanAfrica (SSA). infoDev drew on its sub-stantial library of information and com-munication technology (ICT) projects inSSA. Many provided interesting insightinto the market for ICT services, but thelist of projects inviting further studybecame smaller when using the follow-ing criteria:

1. The service offered should represent thefruits of market research conducted by theprivate sector within the countries them-selves;

2. The service should address unmet needsidentified by the Millennium DevelopmentGoals;

3. Where possible, the projects should be self-sustaining.

Our analysis led to the selection of fivebusinesses, most of which met all threecriteria. The five studied businessesfocus on healthcare, mobile banking, andmarket price information services.After extensive desk and field research,as well as consultation with telecomsoperators working in Sub-SaharanAfrica, several common threads emergedin the course of this study:

• Demand for information and communica-tion services is strong in SSA. Local serv-ice providers have identified demand forservices in the fields of healthcare, banking,property management, and market pricing.The services provided are frequently offeredthrough different channels than in thedeveloped world. Organizations such asPésinet in Senegal illustrate the specific

demand patterns of SSA by designing cus-tomized ICT-based services to addressinfant mortality rates in SSA, which areamong the highest in the world.

• Since information is a normal good,demand for information would increasewith decreased bandwidth costs, which inAfrica are among the highest in the world.Opportunities for lowering bandwidth costsinclude increased competition among oper-ators, universal access requirements, andthe establishment of national or regionalInternet exchange points (IXPs). Sufficientbackbone infrastructure is also a necessarypre-condition for developing ICT services ona wider basis;

• Although voice telephony may be the dom-inant technology, especially in countrieswith low literacy rates, there is significantdemand for data services. The key is todevelop affordable value-added services,and applications with local content. Each ofthe value-added service providers in Chap-ter 1 illustrates that there is demand fordata services;

• Major regulatory, market, and infrastructureimpediments exist, which governmentsmust address if ICTs are to become morepervasive throughout SSA. Among theseimpediments are a lack of a constructivepolicy framework regarding universalaccess and market competition; inade-quate access to investment capital; andweak human capital in the form of educa-tion and training in the use of ICTs. Inabsolute terms, Project IKON in Mali spendsper kilobyte around eight times what itwould spend in a developed country. Ade-quate business loans are difficult to obtainfor Manobi in Senegal due to a lack of phys-ical assets that it can offer as collateral. Bothcompanies also face import duties onequipment of 50-100 percent;

• Operators and service providers can makeprofits in rural areas and low-ARPU mar-kets by reducing total cost of ownershipwith optimized CAPEX and OPEX. This can

Promoting Private Sector Investment and Innovation 1

Executive Summary

be achieved with cost-efficient solutionsdesigned for rural/remote configurations.Innovative business models also allowoperators to access financial innovation andto better address demand through adapt-ed distribution channels and marketingstrategies, as well as designed applications,as specified above;

• Low-income users need customized solu-tions that meet their constraints and needsin terms of access to credit (micro-financ-ing), top-up and payment solutions (e-refill), localized user interfaces, and price.

Critical success factorsIn addition to the common threads enu-merated above, several factors critical tothe successful rollout of informationand communication services becameapparent. Among them were:

Market competition in ICT sectors

A recent World Bank Group report showsthe importance of market competition inspurring investment in ICT infrastruc-ture.1 This study compared theapproaches of Mauritania and Ethiopia.Between 1995 and 2003, Mauritaniaauctioned two mobile licenses, privatizedthe incumbent telecom provider, andestablished an effective, transparentregulatory agency. Ethiopia did none ofthese. During this period, telecommuni-cation penetration rates in Mauritania

went from 0.41 percent to 11.07 percent,while Ethiopia’s penetration rates wentfrom 0.25 percent to 0.61 percent, evenas the mobile penetration rate for SSAoverall (excluding South Africa) increasedfrom 0.26 percent to 3.34 percent.

Greater access to capital

Project IKON and Manobi both cited thedifficulty of access to credit from lendinginstitutions within their respective coun-tries. A lack of tangible assets com-bined with high collateralization require-ments (up to 80 percent of the loanamount) and fees, long delays in distri-bution of funds, and import duties on ICThardware of up to 50 percent, hinderstartups’ ability to capitalize projects.

An educated labor pool

IKON and Manobi also mentioned a lackof a qualified labor pool knowledgeable inICT applications. Often, job applicantslack even the most rudimentary knowledgeof computer use. For SSA countries to jointhe global economy, universities mustequip students with the necessary skills. Educational reform at all levels is aprecondition for the successful rollout ofinformation and communication infra-structure and services. Four of the fiveprojects studied in this report are theresult of a doctoral thesis by the compa-ny founder. One wonders how manyother value-added services remain undis-covered in SSA due to the lack of ade-quate education.

Localization of content

Low literacy rates remain a significantimpediment to the rapid uptake of ICTs.In addition, there exists little content inlocal languages. IKON illustrates thebenefit of localized software in its use ofa Bambara-based Linux distribution.

An enabling policy, legal, and regulatory framework

for rural ICT services

SSA countries will have to address issuessuch as universal access, data privacy, dis-pute resolution, and interconnection feesin order to facilitate the rollout of infor-mation and communication services.These countries must also address voiceover Internet protocol (VoIP) telephony.

2

Executive Summary

Promoting Private Sector Investment and Innovation

0

1

2

3

4

6

5

0%

5%

10%

15%

20%

25%

30%

35%

40%

50%

45%

Cost of 3 Min Call to US (US$)(2000)

Sources: (a) Competition in International Voice Communications, World Bank, 2003, based on World Development Indicators, citing ITU data.

* LAC data are for 1999.There are no countries in the MENA region with full competition.

17%

Sub-SaharanAfrica

East Asia& Pacific

SouthAsia

Latin American& Caribbean*

Europe &Central Asia

13%

38%

45%

29%

% countries with full competition

Cost

of

3.M

in C

all t

o U

S (U

S$)

Lack of competition leads to high prices for international calls in Sub-Saharan Africa

Following workshops with telecommuni-cations providers pursuant to this study,the authors are convinced that the solu-tion to the challenge of scaling up exist-ing or similar service providers is toenable the rural poor to identify morefully their information and communica-tion needs. Provision of these needsshould drive technology choices andbusiness considerations, and not theother way around. A well-regulatedmarket for ICT being necessary for thesecurity of a free market, the ability ofindividuals or companies to providevalue-added services should not beimpeded. These case studies serve todemonstrate that service providers areusing the ICT infrastructure in ways thatoperators did not anticipate, and that,consequently, demand for ICT infra-structure is at present greater thantelecommunications operators think,sufficient to roll out infrastructure torural areas in Africa3.

1 Connecting Sub-Saharan Africa: A World Bank Group

Strategy for Information and Communication Technol-

ogy Sector Development2 ”The Application of Information and Communication

Technologies in the Least Countries for Sustained Eco-

nomic Growth,” 2004 Edition, International Telecom-

munication Union. See also Engvall, Anders and Olof

Hesselmark “Profitable Universal Access Providers”

(Report for Sida), Stockholm, Oct. 2004., p. 5, and

also “Establishing Community Learning and Informa-

tion Centers in Underserved Malian Communities:

Report of Assessment Mission March 2005, Microsoft

Unlimited Potential Grant.3 For further discussion on successful practices, case

studies and access technologies for rural and remote

areas, see http://www.itu.int/ITU-D/fg7/

Public-private partnerships

Public-private partnerships may presentopportunities for ICT infrastructure roll-out, but they may also produce negativeexternalities.2 The design of the financ-ing scheme is critical. Reverse auctionsof spectrum licenses and other “smartsubsidies” have shown some promise incountries such as Chile. For example,public-private partnerships may be par-ticularly useful for building capacitythrough education programs and busi-ness incubation centers.

What is covered in this studyThis paper makes some broad policy rec-ommendations, but does not attempt toaddress the policy or regulatory frame-work among all 48 SSA countries. Thattask is left to other publications. Read-ers looking for a more in-depth discus-sion of policy and regulatory recommen-dations are advised to read, amongother publications, “Connecting Sub-Saharan Africa: A World Bank GroupStrategy for Information and Communi-cation Technology Sector Development.”

Lessons learnedValue-added service (VAS) providers aretoday using ICT infrastructure to deliverinnovative services to end-users. The fiveprojects described have identified demandfor services, and despite difficult infrastruc-tural, human-capacity, and financial con-straints, they are mostly revenue-positive.Greater access to financial and networkresources would enable VAS providers toscale up their enterprises, in turn increas-ing traffic for network operators.

3

Executive Summary


In the face of the ambitious objectivesestablished by the MillenniumDevelopment Goals (MDGs)1, somequestion the value of investing in

information and communication tech-nologies (ICTs). Critics feel that scarceresources would better be allocated tofighting the root causes of extremepoverty and hunger, child mortality, thespread of HIV/AIDS and other diseases,and the other MDGs.∗

Yet ICTs complement, rather than replace,investment in traditional developmentefforts.2 ICTs can advance traditionaldevelopment goals in health and educa-tion by empowering traditionally disen-franchised citizens, including the ruralpoor, by allowing them to identify prob-lems that interest them, and by providinginformation on a variety of matters, fromlife-saving tips such as HIV/AIDS-relatedinformation to market or business infor-mation. In their proper context, ICTs canbe tools to alleviate problems facing therural poor. Another aim of this study is toshow that demand for ICT-enabled serv-ices in unserved areas can increase traf-fic for telecom operators. There is a certain inevitability to theglobalization of information and commu-

nication technologies. Despite much talkabout the so-called “digital divide,” thereis strong evidence that this divide betweendeveloped and developing countries isactually narrowing.3 Unsurprisingly, muchof the current literature indicates that ICTsare a positive economic good in the sensethat demand for ICT increases as incomeincreases.4 The graph below illustrates thisfact. Of greater concern are intra-country digi-tal divides, which may be widening as“early adopters,” the wealthy, and thediaspora adopt ICTs. This alone is sufficientreason to wish to promote the diffusion ofICTs in developing countries, so that therural poor can have similar access toopportunities, and intra-country digitaldivides can decrease. Also, since urbanareas offer a larger potential customer baseas well as lower infrastructure costs, tele-com operators naturally focus on theseregions first. Yet rural inhabitants face high-er opportunity costs, since they have fewer,more widely dispersed alternative commu-nication channels. Simply put, lack ofphysical infrastructure such as roads makesthe cost of inaction with regard to ICT infra-structure even higher in rural areas than inurban regions of developing countries.

Promoting Private Sector Investment and Innovation4

Introduction

0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00%

0

2

4

6

8

10

12

14

Mauritius

Seychelles

South Africa

Botswana

Maldives

Gabon

Morocco

Namibia

Senegal

Tunisia

Equatorial Guinea

Congo Brazza

Egypt

Mauritania

DRC

GD

P pe

r Ca

pita

US$

x 1

000

(200

4 es

t.)

Mali

Source: CIA Fact Book for GDP in PPP, and Alcatel estimates for mobile penetration rates

GDP & Mobile Penetration

* The Millennium Develop-ment Goals arose, in 2000 asa result of the MillenniumDeclaration of the interna-tional community and mem-ber states of the UN, and willachieve byin 2015, as a resultof the Millennium Declarationof the international communi-ty and member states of theUN:1.Eradication of extreme

poverty and hunger;2.Achievement of universal

primary education;3.Promotion of gender equal-

ity and empowerment ofwomen;

4.Reduction of child mortali-ty;

5.Improvement in maternalhealth;

6.Combating HIV/AIDS,malaria and other diseases;

7.Ensuring environmentalsustainability;

8.Developing a global part-nership for development.

transforming technologies, whoseimpacts are still not fully known. Thesame market forces that have trans-formed every human activity with newtechnologies are already making them-selves felt in the “BRIC” countries: Brazil,Russia, India, and China. As a result, itis widely agreed that the “next billion”mobile subscribers in the next decadewill come from these countries. Duringthis time, no more than 20 million newmobile subscribers will come from sub-Saharan Africa (excluding South Africa).This observation begs the question ofwhy this project focused on SSA. Theanswer is that, for the most part, somecombination of demand, supply, andenabling environment exists in the BRICcountries, such that these countries areon track to roll out infrastructure. Also,although it is starting from a lower pen-etration level, SSA is one of the fastest-growing regions in terms of mobiletelephony. Finally, if ICTs are a tool forfighting extreme poverty and achievingthe other Millennium Development Goals,SSA is one of the most challengingplaces to start.

In Chapter 1: Case Studies, we look atfive examples of innovative uses of ICT inSSA∗, and attempt to draw inferencesfrom these examples about the level ofICT demand in the region. Since localservice providers better understand theneeds of their local markets5, our method-

Generally able to respond more quicklyto rapidly changing demand and circum-stances, private sector investment iscrucial to mainstreaming ICT in develop-ing countries. This does not ignore theimportance of public investment. How-ever, the scope and scale of investmentrequired, and severe budget strainsfaced by developing country govern-ments, mean that public investment inICT is most effective when it substantial-ly leverages private investment, andwhen it is targeted on those areas whereprivate investment is inadequate, due tohigh entry costs or the business risksassociated with the delivery of servicesin rural areas. There has been muchsmall-scale private sector ICT innovationin many developing countries, and somedeveloping countries are already makingsubstantial progress in building an ICTsector, or in leveraging ICT to make theirprivate sector more competitive andtheir public sector more responsive.Yet, in most developing countries, thechallenge of scaling up private sectorinnovation and investment in ICTremains substantial. A key challenge countries face is indeveloping new business and servicemodels that directly answer the needs ofdeveloping-country customers. Much ofthe discussion in recent years regardingincreasing ICT access and services indeveloping countries focused on thesupply side of the market for networkinfrastructure in unserved markets.However, an emerging consensus indi-cates that the key to successful, privatesector-led ICT innovation in developingcountries lies in understanding thedemand side of the equation. Our studyexamined the demand side of the provi-sion of ICTs in developing countries, anddiscussed the unique needs of customersthere. The result is this paper, co-pro-duced by the Information for Develop-ment Program (infoDev), a multi-donoragency within the World Bank, andAlcatel, the telecom equipment and ITsolutions provider.

Why focus on sub-Saharan Africa?The explosive uptake of informationand communication technologies such asmobile telephony indicates that these are

5

Introduction


INDICATORS YEAR RESULTS

Population 2003 647 M

GDP per capita (USD) 2002 342

Urban pop (%) 2003 36

Iliteracy (% of population age 15+) 2003 35

Gross promary enrollment (% of school age population) 2003 87

Main telephone lines (%) 2003 0,96

Residential main lines (% households) 2002 3,5

Mobile cellular subscribers (%) 2003 2,78

- % Prepaid (mobile) 2003 91,2

- % Population coverage (mobile) 2003 47,6

Effective teledensity fixed+mobile (%) 2003 2,68

Personal computers (%) 2003 0,75

Internet users (%) 2003 0,7

Television sets (per 1000 people) 2001 60

Radios (per 1000 people) 2001 198

Source : ITU African Telecommunication indicators 2004World Bank Development indicators

Facts and Figures for Sub-Saharan Africa (Excluding South Africa)

* Sub-Saharan Africa con-sists of 48 countries: Angola,Benin, Botswana, BurkinaFaso, Burundi, Cameroon,Cape Verde, Central AfricaRepublic, Chad, Comoros,Congo, The DemocraticRepublic of Congo, Coted'Ivoire, Equatorial Guinea,Eritrea, Ethiopia, Gabon, TheGambia, Ghana, Guinea,Guinea-Bissau, Kenya,Lesotho, Liberia, Madagas-car, Malawi, Mali, Mauritania,Mauritius, Mayotte, Mozam-bique, Namibia, Niger, Nige-ria, Rwanda, Sao Tome andPrincipe, Senegal, Seychelles,Sierra Leone, Somalia, SouthAfrica, Sudan, Swaziland,Tanzania, Togo, Uganda,Zambia, and Zimbabwe.

6

Introduction


ology was to examine how these serviceproviders had assessed the needs oftheir potential customers, and discoverwhat impediments they faced in bringingtheir services to market. From analysis ofthe situation on the ground as perceivedby these service providers, Chapter 2:Understanding Demand Patterns forICT in Developing Countries attempts todraw inferences regarding key successfactors as these companies, or others likethem, attempt to grow. After examining demand , this paper dis-cusses in Chapter 3: The Challenges ofServing Rural Areas, the challengesoperators face in supplying the infra-structure necessary to enable serviceproviders to grow, before moving on toa discussion of the supply side of themarket for information and communica-tion services. Chapter 4: LeveragingNew Technologies and Existing Infra-structure to Address ICT Needs of theRural Poor reviews existing access tech-nologies that allow service providers todeliver profitable value-added servicesand applications to rural and remoteareas. Chapter 5: Understanding theValue Chain describes the various play-ers along the value chain for informationand communication services in SSA,touching briefly on other factors such asregulation that affect producers’ abilityto create value along the chain. Whereenabling regulatory and financial envi-ronments are found to be insufficient tocreate markets, we recommend regula-tory reform, along with some form ofpublic-private partnership. Chapter 6:

Developing Sustainable Business Mod-els for Rural Network Operators pro-vides an analysis of sustainable businessmodels to show that telecom operatorscan create value for themselves and fortheir customers in rural areas. Chapter7: Making It Happen provides broadguidelines for the policy and financialenvironments necessary to spur rolloutof infrastructure. Finally, Chapter 8:Going Forward summarizes lessonslearned from the projects studied in thereport and gives guidelines to move for-ward.

1 See, for example, “Advance Social Watch

Report 2005: Unkept Promises”

http://www.mdgender.net/upload/mono-

graphs/SW-ENG-Advance-2005.pdf 2 See, for example McNamara, Kerry: Infor-

mation And Communication Technologies,

Poverty And Development - Learning From

Experience3 see, for example, “Africa: The Impact of

Mobile Phones” (

http://www.vodafone.com/arti-

cle/0,3029,CATEGORY_ID%253D30402%25

26LANGUAGE_ID%253D0%2526CONTENT_ID

%253D255218,00.html

(http://www.vodafone.com/arti-

cle/0,3029,CATEGORY_ID%253D30402%25

26LANGUAGE_ID%253D0%2526CONTENT_ID

%253D255218,00.html4 Ibid.5 As an example, when it was first rolled

out, mobile telephony was expected to

serve rich customers;, when in fact it has

taken hold in developing countries.

7

Introduction


KENYA

ETHIOPIA

SUDAN

EGYPT

Bits per capita

GDP per capita

Public VSAT licences

Outgoingconnections

0.25 1North America

Europe

Intra-Africa

Asia

5

ASIA

NIGERMAURITANIA

SOUTHAMERICA

EUROPE

MALI

NIGERIASOMALIA

0 200 400 600 800

Total Mbit/s

1036373

132

1000 1200

NAMIBIA

LIBYA

CHAD

SOUTH AFRICA

TANZANIA

ZAIRE

ANGOLA

ALGERIA

MADAGASCAR

MOZAMBIQUE

SEYCHELLES

BOTSWANA

ZAMBIA

GABON

CENTRALAFRICAN REPUBLIC

TUNISIAMOROCCO

UGANDA

SOUTH AFRICA(Walvis Bay)

SWAZILAND

LESOTHO

MALAWI

BURUNDI

RWANDA

COMORO IS.

TOGOBENIN

GHANAIVORYCOAST

LIBERIA

SIERRA LEONE

CAPVERDE

GUINEA

BURKINAGAMBIA

CAMEROON

SAO TOME& PRINCIPE

Cabinda(ANGOLA)

ZIMBABWE

CONGO

EQUATORIAL GUINEA

WESTERNSAHARA

DJIBOUTI

ERITREASENEGAL

GUINEA BISSAU

1000 km

1000 mi.

South Atlantic

Indian Ocean

USD 0-300

USD 300-1000

USD 1000-2000

USD 2000-4000

USD 4000-10000

Source: IDRC

SAT-3WestAfrica

Cable(WASC)(2x2.5

Gbps)

SAT-3/WASC/Southern

Africa& Far East (SAFE)(2x2.5Gbps)

SAT-2(2x500Mbps)

1993

2002

2000

SEA-ME-WE 2/3(2x20 Gbps)

Atlantis-2(2x2.5

Gbps)

LFON (5x 2.5 Gbps)

TDM1(4x2.5Gbps)

2 001

Connectivity in Africa

There are ample data on therapid uptake of ICTs in generaland mobile phones in particular,which would indicate strong

demand for ICT network infrastructure.Yet, skeptics question the worth of data onmobile phone penetration in sub-SaharanAfrica. Specifically, critics ask: Can some-one who owns a SIM card but not a phonebe considered a network user? Should wecount a phone owner who has no pre-paidcredits and can therefore only receivecalls? For these reasons, “teledensity,” orpenetration, simply measures the numberof telephones per capita, not the level ofaccess to telephones.The scarcity of reliable quantitative datahas led to a call for a qualitative ratherthan quantitative examination of howpeople use telephones, or the telephonesthey have access to.1 The following fivecase studies attempt to do just that. Theyare not meant to be exhaustive analysesfrom a business standpoint. Rather, theyseek to show that demand for basic infor-mation and communication servicesexists, and is growing; that existinginfrastructure and ICT technologies arebeing used to deliver basic services (e.g.financial and healthcare) in innovativeways that differ from how they are usedin developed countries; and that theseinnovative service delivery models andsubsequent usage patterns may requirenew indicators to capture demand.

Companies studiedinfoDev and Alcatel looked at five com-panies in depth: REOnet in Mali, specif-ically Project IKON, a teleradiology proj-ect; SIMpill in South Africa, whichaddresses real-time compliance manage-ment for long-term drug therapies;Pésinet in Senegal, a first line of defenseagainst the leading causes of morbidityand mortality among 0-5-year-old chil-dren in SSA; Manobi, also in Senegal, a

company that delivers market priceinformation to farmers and fishermen inaddition to geolocation and GPS mappingservices; and MoPay, a mobile bankingcompany based in South Africa.

I. Project IKONIn Mali, a country with a surface area of1,240,000 km2, a population of 11.6 mil-lion, and just three national and sixregional hospitals, three medical stu-dents at the University of Bamako iden-tified a need for expanding access tomedical services for the rural poor. Thethree also had an interest in open-source software, and created projectIKON, to provide radiological diagnosticservices to individuals in Sikasso, Mopti,and Timbuktu. Patients are x-rayed inthese towns, and a radiology techniciantransmits the images to a hospital inBamako for diagnosis.Project IKON grew from a workshop con-ducted by REOnet and the Internation-al Institute for Communication andDevelopment (IICD), a Dutch NGO, inMay 2003. The medical students identi-fied the inadequate coverage of radiolog-ical services as a particularly pressingneed. At the time, there were 11 radiol-ogy specialists in the country, ten ofwhom lived in the capital, Bamako.Accordingly, REOnet designed a pilotproject, Project IKON, with these specif-ic goals:

• Greater patient care;• A decrease in misdiagnoses;• A decrease in the number of unnecessary

trips to Bamako from regional towns andvillages;

• A decrease in healthcare costs borne by therural poor.

Project design

IKON chose three satellite hospitals inSikasso, Mopti, and Timbuktu that lacked


Chapter 1: Case Studies

the second month of the pilot phase.IKON has already identified additionalservices beyond thoracic radiologicaldiagnosis that it could provide using itsexisting infrastructure. Among theseare dermatological, trauma, and otherpathological diagnoses, for which IKONhas purchased digital cameras. IKONalso envisions monthly distance-learningseminars for medical personnel using itsexisting infrastructure.

Prospects for Growth

IKON faces strong growth prospects asit moves from pilot phase to full imple-mentation. With an additional invest-ment of approximately US$ 64,000,IKON can roll out services to four addi-tional regional hospitals, effectively pro-viding teleradiology services to everyhospital in the country.

radiological specialists to connect to themain hospital at Point G in Bamako. IKONprovided each hospital with an x-rayscanner to digitize images, and otherequipment such as a PC, backup powersupply, and, if necessary, a fixed-linephone. At Point G, IKON installed a serv-er to receive the images, a printer to printthe digital x-rays, and other equipment.IICD provided seed capital of approxi-mately 69,000,000 FCFA, or roughlyUS$ 140,000, to purchase the necessaryequipment at the Point G hospital andthree satellite hospitals, and to trainindividuals in the use of the technology.

Methodology

To use IKON’s teleradiological services,the patient attends the regional hospital.If a General Practitioner determinesthat an x-ray is needed, he performs theservice. The image is digitized using aspecial x-ray scanner, and sent via a dial-up connection to the Bamako server.These files, averaging 150 to 350 Kb insize, transmit quickly, even over dial-up.The specialist in Bamako receives the fileand makes his diagnosis. The radiologyspecialist then emails the GP at theregional hospital. Except in situationswhere a diagnosis is urgently needed, x-rays are transmitted once daily, implyinga 24-hour turn-around time for diag-noses. (Even for radiological exams insitu, 24 hours is standard turn-aroundtime in Mali.). In emergencies, IKON canproduce a diagnosis in one hourFor this service, IKON charges 2500FCFA (roughly five dollars) per image.The 2500 FCFA is split among theregional hospital, the hospital at Point G,the diagnosing physician, and IKON;roughly 600 FCFA goes to the regionalhospital to cover their overhead, 375FCFA goes to the hospital at Point G,1125 FCFA goes to the diagnostician, andapproximately 400 FCFA goes to IKON.∗

The entire process uses open-sourcesoftware tailored to the application byIKON. The software encrypts the imagefor transmission, along with confidentialpatient data, and handles billing. IKONconducted a one-year pilot project to testthe idea, and found sufficient demand forteleradiology services to generate a prof-it. IKON has been revenue-positive from

9

Case Studies


0

50

100

150

200

250

300

FCFA

(x

1000

)

Month1 2 3 4 5 6 7 8 9 10 11 12

Source: Project IKON

Net Cash Flows, Pilot Phase

0

50

100

150

200

250

300

FCFA

(x

1000

)

Month1 2 3 4 5 6 7 8 9 10 11 12

Source: Project IKON

Net Cash Flows, Extension Phase

* Revenues to the regionalhospital and to Project IKONare approximate because theamount each receivesdepends on whether the hos-pital is a private facility or astate-owned facility. For pub-lic hospitals, the amountreceived is 625 FCFA perimage, with Project IKONreceiving 375 FCFA. Whenthe image was is taken at aprivate hospital, Project IKONreceives 1,000 FCFA. . In thecase of public hospitals, Pro-ject IKON helps pay the over-head costs associated withproviding its service.

Impediments to Growth

Although IKON’s business model showsstrongly positive cash flows, employsrobust, appropriate technology, andmeets a social need, Dr. Romain-RolandTohouri reports that the project hashad great difficulty procuring the neces-sary funding. Business loans in Mali typ-ically require up to 80 percent collater-al, and according to Dr. Tohouri, the effec-tive import duties on computer hardwareare in the neighborhood of 50 percent.The table below benchmarks Mali tothe United Kingdom.

It is worth remembering that theseduties are levied on the “Cost + Insurance+ Freight” value (CIF), which remainsroughly constant across countries, whilethe per capita GDP of the United King-dom is US$ 26,507, over 100 times theper capita GDP in Mali, estimated in2004 at US$ 260.2

Lack of access to financing conforms tofindings in other reports for the WorldBank.∗

Greater access to credit is especiallyimportant for dynamic small- and medi-um-scale enterprises whose growthpotential outstrips the financing attain-able from internal or informal sources.Measures to improve the accountingpractices of firms and their ability to pro-vide audited statements can improvecreditworthiness by reducing the cost tobanks of obtaining reliable information.Banks’ concern with risk can beaddressed through better legal systemsto document and collect property offeredas collateral. Competitive banking isessential to give banks incentives toseek new, smaller clients.3

Additionally, the project directors cited alack of job applicants qualified in the useof ICTs. It was their feeling that the cur-rent university curriculum does not ade-quately prepare students for the informa-tion age. REOnet is attempting to address

this issue with workshops in the use of var-ious multimedia software applications. The high cost of Internet access alsoimpedes growth. Currently, IKON pays200,000 FCFA per month, or roughlyUS$ 400, for 128 Kbit/s dial-up service.Although this is at least 200 times moreexpensive than comparable service indeveloped countries, IKON is able to paysuch access fees, but if the companywishes to increase the volume of imagestransmitted or add any videoconferenc-ing capabilities, whether for instructionor for real-time diagnosis, costs willhave to come down.Another impediment facing Project IKONis latency, defined as the time needed totransmit traffic over a network. At present,Mali does not have an Internet exchangepoint (IXP), which means that all trafficbetween Internet service providers mustpass through international backbones,increasing cost and latency. As the follow-ing illustration shows, serious latencyexists in Mali. The author loaded REOnet’sweb page from a location in Bamako, usinga connection on a competing ISP. Althoughthe author was only five kilometers away,the traffic was routed through Senegal, Por-tugal, Spain, two different stops in France,Italy, and finally back to the African con-tinent. Such latency precludes real-timevideoconferencing. It has been estimatedthat the use of international bandwidth for

10

Case Studies


INDICATORS MALI REGION OECD

Procedures (number) 13 11 6

Time (days) 42 63 19

Cost ( percent of income per capita) 190.7 215.3 6.5

Min. capital ( percent of income per capita) 490.8 297.2 28.9

The challenges of launching a business in Mali are shown below. Entrepreneurs can expect

to go through 13 steps to launch a business over 42 days on average, at a cost equal

to 190.7 percent of gross national income (GNI) per capita. They must deposit at least

490.8 percent of GNI per capita in a bank to obtain a business registration number.

Source : Doing Business in 2005: Removing Obstacles to Growth

Tariff on Computer Tariff on Computer Tariff on Computer Tariff on Other Hardware Parts Software Manuals Taxes

Mali 5% Unknown 20% 0% 5% customs service fee on CIF value; 7.5-55% additional taxes

United Kingdom# 0% 0% 0% 0% 17.5% VAT

Source : US Dept. of Commerce, Office of Technology and Electronic Commerce

Malian Import Duties on Technology Compared with the United Kingdom

The Challenges of Doing Business in Mali

#The United Kingdom is aparty to the Information Tech-nology Agreement (ITA). TheITA is a multiplurilateral tradeagreement that requires par-ticipants to eliminate theirtariffs on a specific list ofinformation technology (IT)and telecommunicationsproducts. The agreement cov-ers approximately 95 per-cent percent of world trade indefined IT products, which iscurrently estimated to exceedUS$ 1 trillion. Products cov-ered under the ITA includecomputer hardware andperipherals, telecommunica-tions equipment, computersoftware, semiconductormanufacturing equipment,analytical instruments, andsemiconductors and otherelectronic components.

* See, for example, SmallEnterprises Adjusting to Lib-eralization in Five AfricanCountries http://www.world-bank.org/afr/findings/eng-lish/find42.htm, which states,“A majority of survey respon-dents (62- to 90% percent)considered lack of access tocredit (mainly for workingcapital) a major constrainton their operation.” In addi-tion, in Doing Business in2006, the worldWorld Bankranked Mali in the bottom tenout of 155 countries in termsof regulatory burden on busi-ness. Nine out of the bottomten countries were in sub-Saharan Africa: the Democra-tic Republic of Congo, BurkinaFaso, Central African Repub-lic, Chad, Sudan, Niger, Togo,Congo Republic, and Mali.

In South Africa, the highestincidence of TB occurs inCape Town, with 678 casesper 100,000 of population in2003.6 The city of CapeTown provides free medi-cine to TB patients, whomust take at least fourtablets five days a week forsix months. It is essentialthat patients follow this drugregime exactly; if patientsskip doses, they become“multi-drug resistant.” Tuberculosis exacts an enor-mous economic burden onindividuals and societies inSSA. In Africa as a whole,the mortality rate from TB isthree times the global aver-age, and more than twice ashigh as the next-worstregion, with 538,000 deathsin 2003.7 The cost of treat-ment is also burdensome.For “normal” TB (asopposed to MDR-TB), thedrug regime costs approxi-mately R 600, nearly US$100, per month. Drug-resistant tuberculosis iseven more costly. SouthAfrica has been identified by

the World Health Organization (WHO) inits latest report on global drug-resistanttuberculosis as one of the ten MDR-TBhotspots.8 For MDR-TB, medication costsare R 30,000 (US$ 5,000) per month.

Project design

SIMpill is the brainchild of a doctor in CapeTown, South Africa, who sought to addressthe issue of non-compliance among tuber-culosis patients on long-term drugregimes. This product consists of a pill bot-tle that sends a short, time-stamped textmessage (SMS) to a central server eachtime the top is removed. If the server doesnot receive an SMS at the predeterminedtime, the server in turn sends an SMS tothe patient reminding him to take his med-ication. In a pilot study, the SIMpill On-CueCompliance Service reduced non-compli-ance by approximately 26 percent.For the pilot phase of SIMpill’s On-CueCompliance Service, the project gave 221

local or regional Internet traffic costs theAfrican continent as much as US$ 400 mil-lion per year.4

Lessons learned

As is the case throughout Africa, there islatent demand for ICT-enabled healthservices in Mali. In order to increaseaccess to ICT, connectivity costs willhave to reduce, and access to capitalincrease. Mali will also have to refocusits educational efforts toward creatingICT-savvy potential employees.

II. SIMpillIn absolute numbers, as well as on a per-capita basis, SSA faces a severe tubercu-losis crisis. Nine of the 22 “highest-burden”TB countries are in SSA: Nigeria, Ethiopia,South Africa, DR Congo, Kenya, Tanzania,Uganda, Zimbabwe and Mozambique.Together, these countries accounted for 80percent of global tuberculosis in 2002.5

11

Case Studies


0

100

200

300

400

500

600

700

800

900

1000

US$

Bro

adba

nd p

rice

s pe

r m

onth

Asia Europe OceaniaAmericasAfrica

Notes: (a) Prices as of July 2003; (b) ITU calculation for Africa is based on a limitednumber of countries due to scarcity of data.Based on data from Birth of Broadband. September 2003, ITU

Africa has the most expensive broadband costs

Lack of Internet Exchange Points Creates Latency.

patients a SIMpill bottle, and monitoredcompliance. The City of Cape Townassumed the cost of the bottle and theSMSs, from both the pill bottle and thecentral server to the patient’s phone inthe event of non-compliance. For this,SIMpill charged the City R 150 (US$ 23)per patient per month.

Methodology

Patients are issued their medication in a pillbottle that contains a SIM card and battery.When the top is removed, a time-stampedSMS containing an identifying code issent to a server for logging purposes. If themessage is received within a predeter-mined period, the SMS is simply recorded.If no message is received, the patient issent an SMS reminding him to take hismedication. The system also provides theability to escalate the response by con-tacting a health care provider or familymember in the event of persistent non-compliance. When compared to theexisting protocol for MDR-TB∗, the resultsof the pilot study were ambiguous atbest. According to the bridges.org “Eval-uation of the Compliance Service,” “With the exception of a slightly higher

completion rate for the pilot, treatmentoutcomes are very similar. It is not pos-sible to assign any statistical significanceto the difference in treatment successrates, due to the limited sample size. Atfirst glance, all that can be said is that theCompliance Service has produced resultsthat are normal for this clinic, but do notdemonstrate a significant improvement.”9

However, despite less-than-hoped-forresults from the pilot project, there areseveral mitigating factors. First, thepilot study was rushed into existencewithout adequate training of healthcareproviders. As a result, the pilot clinic maynot have fully “bought in” to the On-CueCompliance service. Additionally, fewhealthcare providers spoke Xhosa, andthe SMS protocol employed only allowedfor ASCII characters, so languages suchas Kiswahili did not work for SMS. Thislast issue is easily fixed, and has been.With adequate training of clinic workers,the issue of “buy-in” should also beresolved, and the SIMpill On-Cue Com-pliance service will enable individualhealthcare providers to supervise themedication regime of a greater numberof patients, at lower cost in terms of lostwages and travel costs to the patient. Asthe box below shows, the alternatemethod of addressing non-compliantpatients, Directly Observable TherapySystem (DOTS), incurs costs to thepatient in the form of travel costs to aclinic for observation while taking med-ication, as well as lost wages for eachvisit. Because SIMpill’s On-Cue Compli-

12

Case Studies


Server receives SMS and stores dataOr

If no SMS is received then servernotifies patient on handset

OrIf still no response after a time

after prompting, care giver is contactedby server

Patient takesmedication

Text reminderto take medication

Care giver visitsor calls patient

Text notifying caregiver of problem

Send SMS

when opened

Pill Box

Patient's handset

Care giver's handset

GSM Wireless network

Source: www.simpill.com

Schematic Diagram of SIMpill Service Delivery

Cost-Benefit Comparison : DOTS vs, SIMpill

• DOTS (Directly Observable Therapy System) 1) Lost wages – 120 visits, or approx. 150 hours’ lost wages 2) Travel costs – 69% of patients in pilot study spent an average of R8 (approx. USD1.40) each way R16 X 120 = R1920

• SIMpills 1) Fewer lost wages – 27 visits, or 33.75 working hours 2) Lower travel costs – R16 X 27 = R432

* The existing protocol isknown as Directly Observ-able Therapy System (DOTS).Essentially, this means that thepatient comes to a clinic sever-al times daily, and is observedwhile taking medication.

Impediments to growth

In South Africa, mobile phone coverage isnot an issue; 71 percent of South Africa’spopulation has cell phone coverage.13 Nordoes mobile phone penetration appear tobe a problem; 50 percent of the patients inthe pilot study were unemployed, yet theystill had a cellphone. In addition, accordingto SIMpill’s own data, 88 percent of thepatients always kept their phone withthem and fully charged.Obviously, issues such as mobile phone pen-etration and the availability of electricity aregermane elsewhere, as are behavioral issues,which include the practice of sharing phones,or the issue of social taboos associated withinfection status. The cost of purchasing ahandset is also a concern, even thoughefforts are underway to lower this cost. For all of these reasons, a better model forrolling out the SIMpill On-Cue ComplianceService continent-wide would be to makethe pill bottle a closed communication loop,meaning both a transmitter and a receiver.Currently, the SIMpill bottle merely acts asa transmitter, but there are examples ofhardware that receives “pushed” informa-tion from wireless networks.∗∗ In otherwords the pill bottle, in addition to sendingan SMS notifying the care giver that thepatient has taken his medication, could alsoglow, vibrate, or simply provide a readoutwhen it is time to take medication.

Lessons learned

SIMpill’s On-Cue Compliance servicedemonstrates that, with proper attentionto local environments, and if localizationissues such as language and power sup-ply are addressed, ICTs can be used asa tool to foster progress on the Millenni-um Development Goals. Additionally,this project demonstrates one way inwhich value-added service providersare using existing technologies in waystheir inventors never envisaged. Perhapsmost importantly, this project demon-strates that, in instances where informa-tion and communication services pro-duce positive effects, public-private part-nerships are appropriate. Although thenarrowly defined value chain may byitself be insufficient to justify infrastruc-ture rollout, the net social benefit ofdecreasing the instance of multi-drug-resistant tuberculosis far exceeds infra-structure costs.

ance System requires fewer visits perpatient, individual costs are lower. Inaddition, each healthcare provider is ableto observe a greater number of patients,further lowering treatment costs.Furthermore, the following graph showsthat some learning did take place, and thatover the life of the project, compliance ratesdid go up, as indicated by the green andblue bars, representing time-appropriate“medication events” and “reminders,”respectively. Not only did the sum of thesetwo events increase over time, but also thenumber of reminders required decreased.

Prospects for growth

Given the high incidence of TB in SSA,the prospects for growth of services aresubstantial.10 In addition, the SIMpilltechnology would apply for any patientundergoing long-term medication ther-apy, such as HIV/AIDS, diabetes, epilep-sy, or hypertension.From 2003-2005, SMS traffic in SouthAfrica increased by 1000 percent.11 Suchgrowth is obviously unsustainable, butindicates the degree of acceptance ofSMS as a method of communication. Fur-thermore, as the preceding graph shows,although there appears to be a “learningcurve” with respect to compliance, bothamong the sample population as a wholeand also among those needingreminders, there will in all likelihoodalways be some who need reminding.Furthermore, as of 2003, there were 30million inhabitants of SSA living withHIV/AIDS.12 Even one SMS a day (indi-cating that they did, in fact, take theirmedication) would produce nearly 11 bil-lion SMSs per year.∗

13

Case Studies


0%

10%

20%

30%

40%

50%

60%

70%

80%

100%

90%

Missed Reminded

Wrong time Right time

1-7days

32.5

22

35

20.5

8-14days

41

21

23

15

15-21days

49

15

22

14

22-28days

58.5

13

20

8.5

29-35days

69

7

20

4

*30,000,000 x 365 =10,950,000

** An example of this is thethe Ambient Devices Orb(www.ambientdevices.com),which delivers real-time infor-mation on stock prices, theweather, or any of severaluser-configurable options.The Orb picks up signals fromthe wireless network in theUnited States without needingof a wired connection to a net-work.

III. PésinetSub-Saharan Africa possesses the highestchild mortality rate in the world, at morethan one child in six. The World HealthOrganization lists SSA as “stagnating” inprogress toward the Millennium Develop-ment Goal of reducing child mortality.14

Furthermore, according to the WorldHealth Organization, “most deaths amongunder-fives are still attributable to just ahandful of conditions and are avoidablethrough existing interventions. Amongthese are pneumonia (19 percent of alldeaths), diarrhea (18 percent), malaria (8percent), measles (4 percent), HIV/AIDS (3percent) and neonatal conditions, mainlypre-term birth, birth asphyxia, and infec-tions (37 percent).”15

Project design

Pésinet is an early-warning system foridentifying at-risk children in Senegal.Recognizing that weight increase is high-ly correlated to the overall health of achild, Pésinet representatives weigh sub-scribed children twice weekly, and thesedata are plotted on a growth curve toensure that the children are gainingweight at an appropriate rate. Anom-alous changes in weight trigger an exam-ination by a doctor. This service hasproved extremely effective at preventingthe leading causes of childhood illness inSSA, as well as in reducing child mortal-ity among the sample population.Pésinet targets 0-5-year-olds in SaintLouis, Senegal. Founded with the supportof Afrique-Initiatives, Pésinet is based ona subscription model and currentlyreaches 8 percent of children in SaintLouis16 in nine different quartiers of thecity. Two “Agents de Pesée” (ADPs orweighing agents) cover each district, atotal of 18 ADPs. As of mid 2005, Pésinet had approxi-mately 2000 babies enrolled in theservice. The monthly subscription fee isapproximately 150 FCFA (roughly US$0.30), but the fee is tiered and declineswith the number of babies per house-hold.17 Although this fee is the onlysource of revenue for Pésinet, AwaGueye Fall, the project director, describedthis fee as largely “symbolic”18, citing thecommon tendency to undervalue thatwhich is offered freely. As will be seenlater, this fee is symbolic in anothersense, in that revenues collected coveraround 16 percent of project costs.In addition to the usual overhead costsfor rent and electricity, Pésinet hassalary costs of 13,800,000 FCFA (rough-ly US$ 28,000) per year, which covers the18 ADPs, the director, an assistant direc-tor, and the two doctors. From a mortality and morbidity perspec-tive, the results of this project havebeen impressive. During its pilot phase,among 1500 enrolled children, eightdied. This compares extremely favorablyto the expected number of 137 children,based on mortality rates for 0-5-year-oldsin Senegal. Although, as with SIMpill,some self-selection in the sample for thispilot study almost surely occurred, froma purely cost-benefit standpoint, the

14

Case Studies


0%

2%

4%

6%

8%

10%

12%

Senegal all SSA World avg.

1995 2000 2003

Senegal is decreasing under-five mortality, but at a decreasing rate (“stagnating”),and at a rate far below the world average

Source: World Health Organization and World Bank data

Percentage Change Over Previous Data Point

0

20

40

60

80

100

120

140

160

180

1990 1995 2000 2003

Senegal AVG SSA World Avg.

Source: World Health Organization and World Bank data

Under Five Mortality Rate, Senegal

of costs. The rest of the operating rev-enues come from Afrique Initiatives. To address the gross imbalance betweenrevenues and expenses, the projectshould consider some combination ofraising prices*, increasing the number offamilies subscribed, and increasing thenumber of services delivered. Pésinetcould consider providing additionalhealth consultation services to mothers,perhaps addressing issues such asmaternal health and family planning. Pésinet must also attack the problem onthe cost side. Increases in sales volumeshould not be accompanied by a com-mensurate increase in the number ofADPs. In order to achieve economies ofscale, Pésinet should leverage technolo-gy. Using personal digital assistants,ADPs could eliminate the need to inputthe data into the database manually, andcould instead see twice as many children,perhaps even extending the project’sreach into rural areas surrounding SaintLouis. At the end of the day, the datacould be transmitted as a batch. Whenthe physician wanted to arrange anappointment with a child, he could emailthe ADP directly on the same PDA. The use of PDAs would have favorableconsequences for network operators aswell. The daily transmission of datawould mean additional traffic on the net-work. Additionally, through growth ofPésinet’s subscriber base, the number ofdoctor’s appointments, and thus commu-nications between the doctors and theAgents de Pesée, would also increase.


The technologies used in the delivery ofservices are not complicated, and pres-ent no impediments to scalability. How-ever, cash flow is desultory, and Pésinetcan only cover 16 percent of its operat-ing costs. Scaling up this project wouldincrease budget shortfalls in absoluteterms, and the burden on the supportingdonor organization, which expected toend its subsidy of Pésinet in Septemberof 2005.

Lessons learned

Pésinet illustrates the importance ofmarketing services in a location-appro-priate manner. Word-of-mouth may not

use of information and communicationtechnologies to deliver its servicesunquestionably adds value. According to Awa Gueye, around 20percent of the enrolled children requirevisits to the doctor each month. As thefollowing graph shows, the reasons forthe visits correspond strongly with theleading causes of death among chil-dren, indicating that the Pésinet modelis effectively catching the leading caus-es of death among children in SSA.

Methodology

An Agent de Pesée visits each hometwice weekly and weighs all enrolled chil-dren. It usually takes the ADP half theday to complete her appointed rounds,so in the afternoon, the ADP enters thecollected data into an Access database atthe Pésinet office. These data are thenpresented graphically through a Webinterface to the consulting physician, whoreceives an email when new data arerecorded. When two successive weightsfor a given child are deemed anomalous,the physician emails the project director,who phones the ADP. The ADP in turnvisits the household and arranges avisit to the doctor, the cost of which iscovered by the subscription.


With roughly 8 percent of children inSaint Louis enrolled, growth prospectsfor this project could be strong. Howev-er, before this can happen, the businessmodel must change drastically, sincerevenues currently cover only 16 percent

15

Case Studies


Skin infections13%

Nutrition24%

Malariaand fever

11%

Other11%

RespiratoryInfections

19%

Diarrhea-relatedIllness22%

Source: Dr. Massaer Dioum, consulting physician

Presenting Pathologies among Children Enrolled in Pésinet

* “As a price comparison,the cost of a mango in Sene-gal is CFA 150 (US$ 0.26) inseason, mangos being a com-mon, readily-available prod-uct.” “What Works”, p. 9. Inother words, currently, thecost of the service is roughlythe equivalent, on a per-childbasis, of buying one mangoper month.

be the most effective method for market-ing value-added ICT services in developedcountries, but in a country with closely-knit communities, low literacy rates,and a strong oral tradition, marketing vialocal interaction may be the best methodof attracting new customers.Another lesson echoes the SIMpill proj-ect: the importance of tailoring the serv-ice to local needs. It is doubtful that net-work operators envisaged employingtheir network to analyze data on chil-dren’s weights over time. The lesson isthat if the infrastructure is in place, andhuman capacities are sufficient, individ-uals and companies in SSA will deviseinnovative uses for the infrastructure.

IV. ManobiInformation asymmetry between com-modity producers such as fishermen orfarmers, and the middlemen to whomthey sell, can lead to loss of income forthe producers, typically the rural poor.A Senegal company called Manobiattempts to address information asym-metries by giving farmers and fishermenreal-time access to price information.Thus, commodity producers are able tosend their products to market on dayswhen prices are strong, and can with-hold products on days when oversupplydrives prices below what producers arewilling to accept.

Project design

Manobi is a multi-channel servicesprovider delivering market informationto farmers and fishermen in Senegal.Since the founder of the project had abackground in agriculture, the projectinitially focused on delivering price infor-mation to farmers. From offering thisservice to farmers, it was a naturalextension to offer price data to fisher-men. In 2003, Manobi conducted aneeds-assessment exercise involvingfishing unions and telecom operators.Demand was found for two-way commu-nication at sea; fishermen wanted priceinformation from the source, ratherthan through the middlemen who metthem at the water’s edge. Later, addition-al benefits of two-way communicationtechnology became apparent. Able to calland be precisely located by GPS to be res-

cued in the event of a disaster at sea,fishermen can obtain insurance; they canalso check meteorological information. Manobi’s Xam Marsé service lets farm-ers check prices in several marketsremotely, enabling them to sell wherethey can obtain the best price. Wishingto capitalize on the two-way nature ofmobile telephony, Manobi realized thatthe search-and-rescue capability avail-able to fishermen could be adapted toinclude fleet vehicle tracking, whichled to contracts with the largest Sene-galese company: Société de Distributiondes Eaux, the municipal water supplierin Dakar. Dispatch operators can locatetrucks nearest to reported water leaks,cutting down response time and savingwater in the process. According toManobi, each vehicle sends, on average,800 SMSs per month and generatesroughly US$ 24 per vehicle per month.19

Manobi further expanded its service byoffering a mobile phone-based landsurveying and transaction tool. Usingmunicipal data on land titles, Manobican offer precise coordinates to prospec-tive land buyers, including data onwater percolation. Manobi has begunsuch a service for the municipality ofSangalcam in Senegal. Sangalcam paysroughly US$ 8 per hectare to Manobi,and in exchange, municipal workers areissued PDAs linked to a central databasecontaining data on all land in the munic-ipality. In addition to the social benefitof shortening the time necessary topurchase land from five months to tendays, and drastically reducing the num-ber of land claims, Manobi’s GIS servicealso generates three to four SMSs pertransaction.20

Methodology

For Xam Marsé, Manobi employs data col-lectors who directly observe and recordmarket prices in three locations in Dakarand Kayar. These data are then transmit-ted by cellphone to a central database,where they are accessible via the Web oron any phone via SMS (using “push” tech-nology). To access this information, farm-ers and fisherman pay around US$ 5 permonth, plus the cost of SMSs. Accordingto Manobi, the average farmer generatesroughly two minutes of WAP transaction

16

Case Studies



However, Manobi has struggled in theface of several impediments. Initially, thesize of the mobile network limited thecompany’s reach out to sea. Sonatel, thetelecom operator, rectified the problemby installing a base station in Kayar, afishing village north of Dakar. Mobile cov-erage is still an issue in rural areas ofSenegal however, and commodity pro-ducers have been slow to subscribe to theservice, even when Manobi offered a freebasic version of the service.∗

The slow uptake of Xam Marsé illustratesthe importance of achieving buy-in fromall stakeholders, including potential con-sumers. To date, Manobi has focused itsefforts on developing rather than market-ing its services. Sonatel, which holds asignificant equity stake in Manobi and,as the network provider for Manobi’sMulti-Channel Service Platform, alsostands to gain from increased traffic fromManobi’s site, could also increase itsefforts to market Manobi’s services.

Lessons learned

By convincing Sonatel to install a BTS inKayar, Manobi illustrates the impor-tance of value-added services in drivinginfrastructure rollout. Additionally, theexperience of Manobi demonstrates theimportant role that network operatorscan play in marketing value-added serv-ices on their network. Such win-winopportunities should be explored morefully in other parts of SSA.

and approximately five minutes of voicetelephony per working day. On a month-ly basis, the overall ARPU (voice and data)is US$ 30, of which US$ 12 go to Manobiand US$ 18 to Sonatel.21

Information also flows in the other direc-tion on Manobi’s network. Buyers canissue a request for large quantities ofagricultural goods, and Manobi serves asan aggregator of transactional informa-tion related to goods supplied by smallfarmers. Thus individual farmers can sellto such large entities as the FrenchArmy base in Dakar, which typicallyorders between two and three tons offruit and vegetables monthly. Accordingto Manobi, transactions with the FrenchArmy alone generate US$ 18 of GSM net-work traffic per month.


Manobi claims that farmers are able toincrease their income by at least 30 per-cent22, more than offsetting the cost ofthe service. Manobi has decided tobroaden its services to include fleetvehicle tracking and geolocation usingGPS. Given recent growth in mobilephone penetration and projections forfuture growth (see graph), it wouldappear that Manobi enjoys strongprospects for growth.

17

Case Studies


0

10

20

30

40

50

60

70

80

90

20012000 2002 2003

(x10

00)

Fixed-line subscribers

Cellular mobile telephone subscribers

Source: data from the World Bank, graph by the author

Mobile Telephony in Senegal

Saint-Louis

Dakar

Richard-Toll

Podor

Linguère

ThièsDiourbel

Matam

Nayé

Tambacounda

Mauritania

The Gambia

Mali

Guinea

Guinea-Bissau

Kolda

Kaolack

Bignona

Ziguinchor Kédougou

Mobile Phone Coverage in Senegal

* Starting in May of 2005,Manobi offered farmers SMSmarket price information forone product for free.

V. MoPayAccording to some estimates, as much as81 percent of the sub-Saharan popula-tion may be “unbanked”, i.e. withoutaccess to formal banking institutions.The size of this informal economy hasseveral implications. Chief among themis the risk of theft, an all-too-commonoccurrence in South Africa. The atten-dant difficulty of transporting largesums, particularly over distances, alsoplaces geographical limits on financialtransactions.Of greater importance from a societalstandpoint is the fact that, by staying inthe informal sector, holders of cash can-not use money to create wealth usingloans or other credit instruments. Themoney multiplier is not allowed to work,since the money is not in the system.

Project design

MoPay is a mobile-banking service basedin South Africa. This service uses simpleSMS messages and Personal InformationNumbers (PINs) to allow customers totop-up pre-paid services, pay bills, andconduct transactions between buyersand sellers. Rather than employ a software or hard-ware solution, MoPay was designed to betechnology-neutral and platform-inde-pendent. Although SMS is the mostusable service delivery channel forMoPay, the platform features a numberof interfaces designed to support otheraccess channels. These include Web,ATM and Interactive Voice Response(IVR). Unlike other examples of mobilebanking, which require special hardwaresuch as a “smart card” or a dedicatedSIM card, all sensitive data reside onMoPay’s servers. This deceptively simplesystem provides greater security from‘hackers’ than systems in which data arestored on individual handsets. In addi-tion, all sensitive data are encrypted, andthere is a complete audit trail for sub-scriber and administrative operations.There is also no problem of bouncedchecks, since the payment clears rightaway.

Methodology

For the individual consumer, there is nocost to use MoPay’s services; even theSMSs are paid for. He simply goes to a

cooperating bank or merchant; registershis phone number and bank account, ifone exists, via a simple web interface;and selects a Personal Information Num-ber. If the consumer does not have abank account, there are two options: hecan exchange cash for an SMS messageto his phone, transferring an equal sumto his virtual account, or he can pay cashfor a MoPay/Visa-branded cash cardthat functions like any other debit card. The vendor or merchant pays the costsassociated with using MoPay’s services,on a per-transaction basis. Fees rangefrom 3-5 percent per transaction, withsome larger merchants paying a flat feeper transaction. Merchants receive aunique vendor number enabling them toreceive payment from a client. A hostedplatform authenticates end-users andmanages payment authorization, provid-ing confirmation and settlements formobile payment processing. To make a payment via an SMS, the pur-chaser sends an SMS similar to the fol-lowing: 2 [main menu item: pay] > PIN> amount > vendor number. MoPay ver-ifies the identity of the purchaser bymatching the mobile number and pass-word with the purchaser’s records storedin the database. MoPay then sends anSMS to the vendor similar to the follow-ing: “ABC Products: You have receivedpayment of R 127.50 from mobile no+2782505050”Alternatively, the vendor can initiatethe payment-clearing process. Whenmaking a purchase, the purchaser pres-ents a MoPay-branded pre-paid debitcard. The merchant system recognizesthe purchaser as an ID checker™ userand sends a payment request to MoPayfor ID verification. MoPay then sends aSMS to the purchaser requesting PINconfirmation of the purchase from thepreviously registered mobile phone, towhich the purchaser responds. MoPayverifies the identity of the purchaser bymatching the mobile number and pass-word with the purchaser’s records storedin the database. Following this, MoPayforwards successful payment authentica-tion information to the merchant. Themerchant processes payment and com-pletes the transaction. The data requiredto process payments can be uploaded

18

Case Studies


ience, particularly in the realm of foreignremittances, make MoPay an attractiveprospect. Additionally, part of the appealof MoPay is its simplicity. Even for the illit-erate, MoPay’s simple commands areeasily learned.∗ As for account security,MoPay compares favorably with its com-petition. Unlike Java-based banking appli-cations, the security risks are limited tothe physical security of MoPay’s servers.25

Currently, there are 134 serviceproviders or local sales capacities, includ-ing social franchisees, using the MoPaysystem, with projected uptake of at least350 by the last semester of 2005.# MoPayhas made the following sales projections:Although service uptake in the preced-ing graph is greater among the “banked”segment of the population, Metcalf’sLaw, which states that the value of anynetwork is proportional to the square ofthe users, almost certainly applies. As thevalue of the MoPay network increases,uptake among the unbanked segment ofthe population should increase, given thenear-zero cost of entry.The table below lists some of the typesof merchants accepting payment throughMoPay’s m-banking service.


MoPay is wholly self-financed and isdebt-free, so investment capital presentsno impediment to growth. Also, MoPayfaces no legal or regulatory constraints.Moreover, mobile coverage does notlimit growth; the mobile coverage areain South Africa comprises 90 percent of

onto the platform’s database either via abatch process designed to meet partici-pant banks’, operators’ and merchants’needs, or through a real-time, on-lineinterface.Cobus Potgieter, CEO of MoPay, states:“Bottom-line is, according to currentclients of the MoPay systems, that notonly do they and their clients experiencereal cost savings but also enhanced serv-ice and security levels, with the commen-surate expansion of their markets.”23

“It’s very cost-effective, quick and easy touse,” says Craig Bouwer, president ofAztec, a company that specializes insupplying and leasing office equipment.Using MoPay has saved Bouwer’s compa-ny three times what he would have paidhad he installed a normal Speedpoint sys-tem. The cost of using MoPay is a lotmore affordable than renting a Speed-point, which can cost between R 600 andR 1,000 a month, says Bouwer.24

There are additional advantages overconventional credit cards, since there isno need for “Speedpoint” credit cardmachines or a fixed line. As a result,informal market vendors can send andreceive payments with lower paymentprocessing costs and improved cash flow.


Given the strong uptake of mobile teleph-ony in SSA and the large percentage of thepopulation that remains “unbanked,”MoPay faces strong prospects for growth.The appeal to the consumer is obvious.Increased security from theft and conven-

19

Case Studies


0

50

100

150

200

250

300

350

400

1 2

68

12

102

18

136

24

170

30

204

36

238

42

272

48

306

54

240

60

374

66

3 4 5 6 7 8 9 10 11

"Banked" "Unbanked" Source: data from MoPay, graph by the author

Uptake of New MoPay Merchants by Month

# Recently, MoPay hasannounced that it has exceed-ed its projections and nowhas 400 vendors of its servic-es.

* Skeptics have expresseddoubts about the ability of theGrameen Village Phone entre-preneurs’ ability to use a tele-phone, given their total lack ofexperience with telephonesand their low literacy rates. .Responding to such skeptics,Muhammad Yunus, Presidentof the Grameen Bank stated:“[P]eople kept asking, wellshe is illiterate,illiterate; shewouldn’t even know to pushthose buttons and dial a num-ber and so on. So I said,there are only ten numbers.So if this pushing these num-bers can bring income,money, I think she will learnit in ten minutes. That is nota big deal … learning thosenumbers. “About five or sixmonths later I was goingaround in the villages talkingto the women who got thisnew telephone about howthey were doing. They wereall delighted, excited aboutthe phone. Everybody has aphone in her hand whenwe’re talking about it. At themiddle of the discussion, Iasked, do you have any prob-lem in pushing those buttonsto dial a number? Everyonesaid, no we don’t have anyproblems. . We can do that.So one woman stood up andsaid why don’t you give me anumber and blindfold me andif I fail to dial it the first timeI will return your telephone.I was stunned. I was stunnedbecause I wished that allthose people who had doubt-ed in the ability of thesewomen were there. . Thesewere women who had neverin their lives seen a tele-phone.” Quoted in “Stimulat-ing Investment in NetworkDevelopment: Roles for Reg-ulators” p. 372

12 http://www.queensu.ca/samp/sampresources/

migrationdocuments/documents/2003/unaids.pdf13 “Digital Divide Assessment of the City of Cape Town”

p.19

PESINET ENDNOTES:14 http://www.who.int/whr/2005/

media_centre/facts_en.pdf15 ibid16 “What Works: Afrique Initiatives—Attempts at Com-

bining social Purpose and Sustainable Business”

http://www.digitaldividend.org/case/case_afrique_i

nitiatives.htm17 The fee for enrolling two children is 250 FCFA per

month, 300 FCFA for three children, and 100 FCFA for

each additional child.18 Quoted in “What Works: Afrique Initiatives: —

Attempts at Combining social Purpose and Sustain-

able Business” p. 9

MANOBI ENDNOTES:19 Manobi Business Plan Annex A: Case Studies, Tech-

nology, and Services (confidential)20 Ibid.21 Ibid.22 http://www.manobi.sn/

MOPAY ENDNOTES:23 http://www.biz-community.com/

Article/196/87/6411.html24 http://www.bestkeptsimple.org/

month/2005-1.php25 M-banking systems which rely on applications on the

handset itself, are vulnerable to hackers.

See, for example,

http://www.securitypark.co.uk/article.asp?arti-

cleid=24084&CategoryID=1


Case Studies

20

1 “Stimulating Investment in Network Development:

Roles for Regulators”

http://www.regulateonline.org/content/view/435/

31/ , p. 72

IKON ENDNOTES:2 World Bank databases (constant 2000 dollars)3 “Small Enterprise Responses to Liberalization in Five

African Countries” http://www.worldbank.org/

afr/findings/english/find42.htm4 Via Africa: Creating Local and Regional IXPs to Save

Money and Bandwidth (draft discussion paper pre-

pared for IDRC and ITU for the 5th annual global sym-

posium for regulators) p. 6

SIMpill ENDNOTES:5 http://results.org/website/

article.asp?id=9556 “Cape Town TB Control Programme Report”, City of

Cape Town Health Directorate, 2003. cited in “Evalua-

tion of the On Cue Compliance Service Pilot: Testing

the use of SMS reminders in the treatment of Tuber-

culosis in Cape Town, South Africa,” bridges.org, 29

March 20057 http://www.who.int/mediacentre/

factsheets/fs104/en/8 ibid9 “Digital Divide Assessment of the City of Cape Town”

bridges.org, 2002, http://www.bridges.org, p. 1810 WHO estimates that “1.75 million deaths resulted from

TB in 2003. As with cases of disease, the highest number

of estimated deaths is in the South-East Asia Region, but

the highest mortality per capita is in the Africa Region,

where HIV has led to rapid increases in the incidence of

TB and increases the likelihood of dying from TB.”11 “Digital Divide Assessment of the City of Cape Town”

p.26

the land mass and 71 percent of the pop-ulation. Perhaps the single impedimentMoPay faces is the relatively high cost ofhandsets, although virtually any handsetwill do, since almost all of them acceptSMSs. As this is going to press, MoPayhas announced that it is selling both newand used low-cost handsets.

Lessons learned

The rapid uptake of MoPay’s servicesindicates that there is a vast market formobile banking services. In order to meetthis demand and market services simi-lar to MoPay’s to the widest possibleaudience, as well as ensure future com-patibility, the service should be platform-independent.

PROPERTY• Rents• Levies and management fees• Security• Service contracts• Parking fees

EDUCATIONAL• Tuition fees• Student mess fees

TRAVEL & TOURISM• Timeshare levies• Platform reservations• Membership fees• Conferences and exhibitions• Airline tickets• Car rental extensions

UTILITIES• Municipal charges• Telecom and postal box accounts• Television licences and subscriptions, also re-connections

RETAIL• Store- & affinity cards• Home shopping / Mail orders• Liquor and food (FMCG), deliveries

INTERNATIONAL SPORT & LEISURE• Golf fees and amenities• Tickets - seasonal and per event

ICT / WEBSITE / E-COMMERCE• Office automation – service • contracts and maintenanceCOMMUNITY & CONSUMER• Newspaper subscriptions• Recurring advertising• Traffic fines

FINANCIAL & MEDICAL• Insurance – monthly and pay-outs• Medical – monthly and emergency• Collections and micro loans

Source: Cobus Potgieter, CEO, MoPay Systems, Inc.

Service Providers that Accept MoPay Payments


Information and communicationservices are highly valued in everyculture and at every income level,and in the last five years, SSA has

seen the fastest growth of mobile teleph-ony of any region in the world.2 In

developing countries, the averageamount spent on telecommunications is2 percent of income.3 A recent Voda-phone study found that “[T]here hasbeen a perception that the rural poor arenot able or willing to pay for mobile

Chapter 2: Understanding Demand Patterns For Information and Communication Technologies In Developing Countries

“Today, a wide variety of new applications such as e-mail, e-commerce,tele-education, telehealth, and telemedicine, among others, has madeaccess to interactive multimedia services as important as – maybe evenmore important than – voice connectivity alone.”1

BEGET LAUNCHES MOBILE AS PANIC BUTTON SOLUTION

Communications software developer Beget Holdings has launched a solution in South Africa that turns most cellphones into a mobile

panic button, alerting family and friends to a distress situation and pinpointing the sender’s location within five seconds.

“At present the SMSOS system operates with any cellphone with speed dialling and caller-ID capabilities on the MTN and Vodacom

networks,” says Andre Potgieter, Beget MD. “Exactmobile is the service provider for the SMSOS system and will provide 24-hour sup-

port through their call centre, as well as contributing knowledge and experience in the field of cellular technology.

Lize Gerber, SMSOS head, says crime is part of day-to-day living and welcomed the birth of SMSOS technology, which can be used

in any panic situation such as car accidents and medical emergencies. “SMSOS is ideal for any situation in which you can use only

one finger. “

Potgieter says by pressing the SMSOS speed dial or “panic button” on a cellphone, a priority SMS is relayed to each of the preset

respondents.

“This SMS includes personal and contact information, as well as the location of the person in distress using GSM coordinates. Multi-

media messaging enabled phones will also receive a location map and shortly, Vodacom subscribers will also have the benefit of

mobile tracking because of the kind of location server used by that network.”

The system’s ability to locate a cellphone depends on the cell coverage of the network provider, explains Potgieter. “The greater the

density of the network’s masts, the greater the accuracy of the location.”

Gerber says the main subscriber can register up to nine dependents and six respondents as part of the roughly R 250- R 300 per

year subscription package, and can easily maintain personal information through the Internet. “The SMOS system is automatic and

can handle 100 calls a second, thereby eliminating the problems of human error and slow response,” says Potgieter. “The system

also includes a logging facility and can generate complete audit trail reports on every call.”

Beget has reached an agreement with a French company for European distribution and a company in Australia for distribution there.

“Locally, the SMSOS is to be made available through a network of distributors to be appointed in the coming months, providing an

excellent marketing and income opportunity for distributors,” concludes Potgieter.

(Source: IT Web, quoted in http://www.balancingact-africa.com/news/back/balancing-act_206.html)

telecommunications services. Yet in fact,in many instances, rural demand hasgreatly exceeded initial expectations.”4

Some of this is no doubt due to a lack of“legacy” copper-wire infrastructure.Vodaphone found that in South Africa, 85percent of small businesses run by blackindividuals relied solely on mobile ratherthan fixed telephony. However, the samephenomenon of small businesses provid-ing services such as plumbing or taxiservices relying solely on a mobile phoneexists in the developed world, indicatingthat the mobility inherent in mobile phonesis itself valued. Historically, low rates of penetration of ICTin SSA, coupled with rates of uptake thathave exceeded expectations, should havemade technology providers eager to enterthese markets, but until now operators

have cited low Average Revenues perUser (ARPU), long payback periods oninvestments, and murky regulatory envi-ronments as reasons for avoiding devel-oping-country markets. In addition tothese challenges on the supply side of themarket, the demand side also differs fromthat found in the developed world.

Problem of measurementIn looking at demand for mobile teleph-ony in SSA, subscriber numbers do nottell the whole story, since in rural areasone phone is often used by many people.To this one can add the problem offlawed income data in countries wherelarge sections of the economy exist sole-ly in the informal sector. “Income statis-tics for Africa - especially at the lowerend of the scale - have proved to be a

22 Promoting Private Sector Investment and Innovation

Understanding Demand Patterns For ICT In Developing Countries

1000 Km

1000 Mi.

Source: GSM Association

Algiers

Kigali

Ouagadougou

Niamey

N’Djamena

Lusaka

Kasama

Kitwe

Nairobi

Mombasa

Kampala

Addis Ababa

AsmeraKhartoum

Port Sudan

Aden

Sana

Jeddah

Medinah

jerusalem

DamascusBagdad

Mosul

Berut

Suez

Riyadh

Al Mukalla

El Fashir

Wau

Juba

Tunis

Mbabane

Maseru

Mahajanga

Tulear

Antananarivo

Gaborone

Lilongwe

Bujumbura

Libreville

Bangui

LomePorto Novo

AccraAbidjanYamoussoukroMonrovia

FreetownConakry

Bissau

Banjul

Tangier

RabatCasablanca

MarrakechAlexandria

Cairo

Aswan

Zinder

Agadez

Nouakchott

Nema

Bamako

Tombouctou

Lagos

KanoMaiduguri

YaoundeDouala

Mogadishu

Berbera

Harare

Bulawayo

Windhoek

Walvis Bay

East London

Brazzaville

Pointe-Noire

Malabo

Bata

La'youn

TripoliBanghazi

Athens

Al Jawf

Djibouti

Dakar

Faya-Largeau

Nacala

Beira

Maputo

Durban

PortElizabethCape

Town

Pretoria

Johannesburg

Dar es Salaam

Mbeya

Kinshasa

Kisangani

Kananga Kalemie

Lubumbashi

Luanda

Namibe

BenguelaHuambo

Oran Constantine

Tindouf

Tamanrasset

Ghardaia

Sao TomeKENYA

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SUDAN

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CaspianSea

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Lake Chad

Lake Turkana

Lake Victoria

Lake Tanganyika

Lake Albert

Lake Nyasa

Lake Kariba

Mediterranean Sea

BOTSWANA

COMOROS

MAYOTTEZAMBIA

GABON

CENTRALAFRICAN REPUBLIC

TUNISIAMOROCCO

SAUDI ARABIA

YEMEN

SPAINTURKEY

IRANIRAQ

JORDANISRAEL

LEBANON

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NorthAtlantic

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GSM Africa Coverage 2005

500 billion, or more than 20 percent of thetotal monetary liabilities of the CentralBank of Nigeria (CBN) in circulation in thecountry, exists outside the formal bankingsystem. “Electronic payment is the orderof the day in all industrialized economies.Nigeria, and indeed all emergingeconomies, must deploy all appropriateresources to develop their respectivepayment systems,” he asserted. Mr. Lawal also examined the state of thenation’s payment system, and said thatthe N 500 billion represents about 90percent of the money supplied into thesystem as of the first quarter 2005.Money that stays in the informal sectorresults in missed economic develop-ment opportunities, diminished opportu-nities for financial intermediation, and areduction in the efficiency of monetarypolicy.9

In somewhat paradoxical fashion, a lackof legacy infrastructure serves to rein-force demand for mobile telephony, asopportunity costs associated with phys-ical travel can be so much higher. In theabsence of roads and transportation,information and communication servic-es are even more highly valued. Physi-cal infrastructure influences demandfor information and communicationtechnologies in other ways as well. Incountries with frequent electrical out-ages, there is a need for more frequentbackup of data and a greater use ofoffline computing. In addition, so-called“store-and-forward” email systems aremore common in areas with little band-width or frequent power outages. Access to electricity affects mobile phoneusage as well. Vodaphone found thatthose without electricity are more like-ly to borrow a phone, whereas those withelectricity are more likely to own one.However, ownership and access are notthe same; the same study found similaraccess to mobile telephony across incomebrackets,10 and found mobile phoneownership less income-dependent thanother consumer durables.11

Rural and urban consumers are differentFor the residents of rural communities,information and communication tech-nologies have great potential for positiveeconomic and social impacts, perhaps

very unreliable predictor of mobile usagebecause of ‘informal markets and theunreliability of existing income data,’”writes Russell Southwood at Balancin-gAct-Africa.org.6

Usage patterns vary in different marketsIn addition to being characterized byunprecedented uptake in SSA, the intro-duction of mobile services has broughtabout “a change in the business andoperating climate of the African telecom-munication sector: competing mobileoperators have helped create an environ-ment that fosters innovation and compe-tition,”7 as illustrated by the case stud-ies described earlier. In profound ways, demand for ICT inSSA differs from demand patterns indeveloped countries. An individual con-sumer is much more likely to share aphone as opposed to owning it solely;often, a mobile phone is considered ahousehold asset as opposed to a person-al asset. Moreover, a lack of legacyinfrastructure extends beyond telepho-ny. Due to a lack of financial infrastruc-ture, including Automated TellerMachines (ATMs), 70 percent of transac-tions today in Nigeria are cash-based.8

Paul Lawal, the Managing Director ofNigeria’s Inter-bank Settlement SystemPlc, has expressed concern that over N

23Promoting Private Sector Investment and Innovation


LG LAUNCHES PHONE FOR MOSLEMS

Global IT leader LG Electronics has launched a new mobile

handset, the F7100 Qiblah phone, which caters to the prayer

needs of the Muslim faithful in Nigeria.

The new phone has a compass that points to Mecca and

comes complete with prayer time alarm functions. The Qiblah

indicator uses an inbuilt longitude and latitude orientation

or city references that, when used in comparison to the mag-

netic north, indicates the direction of the Qiblah so that Mus-

lims know in which direction to pray.

According to LG representative, Vishwas Saxena, LG is look-

ing to cater to the specific needs of Nigeria’s Muslim com-

munity. “I know people who are five times praying but they

are just so occupied and they miss the prayer timing. This

one will tell you when to pray and which direction to seat

(sic),” he said.

Source: http://allafrica.com/stories/200502170084.html

quoted in http://www.balancingact-africa.com

/news/back/balancing-act_245.html

even more so than for their urban coun-terparts, since alternatives are few. ICTsreduce travel needs, assist in job hunt-ing, and provide better access to businessinformation. These benefits occur evenamong the poorest communities.Unfortunately, assessing demand forinformation and communication tech-nologies among the rural poor in SSA iseven more difficult than it is for theurban poor. Difficulties relating to poorroads and language differences hinderthe process of surveying demand amongthis constituency. The companies in the Case Studiesemployed various methods of assessingdemand for their services. In the case ofProject IKON, the founders of this compa-ny gathered at a conference of the MalianLinux Users Group (AMULL). The foundersof IKON were three medical students at theUniversity of Bamako, so their orientationnaturally pointed to a health-related tech-nology application. Dr. Romain-RolandTohoury had written his doctoral thesis on

the contribution of telemedicine to med-ical diagnosis, studying exchangesbetween hospitals in Geneva, Switzerland;Marseilles, France; and Point G Hospitalin Bamako, Mali. In the case of SIMpill,David Green was working as a consultanton managed care, disease managementand information systems, having writtenhis PhD thesis on pharmacology. At thesame time, his mother was on blood-pres-sure medication, but frequently forgot totake it. Dr. Green began sending hismother text messages reminding her to



0

10

20

30

40

50

60

70

80

100

90

Source: SIMpill Patient Survey

12%

88%

Do not share Share

Do you share your phone with anyone else?

iTOUCH BUILDS ITSELF A MOBILE DATA BUSINESS IN SA AND ROLLS OUT

IN MOROCCO

The iTouch Plc group is a media company that provides a wide range

of information, entertainment and messaging services to mobile

users including regular news updates, weather alerts, download-

ing ring tones and wallpapers, voting mechanisms on behalf of

media partners, etc. Recognizing the affluent market in South Africa,

iTouch launched the direct channel model (35050) there at the end

of 2003, which enabled them to sell and deliver services and appli-

cations directly to customers through Premium SMS short codes.

With operations in 25 countries at present, iTouch has become South

Africa’s leading mobile VAS provider of wireless data services and

products for both consumer and business markets, according to

Wayne Levine, Commercial Director at iTouch SA. “Vodacom statis-

tics have shown that iTouch receives the highest volume of

requests,” he said.

Of these requests, consumer demands predominate and are why

their services are orientated around the consumer market. “We pro-

vide two types of consumer services – ‘alerts,’ which are a suite

of information and personalized reminders sent to the cellphone

as a short text message at a time specified by the user, and ‘MO

services’, which stands for Mobile Originate and is where the user

can pull content and products at any time.”

Current developments have demonstrated that these application-

to-person (A2P) services, in which subscribers can receive informa-

tion and products by sending a text message, are most appealing

to mobile users, explained Levine. “Of all our users about 5 per-

cent favor alerts whereas 95 percent prefer data when they want

it.” The popularity of the 35050 services, which offers ring tone and

logo downloading among the many pickings, is evidence of this

trend as it is “our biggest product,” he said. Marketed to a target

group of 16-24 year olds, Levine definitely credits the success of

35050 to the youth generation who “are the most aggressive in

terms of data services for cellphones.”

An interesting trend that Levine touched upon when asked about

the background of users was that many black South Africans were

attracted to their iTouch services and that iTouch SA actually “under-

estimated the popularity of our services within the ethnic commu-

nity and that they may even be more popular than in the white

community.” He put this down to the fact that while many white

South Africans had access to other means of communication, many

members of the black community “have limits to communication

devices so use their cellphones more to retrieve information.”

The accelerating growth in the sale and distribution of multi-media

handsets and an ever-increasing market focused on device person-

alization, SMS short codes and premium SMS billing provides high-

ly favorable conditions within Africa for iTouch overall. Levine con-

cluded that there is “definitely demand for content services through-

out Africa,” but iTouch are taking a cautious approach in regards

to expanding across the continent, as “the ways in which African

businesses are run are still quite foreign to us.”

(Source: http://www.balancingact-africa.com/news/back/bal-

ancing-act_241.html)

information on demand, rather thanpassively receiving information as witha radio broadcast, and could demandspecific information, such as land titles. These examples suggest a few key stepsin assessing demand for ICT services.These steps apply in any market, but areespecially important in a market such asSSA where consumers’ ability to pay isconstrained.

Suggestions for how better to assess demandfor ICTs in developing countriesIn his book “The Fortune at the Bottom ofthe Pyramid: Eradicating Poverty throughProfits,”12 C.K. Prahalad outlines severalimportant considerations when market-ing to poorer customers. Many of Praha-lad’s suggestions focus on tailoring theproduct or service to the local environ-

take her medication, and he quickly sawthe link between his mother’s non-compli-ance and that of tuberculosis patients. Asimple calculation of the number of tuber-culosis patients in South Africa multipliedby the mobile telephone penetration rateconvinced Dr. Green that if he could pur-chase SMSs in bulk, he could make a greatdeal of money.He formed his company, The On-CueCompliance Service, and approached aclinic in Cape Town about using his serv-ice. As they already had patients, therewas a ready population of potential “cus-tomers,” which he further refined using asurvey questionnaire which asked ques-tions about patients’ medication habits andmobile phone usage. The survey resultswere aggregated and the service was tai-lored accordingly for a pilot project.The results of the survey convinced Dr.Green that SMS technology was anappropriate solution to the problem ofnon-compliance. Mobile phone owner-ship rates were sufficiently high, mobilecoverage was adequate, and patients hadno trouble keeping their phones charged.In addition, patients did not worry aboutprivacy issues. Cobus Potgieter of MoPay had a back-ground in finance and wrote his thesis one-commerce. Realizing that manyAfricans were already familiar withmobile phones, and that personal com-puters would not achieve the level of pen-etration that mobile phones enjoyed forquite some time, Potgieter decided tofocus on value-added services on theGSM network. For him, it was as simpleas looking around him to see the vastnumbers (an estimated 71 percent) ofSouth Africans without access to bankaccounts or debit cards. In addition,banks and telecom operators were reluc-tant to offer this service, since mobilebanking did not mesh with the core com-petencies of either industry.Daniel Annerose of Manobi met withfishing unions and telecom operators inorder to identify what unmet informationneeds existed among one of the domi-nant industries in Senegal. As the proj-ect developed however, Manobi saw thatthe real benefit of this communicationtechnology was the possibility of two-waycommunication. Consumers could “pull”



0

10

20

30

40

50

60

70

80

100

909%

91%

No Yes


Is it sometimes difficult to read messages on your phone ?

0

10

20

30

40

50

60

70

80

100

90

5%

95%

No Yes


Do you ever get poor cell phone reception in the place wher younormally receive your SMS from the clinic ?



ment. “Local environment” refers notonly to the actual product or serviceitself, but also to language localization andconstraints imposed by e.g. intermittentor non-existent power sources. Prahaladalso stresses the importance of scalabil-ity and scope. Since “bottom of the pyra-mid” (BOP) markets are large, solutionsthat are developed must be scalable, anddevelopers must focus on the whole “plat-form,” designing products or servicesthat can easily incorporate new featuresas circumstances warrant. Additionally,developers must be prepared to educateconsumers on usage, in effect creatingdemand. Above all, developers mustfocus on the price performance of theirproducts at every step in the value chain:“Process innovations are just as critical inBOP markets as product innovations.”With respect to information and commu-nication technologies, below are someguidelines for assessing demand:

1. Assume that information is a positivegood, i.e. more is better

Perhaps a better formulation is thatincreased access to information is apositive good.

2. Look for situations where informationasymmetries exist

A good place to begin a search forinformation asymmetries is any mar-ket where prices are disproportion-ately high (or low) relative to other,comparable markets. This impliesthat the price reflects more than sim-ply factors of production such aslabor, factory resources, etc., and thatthere is an information premium (ordiscount) bundled into the price.

3. Do technologies exist which can addressthis asymmetry?

Since the 1990s, there has been averitable explosion of technolo-gies for lowering the cost of infor-mation. Low per-consumer rev-enues in SSA provide disincen-tives for reinventing the wheel;indeed, most of the cost-efficienciesavailable through ICTs are due tothe implicit subsidy flowing fromthe developed world to the devel-oping world that results from rich-

er countries conducting ICTresearch and development.

4. Are they available in this market?If not, one should determine why.Are these technologies illegal, orcounter to accepted social or cultur-al norms? Are import tariffs prohib-itively high?

5. Are there any localization issues thatpreclude use of the technology?

Localization issues include suchitems as power supply and lan-guage. Many issues of localizationcan be overcome through intimateknowledge of the market. For exam-ple, low- and solar-powered comput-ing might be appropriate in much ofAfrica, and many open-source appli-cations have been translated intolocal languages. Other examples oflocalizing applications include morefrequent writing of data to disk inareas where electricity is frequent-ly interrupted, and store-and-for-ward email servers where Internetaccess is not “always-on.”

6. Does the infrastructure (network, phys-ical, human) exist to support this serv-ice delivery?

Without employees to provideyour service or a network uponwhich to deliver your service,one is only adding to costs,although such situations can alsoprovide opportunities for verticalintegration. For example, Manobicould train fishermen in the useof its market price service, who inturn can become marketers of theservice. Similarly, Pésinet caneducate mothers in the benefits ofits service, and these mothers canthemselves become Agents dePesée.

7. Estimate opportunity costs: is this thelowest-cost service delivery channel?

If this is not the lowest-cost methodof service delivery, market share isnot sustainable. All you are doing iscreating demand for a service thatan imitator with a lower cost struc-ture can exploit.



consumers’ views on the value of mobiletelephony varied with income level.While the richest consumers saw that thetelephone had high economic value, thepoorest consumers saw telephony asmerely a luxury, a cost-creating methodof social networking. Value-added serv-ices such as Manobi are helpful inreversing this impression among thepoor, but other value-added servicesare necessary in order to convince poorconsumers that mobile telephony canlower overall costs (by avoiding theneed for travel, for example) instead ofadding to them. As Chapter 7 will show,network operators can, and should,work with service providers to marketvalue-added services in order to stimu-late network traffic.

1 “New Technologies for Rural Applications,” p. 77

(Final Report of ITU-D Focus Group 7)2 “Africa: The Impact of Mobile Phones” Vodaphone

Policy Paper Series, Number 2, March 2005

(http://www.vodafone.com/assets/files/en/AIMP_

09032005.pdf), p. 33 Ibid, p. 74 Ibid, p. XX5 “Africa: The Impact of Mobile Phones” p. 516 http://www.balancingact-

africa.com/news/back/balancing-act_206.html7 “Africa: The Impact of Mobile Phones” p. 448 “ICT, Key to E-Payment Solution” Daily Champion

(Lagos) July 28, 20059 http://allafrica.com/stories/200507280049.html

10 “Africa: The Impact of Mobile Phones” p. 4611 Ibid. p. 4712 Prahalad, C.K., “Fortune at the Bottom of the Pyra-

mid, The: Eradicating Poverty Through Profits”13 “The Economic Impact of Telecommunications on

Rural Livelihoods and Poverty Reduction: a study of

rural communities in India (Gujarat), Mozambique,

and Tanzania”

8. Ensure that the service meets the inter-ests of all stakeholders

If any one of the stakeholders doesnot feel that the proposed servicemeets with his needs, this creates animpediment to growth and success.

9. VRIO Analysis: Is this service•• Valued? Does this ICT Application

truly lower the cost of informationrelative to all other forms of infor-mation and communication tech-nologies?

•• Rare? Is this a new or little-exploited delivery channel?

•• Inimitable: i.e. difficult or impos-sible to duplicate?

•• Organized? (See number 6 above)

ConclusionPrahalad has identified four elements askey to a thriving market: creating buy-ing power, shaping aspirations, improv-ing access, and tailoring local solutions.Each of these stresses the importance ofproviding what the customer wants inquantities he wants and can afford.Another implication of these four ele-ments is the notion that low-ARPU cus-tomers will not remain low-ARPU cus-tomers. By building infrastructure now,network operators are investing in futuredemand for information and communi-cation technologies. A final word of caution is in order, how-ever. A recent survey by DFID found thatconsumers’ views on the value of mobiletelephony varied with income level.

Giving access to rural areas: technical constraints Developing access in rural areas is a crit-ical and strategic challenge for policymakers of developing countries, sincetelecom operators have historically spenttheir efforts on urban areas. Numeroustechnical options enable telecom suppli-ers to provide ICT services to ruralareas, nevertheless access and core net-works have to be considered togetherwhen focusing on rural connectivity.In effect, there are technological require-ments to consider before focusing onaccess, which is just a part of the infra-structure roll-out. In fact, the quality andrelevance of the technology chosen forthe provision of access to rural areas willbe influenced by other network consid-erations like existing backbones, quali-ty of core network infrastructure, suffi-cient number of Internet Exchange Points(IXP), backhauling options depending onexisting telecom infrastructure and corenetwork issues must be considered con-currently when focusing on rural connec-tivity.

The access issue

Fostering ICT development in rural areasof sub-Saharan Africa is a great challenge,and the bundle of chosen solutions shouldbe cost-efficient to allow Total Cost of Own-ership reduction for telecom operatorswhile also guaranteeing profits. There isno unique model designed to fit operators’constraints. Several factors influence thechoice of access technologies for a target-ed rural area, each region and country

having different characteristics, physicalconstraints and existing infrastructure.

Core network issues

Today, most networks are designed toprovide services relating to a specificapplication:

• Public Switched Telephone Networks(PSTN) were originally designed to carryvoice communication applications.

• Data networks, such as Internet Protocol(IP) networks, provide Internet services likeaccess to the World Wide Web (WWW) ande-mail.

• Mobile networks provide mobile communi-cation applications.

• Cable networks were initially developed tooffer television distribution services, andnow deliver Internet access and voice serv-ices at reasonable cost.

Existing telecom operators wishing toprovide access to rural areas will oftenbuild on their existing core networkinfrastructure. If they want to maintainquality of service and attract new cus-tomers, they have to upgrade their exist-ing infrastructure (hardware and soft-ware) to efficiently manage and absorban increasing customer base with itsassociated voice and data traffic. Wheninvesting in rural infrastructure projects,most service providers do not payenough attention to the notion of quali-ty of service continuation, as they try tooptimize their revenues to absorb initialinvestments (CAPEX) and operational


Chapter 3: The Challenges of Serving Rural Areas

Mobile Phones Radio Access Transmission Core Network Applications

Source: Alcatel

Basic Overview of a mobile Network

expenditures (OPEX), to achieve fasterreturn on investment (ROI).

Transmission

In a telecommunications network, trans-mission is the transfer of informationfrom one network point to another. Themedium used may be copper cables, opti-cal fibers, or radio relays. Optical fiberand microwave may be found in urbanareas, while microwave and satellitemay be found in rural areas. Backhauling technology, which can beterrestrial (radio or cable) or non-terres-trial (satellite), enables voice and dataservices to be transmitted between coreand access networks, while an accesstechnology enables end-users with aCPE (Customer Premises Equipment) toconnect to the network via an accesspoint (BTS, WiFi hotspot, etc.), alsoknown as last-mile technology. Backbones ensure voice and data trans-mission between national and interna-tional networks. The backhauling issueis a major constraint for ICT infrastruc-ture roll-out in rural areas, due to thelong distance between the core networkinfrastructure, normally located in anurban area, and local access points.

The importance of backbones

A national backbone network is the infra-structure needed to allow broadbandaccess to basic telecommunications andadvanced value-added services for fixed


The Challenges of Serving Rural Areas

WHO ARE THE BACKBONE CARRIERS?

Backbone carriers are those long-distance transport providers

whose fiber networks span national or continental bound-

aries or even the entire globe, providing the core combined

infrastructure that forms the foundation for all global com-

munication.

Together with local data carriers, to which they supply band-

width and connectivity, backbone carriers offer the interna-

tional capacity and connectivity that enable ubiquitous access

to Internet content.

The majority of backbone service providers offer wholesale

access services to other service providers. These services can

take the form of direct connections to the edge

routers/switches of their backbone network (dedicated Inter-

net access services). They can also be offered as rented- or

leased-access server ports for backbone providers whose

reach spans to an access PoP (point of presence). Backbones

service providers have PoPs in various strategic locations and

high-speed connectivity to an Internet backbone. They may

use the existing infrastructure of railways, pipelines or power

networks when deploying cables (in the case of optical fiber),

to reduce civil works costs and rapidly build the network.

Thus core network owners, including backbone service

providers (BSPs), Internet service providers (ISPs) and

incumbent local exchange carriers (ILECs) are the infrastruc-

ture providers that typically offer transport and enhanced

data services. They often interconnect terrestrial networks

with submarine networks, and sometimes own a worldwide

backbone infrastructure. Each backbone owner can offer a

wide range of transport services and more.

Carriers must be prepared to enhance backbone networks

to provide global connectivity for growing volumes of traf-

fic and demand for bandwidth, while guaranteeing service

availability and quality.

Mobile Transport is a key challenge for operators25% of total Mobile Network cost is Transport, of which 75% is Backhaul

BaseStation

SGSNGGSN

MSC

IP/MPLS

BSCRNC

ATM/MPLS

AccessNetwork

AggregationTransport

Network

Point of Presence Point of Presence

ATM: Asynchronous Transfer ModeBSC: Base Station ControllerIP: Internet ProtocolGGSN: Gateway GPRS Support Node

MPLS: Multi Protocol Label SwitchingMSC: Mobile Switching CenterRNC: Radio Network ControllerSGSN: Serving GPRS Support Node

Access Network Core Network

EDGESWITCHES

CORESWITCHES

EDGESWITCHES

BACKHAUL BACKBONE

Source: Alcatel

From Core to Access

and mobile telecom operators and ISPs.National backbones offer cost-efficientaccess opportunities for intra-countrycommunication and data exchange, ratherthan leasing foreign or external facilities.Long-term return on investment on suchprojects requires some sort of publicsupport, consisting of regulatory improve-ments and financing options. Public-pri-vate partnerships (PPP) involving govern-ments and private players could then beconsidered to ensure financing of thesenational backbone networks. National backbone development is cru-cial to ensure rural connectivity. Thereare still many SSA countries that lack anational backbone network, relying onother countries for connectivity. Thisresults in high service delivery costs andlimited opportunities for scalability.

How to ensure backhauling

There are different ways to ensure back-hauling in rural and remote areas.Depending on the distance between coreand access facilities, and the density ofthe target population, it is possible tochoose between wired, radio and satel-lite backhauling solutions.Wired backhauling may be not appropri-ate for rural coverage due to heavyCAPEX costs. However, radio technologiesand satellite-enabled applications willhave an impact on the costs and timerequired to extend the network, with adecrease in CAPEX thanks to reduced civilworks and engineering, but increasedOPEX especially for satellite. Costs can beparticularly high in remote rural areas.

Operator constraintsThere are different parameters thatmake rural and remote areas less attrac-tive than urban ones for telecom opera-tors, mainly to do with costs and rev-enues.

Complex environment

Rural areas are often harder to serve dueto harsh environments and physicalremoteness. This makes civil works andengineering harder to manage, generat-ing additional costs and longer timeschedules for infrastructure rollout. Theclimate in SSA also affects equipmentdesign; high temperatures can affect the

efficiency of equipment. Theft and van-dalism are threats when installing hard-ware on isolated sites; it is sometimesnecessary to secure sites with dedicatedsecurity staff, adding further costs.

Lack of infrastructure

Rural populations often lack basic infra-structure in terms of housing, publicservices (health, schools, post offices), cop-per equipment (fixed telephone lines), per-manent power supply, roads, etc. Theseshortages make investment less attractiveand complicate infrastructure roll-out.

Human capability

Human capability is also a constraint, asmost potential users do not know how touse new technologies, and need to beeducated to do so. Illiteracy is high indeveloping countries, especially in ruralareas of SSA. A local workforce able toinstall and maintain the network is alsoof great importance; however, this skilledlabor is hard to find and to keep, due tohigh turnover.

High entry costs

The consequence of these constraints ishigh entry costs due to long distances,



AN ACCESS SOLUTION TO HELP BRIDGE THE DIGITAL DIVIDE IN THE

HIMALAYAS

In December 2004, Bhutan rolled out its plan for a rural telecom-

munications network. The challenges facing this country, situated

in the high mountains of the Himalayas, were substantial. Among

the 201 administrative counties, only 79 are connected to a telecom-

munication network. The high mountains preclude cables as an

alternative, so a turnkey network solution was chosen to provide

rural areas with voice and data, based on microwave radio and wire-

less voice-over-IP. Each subscriber will be equipped with a solar cell,

a telephone set and a small antenna able to receive data from a

central radio base station in the village.

Alcatel will implement this project before the end of 2006, which

will see installation of equipment in the Himalayas up to 4,700

meters in altitude. Some of the sites are three or four days’ walk-

ing distance from the nearest road. Most of the sites will be pow-

ered by solar power. The backbone network will be based on

microwave links, the switching technology on an NGN softswitch,

and the access portion based on a point-to-multipoint radio sys-

tem, wireless local loop and a small-scale fixed wireless broadband

access solution with VoIP.

users, promoting the benefits of ICT, andtraining in their use have to be taken intoaccount.

Need for low-price terminals

New generations of mobile phones devel-oped for emerging markets are charac-terized by innovative design in terms oflooks and functionality. The key driversshould be low price, basic features, andbattery life. High illiteracy rates, especial-ly in rural areas, should also be takeninto account in the design of handsets,making appropriate use of voice recog-nition and icons.Prahalad and most telecom analystssuggest, when talking about bridging thedigital divide, that the mobile phone hasmore potential than the personal com-puter: “Emerging markets will be wire-less-centric, not PC-centric”. Still, thepotential impact of broadband Internetaccess on local communities must beconsidered, especially for specific appli-cations like e-education, e-health and e-governance, as in the five case studiesdescribed earlier. It would thereforemake sense to give connectivity to pub-lic facilities like schools, health centers,and post offices.

Provide micro-financing solutions

One of the main obstacles for mobileexpansion among low-income users isthe acquisition cost of the terminal.There are successful examples of telecomoperators (Grameen Phone/GrameenBank) that provided micro-financingsolutions to allow end-users or interme-diaries to acquire a mobile phone andmaybe set up businesses.

difficult access, and high transmissionand civil works costs. Initial invest-ment is high, but the future upgradepotential could be substantial, thanks tothe possibility of remote softwareupgrades with the new-generation net-works. In effect, network expansion/evo-lution sometimes does not require cost-ly re-engineering. The cost of acquiringrural customers is also higher than forurban customers, due to the need forspecific marketing campaigns and mes-sages. However, franchising systemscan decrease entry costs, for example byusing a private local entity for cus-tomer care, or buying bandwidth atwholesale prices, as in the GrameenPhone business model.

Low profitability

In terms of customer profiles, rural usersoften have, for the most part, lower incomesthan their urban counterparts. The absenceof human capability could also affect prof-its; it may take a long time to achieve fullICT awareness and empowerment.As a result, return on investment willtake more time than in urban areas, aspeople will need to be trained andconvinced about the clear benefits ofusing communication tools. Operatorsmust count on large volumes of sub-scribers to compensate for the lowerspending of these low-income users,although they can take into accountincoming call opportunities, which rep-resent 50-60 percent of rural telepho-ny traffic.

Low-density area

The business case is complicated bythe fact that user density is insufficientto offset the high installation costs,resulting in low optimization of BTSsites in the case of mobile telephony. Adecrease in the number of BTS sitesneeded to reach a certain number ofusers will affect Total Cost of Ownership,and help to reduce costs per subscriber.

Understanding the low-ARPU segment: end user constraintsService providers should be aware ofrural users’ ICT needs, and adapt theirdistribution and marketing strategiesaccordingly. The profile of potential



Grameen’s Village Phone (VP) program in Bangladesh is a well-

known case illustrating how telephone service can be extended to

low-income rural dwellers. VPs are public access GSM phones that

are owned and operated by local women entrepreneurs in villages

throughout Bangladesh. Financial assistance for purchasing a GSM

phone is provided by Grameen Bank, a microfinance institution.

Once an entrepreneur has acquired a phone, she can then offer

mobile payphone service at her shop, home or at the local mar-

ket. Bulk airtime is purchased by the non-profit VP sponsor,

Grameen Telecom (GTC) at a discount from the for-profit GSM oper-

ator Grameen Phone (GP). The airtime is then resold to the VP oper-

ators at a rate significantly below retail tariffs.

Use appropriate distribution channelsReseller network

Telecom operators should also develop areseller network in rural areas to reachthe widest number of potential usersthrough phone shops, retailers, tele-centers, or private intermediaries sellingairtime. The use of dedicated intermedi-aries (individuals or community centers)has the advantage of reducing customermanagement costs for telecom operators.This is one reason why Grameen Phonesucceeded.

New forms of top-up

Mobile payment schemes need to changeto address low-income end-users. Prepaidschemes extended mobile services to themasses in mature markets, but the aver-age price of the prepaid scratch card is gen-erally too high for low-end users. Most ofthese customers do not have a credit cardor bank account, and only a tiny sum tospend on mobile communications.

Considering that low-ARPU segmentsrange up to US$ 5, telecom operatorsshould provide the widest choice ofmicro-top-up options, such as cheaperrecharge cards (like Nokia’s US$ 0.5recharge card with limited validity), orother alternatives like e-refill solutions,over-the-air payment solutions or microvouchers. Some operators even offerairtime-swapping options betweennations, enabling users from one coun-try to send credit to someone in anoth-er country.By enabling users to reload their phoneswithout using of physical debit or pre-paid cards, operators reduce productionand distribution costs (OPEX), and candecrease churn rate (customers switch-ing to another network operator). Churncan be also minimized with additionalservices based on consumer demand.

Providing affordable value-added servicesService differentiation

Public authorities and regulators have astrong role to play in opening competi-tion and decreasing import taxes andduties on equipment and services. Thecost of telecom services often remains toohigh, and not always in line with the dis-posable income of many African commu-nities.Operators should also be encouraged tooffer different tariffs depending on thelevel of service, customer profile and con-sumption patterns. In effect, a distinctionshould be made between urban andrural customers, to provide the rightservice to the right segment. Low-incomesegments will require fewer or morebasic services, and their lower level ofconsumption could justify a difference inpricing.Tariff plans are fundamental to encour-aging consumption, and to retain cus-tomers through promotions, discounts,and special offers. Group and familyplans for both prepaid and postpaidare a strategic way to increase loyalty.Finally, the gap between pre-paid andpost-paid communication rates shouldalso diminish, as the pre-paid schemehas become the reference model indeveloping countries, partly due to pooraccess and low banking service penetra-tion, especially in rural areas.



A US$ 30 HANDSET FOR EMERGING MARKETS

Following a request to phone manufacturers from the GSM Asso-

ciation to develop and supply the next ultra-low cost handset to

connect the unconnected in developing markets, Motorola was

selected and said that it will release a US$ 30 mobile phone for

commercial distribution in early 2006. This new generation of

mobile phone for emerging markets will still allow the supplier to

make a margin, while being reliable and having an improved bat-

tery capacity, since users may have limited access to electricity.

A $100 LAPTOP FOR CHILDREN

MIT Media Lab is currently developing a $100 laptop, a project that

could revolutionize the education of the world’s children, especial-

ly in emerging countries.

The proposed $100 machine will be a Linux-based, full-color, full-

screen laptop, will use innovative power (including wind-up), and

will be able to do almost everything except store huge amounts

of data. The rugged laptop will be WiFi- and cell phone-enabled,

and have several USB ports. Its current specifications are: 500 MHz,

1GB, 1 Megapixel.

The idea is to distribute the machine through ministries of educa-

tion willing to adopt a policy of “one laptop per child.” Initial dis-

cussions have been held with China and Brazil. In addition,

smaller countries will be selected for beta testing. Initial orders will

be limited to a minimum of one million units (with appropriate

financing). The preliminary schedule is to have units ready for ship-

ment by end 2006 or early 2007.

There are also core network-enabled fea-tures adapted to rural use: Push to Talkover cellular, audio messaging (alterna-tive to SMS), Fixed Cellular Subscriber(FCS), emergency warnings throughSMS, etc. These services should beoffered with local content, and take intoaccount the constraint of illiteracy.With the region’s limited fixed-line pen-etration effectively limiting Internetaccess via traditional access methods,mobile technology now has the opportu-nity to drive Internet use.

Time for wireless data

So-called 2nd-generation services suchas WAP (Wireless Application Protocol)or SMS (Short messaging service) aregaining ground. Innovative, region-spe-cific applications have also helped driveSMS and WAP usage: mobile banking inNigeria for example, or providing elec-tion results in Kenya. Interest in theseapplications indicates a broader level ofdemand for data services. GPRS (Gener-al Packet Radio Services) or EDGE(Enhanced Data Rates for GSM Evolution)are being launched in an increasingnumber of the region’s markets, with anumber of other networks nowGPRS/EDGE ready. With the capacity toprovide higher-speed Internet access,GPRS/EDGE can provide an initial solu-tion to the lack of Internet access inemerging markets.

Value-added services and applications

A good understanding of rural customerneeds can help in the design of value-added services and applications. Thiscould take the form of applicationsdeveloped by service providers, whichtelecom operators could resell: e-bank-ing, e-health, e-trade, market price infor-mation applications, etc.

33


PUSH TO TALK (PTT)

PTT is based on the concept of two-way radio communica-

tions as implemented with walkie-talkies. The introduction

of PTT in digital cellular mobile networks effectively allows

mobile phones to become walkie-talkies with unlimited

range between a closed group of subscribers. The user push-

es a button on the mobile phone to obtain the right to talk,

and immediately starts to speak, with no need to dial. The

recipient (one or many) hears the message streamed

almost immediately. There is no need to hang up; this is an

“always-on” type of feature.

AUDIO SMS

Audio SMS provides an audio presentation of SMS. This sys-

tem translates standard text SMS into speech. All kinds of SMS

services can be translated (presentation of incoming num-

bers, alerting, games, etc.). The ability to receive spoken SMS

information offers a solution for illiterate users.

INNOVATIVE E-REFILL SOLUTIONS

E-refill allows subscribers to pay the reseller of their choice for the

desired amount of airtime, just like buying vouchers. Upon receipt

of cash from the subscriber, the reseller sends a payment request

message to the prepaid system. The subscriber’s account is cred-

ited automatically, and both parties are notified that the transac-

tion has occurred and the latest account balance is provided in a

text message to the subscriber.

Over the Air Refill (OTAR) solutions satisfy operators’ key refill tar-

gets: more revenue generation, and simple and fashionable refill

methods for end users. Due to the heavy cost structure of standard

scratch cards, mobile operators are very keen on introducing “elec-

tronic” or “over-the-air” refill capabilities (using SMS) to their sub-

scriber base. By suppressing the manufacturing and warehousing

costs linked to physical vouchers Telcos can:

- Easily increase their margin on each top-up transaction;

- Increase revenue generation and subscriber numbers by launch-

ing new marketing offers;

- Enhance their offer by providing customers with a new and fash-

ionable refill method.

E-vouchers enable mobile operators to launch entry-level, prepaid

packs with micro-prepaid refills dedicated to low-ARPU seg-

ments. Thanks to the E-voucher solution, some amazing market-

ing successes have already been achieved in emerging markets.

In addition to E-voucher, Person to Person refill (P2P) transactions

are a complementary tool enabling mobile operators to provide

more flexibility to their customers in the way they use their own

credit. This P2P facility is highly appreciated within a family or with-

in a community, since credit can move from one account to anoth-

er (e.g. between a father and his son, between two friends). It

allows the unblocking of prepaid users who have reached their cred-

it limit or expiry date. It is also a way of granting small amounts

of credit to relatives, or to people who cannot afford to buy a com-

plete scratch card.

Examples of telecom operators that have implemented e-refill solu-

tions: Smart Globe and Digitel (Philippines), Airtel (India), Exelcom

(Indonesia), Comvik (Vietnam).


Community-based applications

There are also community-based appli-cations, which could be providedthrough community intermediaries, aim-ing at improving public services andreducing isolation.There are numerous cases of applica-tions in the fields of healthcare oreducation that help reduce the so-called digital divide between urban

and rural areas. Digital Radiology forexample, even if it requires heavyinvestment in hardware, bringseconomies of scale in terms of equip-ment and staff, while improving qual-ity of service. It also enables publichealth targets to be reached, offeringremote diagnosis services for isolatedpeople in rural areas.



DEVELOPING TELEMEDICINE SOLUTIONS USING DVB-RCS

The Healthware project is designed to foster the development

of satellite-based telemedicine solutions, in particular those

using DVB-RCS technologies (digital video broadcasting -

return channel by satellite). The use of DVB-RCS technologies

guarantees broadband transmission capacity from any med-

ical facility, and opens new possibilities for highly interac-

tive applications, such as second opinions or surgical video-

assistance.

The Healthware project also addresses the issues of interop-

erability between DVB-RCS platforms, integration with

mobile and terrestrial solutions, and open standard applica-

tion and service platforms, in order to enhance the deploy-

ment and operational flexibility of these services. One focus

of the project is service quality, to ensure reliable, secure end-

to-end service.

Healthware is a three-year project led by a consortium of 19

European-based partners including the European Commis-

sion and Alcatel.

FIXED USAGE OF WiMAX

In India, 72 percent of the population, or 750 million peo-

ple, live in rural areas. Often there is no access to basic teleph-

ony, and the Internet is unknown to many. Yet children in sep-

arate villages can share the same teacher and interact with

classmates through rural broadband wireless networks. For

e-education to work in this context, a cost-effective wireless

broadband solution is fundamental.

Rural e-education is not only a concern for developing nations.

Australia, Canada, and the US are regular users of rural edu-

cation. Wireless broadband goes beyond learning in remote

areas; it can be used to perform remote medical check-ups,

diagnoses, and assisted first aid. This type of application is

already in use in Africa, but its use has not spread, since wired

broadband is in most cases not widely available or commer-

cially viable.

Voice and data services (mainlySMS) remain the main commu-nication needs in emerging anddeveloping markets, including

sub-Saharan Africa. From an individualend-user perspective, rural areas current-ly offer limited opportunities for data andhigh-speed, non-voice technologies. How-ever, Internet access and enhanced value-added services and applications (VAS)could open further opportunities andcontribute to bridge the digital divide,when considered at the community level.Level of service and customer profile,including their degree of knowledgeregarding ICT, will greatly influence thechoice of access technologies, as band-width and mobility needs will differ fromone market to another (see figure).

There is no one-size-fits-all solution forrural areas. Nevertheless, there are still afew emerging trends in rural areas regard-ing the economics of infrastructure rollout.Wireless solutions are supposed to bemore cost-efficient than wired solutions,due to their wide coverage and smallercivil works requirements. Wireless solu-tions are also quicker to deploy (fewertechnical constraints related to the envi-ronment), saving time and money.Another assumption is that voice serviceis the primary communication need thatshould be addressed, and the most like-ly growth generator, through mobiletelephony, for telecom operators. Mobilepenetration has been successful in SSA,especially in urban environments, andthere are still major opportunities in un-served areas that could bring furtherprofits to telecom operators as theirmargins and customer base in urbanmarkets stabilize.Today, several technological approachesoffer mobility. Each solution or technolo-gy has its own advantages and disadvan-tages, with the main factor for consider-

ation being the radio/access technologydeployed. In the last five to ten years, var-ious technologies have emerged that offerintriguing possibilities from a technical aswell as a business point of view. Two verystrong mobility enablers are now in placeat the infrastructure level, one indoor(WLAN), and one outdoor (cellular).Recently, IP-based wireless technologyhas received a strong boost, technolog-ically and economically (e.g., WLAN,WiMAX, etc.). These technologies havealready found some use in commercial-ly available off-the-shelf products (WiFicards, access points), which providerelatively high data rates at low prices.These technologies are currently evolv-ing towards higher (broadband) datarates, improved voice support, etc.


Chapter 4: Leveraging New Technologies and ExistingInfrastructure to address ICT Needs of the Rural Poor

Fiber

VDSLDVB-S2Satellite

WLAN802.11

TD-SCDMATDD

CDMA2000EV-DV

UMTSHSDPA

UMTS

EDGE

GSM/GPRS

CDMA2000EV-DO

CDMA20001X

WLAN802.16

DVB-SSatellite

ADSL,ADSL2plus

Cable

Dial-up

Ban

dwid

th

MobilitySource: Alcatel

Positioning each access technology

This figure compares different access technologies, highlightingbandwidth and mobility capabilities. Dial-up uses a classic voiceinfrastructure connection via the standard copper wire telephonenetwork. Fiber, DSL and cable are wired technologies offering thehighest bandwidth but are not, by nature, mobile. These tech-nologies are suitable for data. GSM and CDMA technologies offermainly mobile voice and data services through 2G, but more andmore bandwidth, nomadicity and mobility is being offered with3G and other coming technologies (WiMAX, 4G) enabling a fullpackage of high-end services: voice, broadband data, and multi-media applications.

Bringing mobile voice services into rural areasAccording to Pyramid Research, thevoice-centric trend should prevail, with86 percent of subscriber additions in2008 (vs. 93 percent in 2004 & 2005)being 2G-related. Operators will invest inintermediate solutions that do notrequire high CAPEX, but allow them tobuild on voice services and take betteradvantage of high-margin applicationssuch as international calling, roaming,and SMS.Cellular networks are the key enabler ofwide-coverage voice and data applica-tions. Currently, 2nd-generation net-works (GSM, cdmaOne, TDMA, andPDC/PHS) represent more than 97 per-cent of the mobile market. GSM, withGPRS (General Packet Radio Service),offers around 40 Kbit/s. An improvedversion, EDGE (Enhanced Data rate forGlobal Evolution), triples the GPRS band-width. CdmaOne (IS-95B) allows datarates of up to 64 Kbit/s.

Solutions for rural areas

Effective solutions and cost-efficientmodels for rural areas are presented inthe chapter “Designing Sustainable Busi-ness Models for Rural Network Opera-tors”. The “rural area” is where currentmobile coverage is insufficient, such asthe countryside, highways and beautyspots. The challenge is to provide thiscoverage at a reasonable cost.GSM 2G and CDMA 450 are the two lead-ing mobile telephony standards capableof delivering services to rural users,enabling voice and data for individualusage as well as Internet access at a lowdata bit rate. GSM has been in service since 1995. Ithas been adopted by the majority ofmobile telecom operators in the world,and is recognized as the reference tech-nology for 2G mobile telephony. Onecompetitive advantage of GSM is that ithas a large installed base in the worldand in developing countries, allowingeconomies of scale. It remains the lead-ing technology in Africa, offering a widechoice of available handsets for endusers, and low entry cost for mobileoperators due to its degree of maturity.One disadvantage is that it can be expen-sive to install in very low-density and


Leveraging New Technologies and Existing Infrastructure To Address ICT Needs of the Rural Poor

0%

10%

20%

30%

40%

50%

60%

70%

80%

100%

90%

WCDMA

GSM

CDMA

2002 2003 2004 2005 2006 2007

Breakdown of infrastructure CAPEX by technology

GSM, CDMA, AND 3G

Today, some 75 percent of all mobile subscribers use GSM tech-nology (1.8 million subscribers at the end of end 2005).Subscriber growth in the developing markets, such as Africa,Eastern Europe, and Southeast Asia, remains strong. Although pre-paid subscriptions reduce the cost of customer ownership to theoperator, there is a clear trend towards lower ARPU, and it isincreasingly difficult to win new customers to help revenuegrowth. Many GSM operators believe that ARPU can be increasedby providing useful or entertaining new services to existing sub-scribers. The first such services were based on the ShortMessaging Service (SMS). GPRS is a 2.5G technology that intro-duces new network elements for handling the packet datastreams. This solution provides much greater capacity than SMS,and can be the basis for operators to provide more sophisticated,value-added services. EDGE is an emerging enhancement to GPRSthat can be deployed at minimal cost by operators to providehigher-speed data services before implementing WCDMA, or pos-sibly as a complementary technology for suburban area coverage.Later, the introduction of High Speed Downlink Packet Access(HSDPA) in WCDMA will bring an 8 Mbit/s user data rate.

In recent years, CCDDMMAA has grown strongly. The worldwide increasein CDMA subscribers exceeds 130 percent every year; today thereare over 200 million subscribers (end 2005). The CDMA2000 1xsystem is being deployed in many countries to provide high-speed data transmission, enhancing network efficiency and oftenimproving profitability.

33GG, the third generation of mobile technologies, is a set of stan-dards endorsed by the International Telecommunications Union(ITU) under the name IMT2000. The primary benefit of 3G tech-nologies is that they enable operators to offer multimedia servic-es by providing significant capacity improvements on individualsubscriber channels and to overall cell capacities. Enhancementsto the core network also enable real-time services to be deliveredon the packet-switched infrastructure. Major advances in handsettechnologies have enabled the production of multimedia-capableterminals at reasonable prices. The 3G standards are in place, thespectrum is available, licenses have been awarded, and the infra-structure is ready. However, while such deployments and servicesmake sense in mature telecom markets or possibly cities in devel-oping countries, they remain far from reality in rural areas.

Source: Pyramid Research

areas that have been addressed, and un-served rural areas. Reducing the digitaldivide is a challenging strategy for pub-lic bodies and private investors, if weconsider that ICT could be used as a toolfor development.The diffusion of value-added services(Internet-enabled) and applications canaffect daily life and offer new opportuni-ties to individuals. In addition, consider-ing the financial constraints of ruralusers, many relevant applications usingwireless broadband Internet access tech-nologies (satellite, WiFi, WiMAX) can beintroduced for collective use, bringingconnectivity to communities throughschools, health centers, telecenters, etc.This has the advantage of raising ICTawareness and use, offering a wayaround the lack of infrastructure andpublic services in rural and remoteareas.

We are also increasingly seeing a needfor networks and access methods capa-ble of supporting bandwidth-hungryapplications requiring broadband con-nectivity. The market, especially inmature telecom arenas, is evolvingtowards the use of more and more IPapplications, partly because reliable andcost-efficient broadband access tech-nologies are being rapidly introducedand deployed.

Offering broadband Internet access

Broadband Internet access can be seena sustainable solution for rural areas ifconsidered for shared/collective usage(“pay as you go”). IP-based applicationsoffer opportunities for rural areas; thekey is to choose the right backhaulingsolution and access technologies.

remote areas, partly due to the lowoptimization of BTS sites.CDMA is also a cost-efficient solution,competing with GSM. Operating at the 450MHz frequency, it is recognized as the eco-nomic solution in outdoor conditions andlow-density rural areas (less than 10percent teledensity), thanks to its unri-valled geographical reach. In effect, its lowfrequency range makes it an appropriatetechnology for remote/rural areas, sincethe lower the frequency band, the greaterthe range. This enables economies of scalefrom fewer installations (decreasedCAPEX) compared to higher-frequencytechnologies. This cost-effectiveness offersreal opportunities for low-density and lowGDP-per-capita areas.CDMA fully supports voice service, whileoffering an acceptable data rate (compa-rable to the lowest class of fixed DSL).One disadvantage is the problem ofquality reduction when scaling up toserve an increasing subscriber base,especially in high-density areas. There isa limited choice of handsets (fewproviders of handsets with low features)compared to GSM, and limited roamingability for public mobile service applica-tions is another constraint of CDMA.

Bringing more than just voice to reduce the dig-ital divide Some telecom experts and analystsbelieve that the digital divide between theNorth (Western countries) and South(developing world) is narrowing in termsof access, especially with the fast adop-tion and growth of mobile telephony, andpromisingly progressive Internet pene-tration. However, there is still a realintra-country digital divide, in terms ofthe availability of ICT services in urban



ISP: Internet Service Provider PoP: Point of Presence

Network under study

1-5 km 10-30 km (more for satellite) 100-1000 km

Internet

CPE

Access

Access

1 user 5-75 users 1000-10000users

Operator/ISP

Backhauling Intercity Fiber Ring

Aggregation

LDPoP

ISPPoP

- WiFi- DSLAM- WIP station

- DSLAM- Ethernet switch- Satellite hub

- Copper - Radio- Satellite

- Leased Lines E1- Radio- Satellite- Fiber

- Fiber

Source: Alcatel

Network model

Some would argue that the provision ofbroadband access is too ambitious, sincerural users primarily need voice services,and are insufficiently educated or interest-ed to want Internet access. It is true thatInternet connection uptake will first appearin urban markets. Still, the idea is that byproviding broadband Internet access, itwill be possible to offer enhanced applica-tions that contribute to the decrease ofrural isolation and generate economicgrowth. The example of Project IKONillustrates the potential of broadband, if thePrahalad ‘Triple A’s’ (Access, Availability,Affordability) were realized for the non-Bamako citizens of Mali.

Wireless vs. wired

As mentioned before, there are differentpossible configurations and no idealsolution for the provision of broadbandInternet access in rural areas. Onceagain, the technology choice will rely onmany factors which could be economic(financial constraints and market needs)and influenced by existing infrastructure.If no copper infrastructure exists, it isinteresting to consider wireless technolo-gies such as satellite (especially forremote areas) or wireless IP (WiFi,WiMAX, etc.). It is also possible to mixdifferent backhauling and access tech-nologies, depending on the environ-ment: combining leased lines,microwave, DSL, fiber, satellite andwireless IP.

Wireless DSL

As a complement to either fixed DSLlines for low-density areas, or a mobile2G/3G network in higher-density zones,

new wireless solutions help to connectconsumers anytime, anywhere, at a suit-able broadband speed.The market dynamics for last-mile wire-less technologies that provide broadbandconnectivity to homes, businesses andWiFi hotspots or white spots will changesignificantly, as demand for high-speedInternet increases in areas with lowpopulation densities. This demand willbe served by the fixed operators as acomplement to their DSL services and/orby local communities to reduce the dig-ital divide. Mobile operators that want toleverage their customer base and exist-ing radio infrastructure are planning todevelop new services, such as nomadicwireless DSL, which are not provided bytheir wired competitors.Thanks to today’s power processors,wireless systems can provide an alterna-tive to DSL in locations where DSL can-not be deployed for geographic (ruralareas) or economic (lack of copper line)reasons. Furthermore, improvementsin technology mean that these systemsare no longer fixed but offer nomadicaccess today, with mobile access in thenear future.Public WLAN offers high data rates (sev-eral Mbit/s) in any of the 50,000 hotspots that currently exist in places suchas airports, hotels, or conference centers.Nevertheless WLAN, while offering clearbenefits, is limited in its coverage andmobility capabilities for public applica-tions. WiMAX (Worldwide Interoper-ability for Microwave Access), in partic-ular in its IEEE 802.16e variant, over-comes these limitations, and can offerbroadband connectivity in extendedareas (hot zones). Thanks to state-of-the-art radio technology, WiMAX offersbroadband wireless access at data ratesof several tens of Mbit/s over a range ofseveral tens of kilometers.

Standards

In the field of wireless systems, IEEE802.11 (Wireless Fidelity or WiFi) hasexploded onto the market because of itslow cost and satisfactory performance.IEEE 802.11a offers high data ratesand better radio resource management;802.16 introduces still higher rates foroutdoor applications, mainly for enter-



DSL: THE DOMINANT BROADBAND ACCESS TECHNOLOGY FOR URBAN

AREAS

DSL (Digital Subscriber Line) is an access technology; but recent tri-

als have shown that it could also be used for backhauling, as an

alternative to leased lines and microwave. Copper technologies have

the advantage of being a widely-deployed technology in urban

areas. Other competitive advantages are that they are always on

line, do not tie up the phone line, could be self-installed, and are

cost-efficient thanks to inexpensive modems and competitive sub-

scription fees. The main constraint is their limited reach (up to 5km

from the central office).

prise broadband access and WLAN back-hauling. Requirements are currentlybeing defined for IEEE 802.20 mobilebroadband wireless access. According tosome, WiFi was brought to life by stan-dardization.Broadband Wireless Access (BWA) tech-nology supports the following mainapplications:

• Wireless DSL: DSL-like services but unwiredinstead of wired. The technology could beintroduced faster than wired technology,because there is no need to modify the sub-scriber line at the central office. Of course,the base stations should provide sufficientpopulation coverage.

• Backhaul for WLAN: Pushed by local coun-cils to reduce the “digital divide”, operatorsare increasingly looking to deploy WiFi tech-nology for broadband access in less popu-lous areas. However, even if WiFi offers anaccess solution, connection to the Point ofPresence (PoP) is still a bottleneck. BWAtechnology offers a good solution to thisproblem.

• Nomadic/mobile DSL: This new concept hasbeen made possible by new technologies.Thanks to its non-line-of-sight, zero-installand plug-and-play features, an anytime,anywhere connection becomes a reality.Nomadic or portable DSL provides broad-band Internet/Intranet indoor and out-door connectivity at any location within thecoverage area.

Satellite: another alternative for backhaul-ing and access in remote areasSatellite can provide a network with theability to cover large, under-equippedareas, and to immediately deploy net-work components for fixed and mobiletelephony, as well as numerous profitableapplications such as TV and radio broad-casting, content distribution by fixed ormobile multicast, and fast Internetaccess.This technology provides Internet accessworldwide, and gives ISPs the freedomto set up operations almost anywhere. Itwill have a short-term advantage innavigation and location systems, whichwill help to bridge current infrastructuregaps in some regions. It should howev-er be noted that broadband Internetaccess would be considered first for



WIFI: AN ALTERNATIVE FOR THE LAST-MILE CONNECTION

Wireless Local Area Networks (WLANs) are now expanding beyond

their original enterprise role to provide high-speed Internet

access on the move to business and high-end residential travel-

ers in hotspots such as airports, train stations, hotels and cafés. By

adapting some of its radio capabilities (e.g. adding external anten-

nas), WLAN can be used as a low-cost radio access solution in rural

areas with low population densities.

It is especially attractive to business people on the move,

enabling them to use a laptop or Personal Digital Assistant (PDA)

equipped with a WLAN card to connect to the Internet, as well as

to corporate and local web sites. In all these cases, the low band-

width/cost ratio makes WLAN an interesting value proposition for

nomadic usage in dense and indoor areas. Thus, WLAN is an ideal

complement to other broadband access technologies.

WiFi is a living example of Wireless broadband access. It is grow-

ing fast for several reasons: it meets the connectivity needs of end-

users, and generates profits for service providers and infrastruc-

ture vendors; WiFi’s success adds credibility to other BWA business

models. Its steep growth rate is comparable to that of wireline DSL.

WiFi’s evolution and key success factors are being carefully ana-

lyzed, reproduced and improved during the development of

WiMAX

LICENSING

The WLAN frequency bands are license-exempt, which means that

the spectrum is available to any operator wishing to deploy a WLAN

infrastructure without the need to deal with the regulator. WLAN

is not a truly mobile system, as it does not include the high-speed

handover mechanisms associated with mobile radio access tech-

nologies like the General Packet Radio System (GPRS) and the Uni-

versal Mobile Telecommunications System (UMTS). Nevertheless,

it offers limited mobility with full broadband access (making it ideal

for PCs), whereas Third Generation (3G) / UMTS offers complete

mobility with a somewhat smaller bandwidth (making it suitable

for handsets).

TERMINALS FOR PUBLIC WLAN ACCESS

Any laptop PC can be endowed with WLAN connectivity by adding

a PC card. These cards are readily available for less than US$ 50.

In the first half of 2003, 40 percent of the PCs sold in the United

States were WiFi-enabled; by the end of 2005, it is anticipated that

more than 90 percent of all PCs sold in the world will be original-

ly equipped with the WiFi communication chipset. PDAs are avail-

able with built-in GPRS and WLAN connectivity. Such devices are

key success drivers for the take-off of WiFi, as they are more con-

venient to use while on the move. Dual-band WiFi/GPRS cards will

quickly become popular PC accessories.

SECURITY

Deploying a secure WLAN today must include a WLAN infrastruc-

ture that provides strong user authentication, data privacy, inter-

ference detection and avoidance, denial of service and intrusion

detection, and strong rogue access point handling features.

business users, then for the generalconsumer, possibly through communi-ties. Satellite access solutions offer an alter-native to terrestrial access solutions.Players in the telecom sector are lookingat the new opportunities for satellitesoffered by the two main trends in

telecommunications: broadband Internet,and next-generation, broadband mobilenetworks.Satellite technology can be used as acomplementary access solution. The com-bination of broadband satellite solutionswith wireline and wireless solutions (DSL,WiFi, WiMAX, GSM) can provide users



WIMAX: THE NEXT-GENERATION WIRELESS TECHNOLOGY OFFERING BROADBAND ACCESS FOR ALL

WiMAX is a wide area network access technology whose evolution and market relevance are being managed by a group of compa-

nies forming the WiMAX forum. WiMAX stands for “Worldwide Interoperability for Microwave Access”, and is related to a telecom

standard called IEEE 802.16 and its variants.

WiMAX is the right solution to:

- extend the currently limited coverage of public WLAN (hotspots) to citywide coverage (hot zones), the same technology being usable

at home and on the move;

- blanket metropolitan areas for mobile data-centric service delivery;

- offer fixed broadband access in urban and suburban areas where copper quality is poor or unbundling difficult;

- bridge the digital divide in low-density areas where technical and economic factors make broadband deployment very challenging.

WiMAX, the natural complement to mobile and WiFi networks

Mobile networks offer full mobility, nationwide coverage for voice services, and moderate data rates. WiMAX can therefore be posi-

tioned as a complementary solution by offering higher bandwidth when required, in particular in dense urban areas. Public WLAN,

while offering clear benefits, is limited in coverage and mobility capabilities. WiMAX bypasses these limitations and offers broad-

band connectivity in larger areas (hot zones). WiFi and WiMAX solutions are also complementary, with WiFi being better adapted

for short-range, indoor connections (in particular in the enterprise and at home), and WiMAX for long-range outdoor connections.

WiMAX Spectrum and Regulation Issues

WiMAX-compliant equipment will be allowed to operate in both licensed and unlicensed bands. Most countries have already allo-

cated licensed spectrum, generally to alternate operators. Nevertheless, large quantities of spectrum are still being allocated, and

some countries have not even defined any WiMAX licensed bands yet. Geographical usage differences, and the possibility of non-

line-of-sight applications, have led the WiMAX forum to concentrate on the 2.5GHz and 3.5GHz bands, which are accessible in 90 per-

cent of the world. Some equipment providers are also targeting a 700MHz solution for use in rural deployments, even if there is no

WiMAX profile for the 700MHz spectrum at this time, but there is at least some interest within the WiMAX community to introduce

it in this frequency band. 700MHz, like CDMA 450MHz for mobile coverage in rural areas, is a very attractive spectrum band in remote

regions due to the favorable propagation conditions that exist at this lower frequency.

Opportunities for developing countries and un-served markets

WiMAX is already seen as a source of hope in the developing world. Low-cost BWA in blooming economies like India and China may

bring the benefits of economic growth to their remotest areas in the form of remote education. BWA is compelling, not only for its

practical, short-term applications, but for the long-term impact it may have on the lifestyle of millions of people and on human progress

by the dissemination of culture and knowledge. In emerging countries, the focus of broadband deployment is on urban and subur-

ban areas, and will remain so in the near future. The low quality of the copper pair prevents mass-scale DSL deployment, and fos-

ters the need for alternative broadband technologies. In this context, WiMAX is positioned as an excellent option. Moreover, the pos-

sibility of offering broadband services in combination with voice services will gradually lead to narrowband WLL substitution. Para-

meters such as availability of copper, distance to the remote unit/central office, backhauling costs, and teledensity will drive the

choice of one of these solutions.

WiMAX can provide broadband access in remote regions and developing parts of the world where basic voice or broadband access

using fixed-line service is not economically feasible. A fixed version of the WiMAX standard, 802.16-2004, can also be used to pro-

vide backhaul in cellular networks, or it can be used to significantly enhance the performance of public WiFi hot spots by increas-

ing throughput in the backhaul network, and by making it easier and more economical to deploy WiFi access points. By eliminat-

ing the need to deploy copper or fiber, an operator can significantly reduce its up-front capital expenditures, while at the same time

reducing the risk of service disruption through vandalism or theft of the buried cabling.

important role in the deployment of landmobile networks in regions with littleground infrastructure. Since they deliveruniform coverage over vast areas, and canbe deployed without pre-existing terres-trial infrastructures, they are well suitedto delivering equal quality of service,everywhere and for everyone.

with a terrestrial broadband connectionwith the same user experience as if theywere connected to urban broadband sites.With this objective, plus the developmentof turnkey hybrid solutions, includingsatellite backhaul plus DSL, WiMAX,GSM or WiFi, this next-generation net-work infrastructure will extend the broad-band reach of telecom and entertainmentservices to non-connected users.Voice and data access for businesstelecommunications or in isolated areasare changing to take advantage of inex-pensive Internet Protocol (IP) compatibleterminals. VSAT (Very Small ApertureTerminal) applications are being replacedby new IP applications and broadbandsatellite access.Satellite enables a wide range of appli-cations linked to service platforms, infields like content distribution, cooper-ative working, distance learning, tele-working, remote crisis management,credit card authorization, access to cor-porate networks, etc. Broadband IPaccess by satellite also offers a promis-ing backhaul opportunity for the inex-pensive connection of 2G and 2.5Gmobile base stations to the core network.Telecom service prices in developingregions remain higher than in their devel-oped counterparts, thus limiting afford-ability and ICT development. To helpreduce the digital divide, governments andregulators are increasingly prepared tofree up satellite frequency spectrum forbroadband services. Satellite has an



Isolated

Scattered

Grouped

User Density

Wireless, WiMAX,or PLT, DSL,..

WiFi

DirectConnections

BackhaulConnections

AnyBroadbandNetwork

Connecting isolated user so public broadband networks

Source: Alcatel

RASCOM: A SATELLITE FOR AFRICA

A new satellite designed to provide coverage of the entire African

continent and parts of Europe and the Middle East, is due to enter

service in late 2006. This project is based on a satellite in geosta-

tionary orbit using the Ku and C bands. The ground networks asso-

ciated with the satellite system will include earth stations and low-

cost rural terminals, fed by solar power. The RASCOM system will

offer the capabilities required to provide fixed voice and data links,

Internet access, and broadband radio broadcasting services to the

entire African continent. It will ultimately enable almost 300,000

hitherto isolated villages to be connected. Innovative transmission

techniques, specially developed for this project, and the benefits

of economies of scale for the terminals, will enable communica-

tion services to be offered at very attractive prices, affordable by

local populations. The project owes its name to the intergovern-

mental organization RASCOM (Regional African Satellite Commu-

nication Organization), which represents the interests of 44

African operators. RASCOM is therefore the manifestation of the will

of African governments and telecommunication operators to pool

their efforts to offer the continent an infrastructure based on space

technology. This initiative is not only a global response to a set of

identified needs, but is also characterized, more specifically, by the

offer of inexpensive telecommunication services, giving sub-

stance to the desire to extend universal service in Africa. It should

also result in decreased OPEX, the same satellite being used for both

emission and reception.

In effect, wireless technologies, andsatellite in particular, are well posi-tioned to facilitate the rapid deploy-ment of a broadband infrastructure atlower cost, even if they are still perceived(in the case of voice and data services) ascostly solutions for specific niche mar-kets. In fact, the cost of satellite band-width is seen as the limiting factor in thedeployment of individual satellite-basedservices.

Cost-efficient models?Broadband Internet access should not beconsidered for individual usage. Whileinfrastructure roll-out could be co-financed by public donors to help reducethe digital divide and boost localeconomies, return on investment willnot be as profitable as mobile voice (GSMor CDMA), due to high CAPEX and slow


This figure compares the costs ofdeploying the main end-to-end solu-tions. The reference cost is that ofdeploying a DSL-based solution inurban areas by a competitive operatorusing the local loop in unbundlingline-sharing mode (x1). The Y-axis isthe number of users to be served inthe village, while the X-axis is thebackhauling distance, roughly the dis-tance from the village to the regionalfiber network. The reference urbanDSL minimum configuration isassumed to be a hundred users withinaverage DSL reach (5 km). In equip-ment terms, it consists of a single,high-capacity DSLAM located close tothe incumbent’s central office, and abasic DSL modem at the customerpremises. If there are only a few tensof users, this cost doubles. In smallvillages (less than ten users) or scat-tered households, the cheapest optionis the end-to-end two-way satellite solution. Although rather expensive today (about four times the cost of urban DSL), it is inde-pendent of the backhauling distance.

There are a number of possible solutions for medium-sized villages (10-50 users). At the lower end (10-20 users), villages withinWiMAX reach (up to 15 km) can use this solution at four times the reference cost. For larger villages (20+ users), an access solutionsuch as DSL, WiFi or WiMAX can be suitable, maybe combined with satellite for long-distance backhaul. In the case of large villages(50+ users), the optimal solution is DSL access. Combining DSL access with microwave (up to 30 km) and fiber backhauling canprove to be a competitive solution for short backhauling distances, if the passive infrastructure is amortized over a long period (20years), and the time to market is acceptable. The average end-to-end cost is 1.5-2 times the reference cost. It is interesting toexamine how the costs of these solutions are likely to change over the coming years. DSL technologies are quite mature, but costimprovements are still achievable for remote configurations, leading to a reduction in the end-to-end cost of about 20 percent.Local-loop unbundling costs still represent the largest portion of the DSL access cost. Radio technologies (WiFi and WiMAX) arebooming solutions with more potential for cost reductions (expected to be around 30 percent), especially for installation (line-of-sight constraint relief) and the CPE (economies of scale). Satellite solutions are forecast to offer the largest cost reductions (mini-mum 40 percent) thanks to technology breakthroughs in satellite bandwidth and CPE costs.


DVB-RCS

DVB-RCS (Digital Video Broadcast – Return Channel via Satellite) stan-

dard has been defined to offer the same level of service (IP and

TV services) as terrestrial systems, with an identical user experi-

ence for people not connected via DSL. There will also soon be a

need to consider providing support for WiMAX via satellite.

The main target group for DVB-RCS is broadband two-way networks

requiring asymmetrical connectivity. This is also typically the seg-

ment for which, in dense urban areas, ADSL access technology is

a very suitable solution. However, due to its high cost and relative-

ly short reach (ADSL runs over copper up to 4 km), ADSL is certain-

ly not the right choice for other areas.

DVB-RCS however is well suited as an access method for SMEs in

suburban and rural regions. When the time is right, the full poten-

tial user base of consumers and residents in those non-served

regions will become a target market.

Since applications require more and more connectivity, DVB-RCS

broadband access is very well placed, due to its capability to reach

any type of population within large geographic areas.

Notes: Access technology (Backhaul) Source: ALCATEL

E2E 2-way Satellite

DSL (Fibre-with light civil works)

DSL/WIMAX(Satellite)

E2E WIMAXor DSL (WIMAX)

DSL(µWave)

Microvillage

Average

Relative Capital Expenditure vs. Urban ADSL

UrbanDSL

x2

x4

x4

x2.5... x3

x1.5... x2Ref.Price

Backhauling distance (km)

# co

nnec

ted

user

sLargeVillage

1

1

10

30

50

70

5 15 30 50 100 1000

Cost comparison of access technologies

in this context, offer a strategic advan-tage to new entrants in terms of cost opti-mization and future market develop-ments.

Next-generation networks (NGNs)NGNs take a radically different approachthan legacy networks, as they are notdesigned to support any particular appli-cation. Instead, this new network archi-tecture offers all types of applicationsthrough “service convergence”. WithNGNs, some services specific to a givennetwork can be offered through anoth-er service network. As an example, theopen architecture of a packet networkenables it to carry voice services. Simi-larly, mobile multimedia services will beoffered by third-generation (3G) mobilenetworks and wireless access.

What is service convergence?

Service convergence means that varioussubscriber services are provided by thesame telecommunication equipment, thesame terminal, the same access link, thesame transport media, the same controlelement, or the same application soft-ware. This convergence can be imple-mented at various locations in the net-work, or at the network edge. For exam-ple, mobile 2G+ terminal vendors areachieving service convergence in theterminal. An i-Mode terminal or Smart-phone offers both data and voice servic-es, with the possibility of moving infor-mation from one service to the other inthe terminal. A network server can offer

customer uptake offering poor revenueopportunities. Nevertheless, its benefitsshould be considered from a wider per-spective; broadband access can con-tribute to local development throughimproved education, healthcare, andaccess to information. Its impact andreturn on investment would be measur-able in the mid/long-term, helping toslow rural exodus, bring new businessopportunities, and create new jobs, whileimproving human capability.

Other technological opportunities for develop-ing countries The telecom industry evolves very rapid-ly (see chart) and there are numeroustechnological advancements that shouldrevolutionize the way people communi-cate, bringing further opportunities foremerging markets. IP technologies forexample should attract new businessplayers, especially in developing countries.It should be observed that successfulbusiness models in developed countrieswill not necessarily adapt to developingcountries, even if leapfrogging opportu-nities offered by technological innovationwill enable cost optimization, enhancedquality of service and fast deployment. Developing countries, and more pre-cisely rural areas, firstly need basiccommunication services such as voice atlower cost. However, the evolving needsof rural populations after ICT empower-ment will justify future services beyondvoice, which influences initial networkdesign. Next-generation networks could,



NewServices

Adoption

User-CentricBroadband

Services

• Any device, any connectivity• Single subscription & Authentication• Consistent personalization• Transparent synchronization

• Fixed BB (DSL)• Wireless BB (Wi-Fi)• Mobile BB (3G)…

Many new services…… but a fragmentedexperience

• Mobile Voice• LAN• Internet…

1995 2000 2005 2010

BroadbandServices

Multiple newConnectivity

Services

Source: Alcatel

Telecom evolution chart

service convergence, as is the case forunified messaging servers. Of course,service convergence can take place at thenetwork infrastructure level, for exampleby using the same IP network switchingequipment to switch both data and voice.

New sources of revenues for service providers

Today, the highest revenues for net-work operators are undoubtedly gener-ated by voice services. However, over thepast few years, increased competitionhas resulted in a gradual decline in theprofits from voice services in maturemarkets. Although revenues from voiceservices are still dominant, especially indeveloping markets, operators are con-fronted with supporting more call min-utes for less profit. Especially in countrieswith metered local calls, this lost revenuewas offset to some extent by revenuesfrom the extensive use of the PSTN fordial-up Internet access.As voice revenues tend to decrease fur-ther and the trend to flat-rate Internet

access gains momentum, operators indeveloped countries are looking for othermeans to compensate for these losses.Consequently, they are seeking new,advanced services and applications thatwill allow them to retain or even toextend their customer base, and therebykeep profits high. The most interestingnew service opportunities lie with a vari-ety of applications integrating telephonyservices, Internet data, and/or videowithin the application itself. The chal-lenge is to find new applications that addsufficient value or convenience to justifythe additional expense in the mind of thesubscriber. NGN architectures offer theopportunity not only to increase profit,but also to reduce operating and invest-ment costs. Thus, new operators are notburdened with the need to develop amigration strategy, as from the outsetthey can opt for a converged voice anddata NGN solution to provide advancedvoice and data services.

Opportunities for sub-Saharan Africa?Implementing an NGN enables operatorsto achieve efficiencies today while ensur-ing the future evolution of the core net-work. Costs are reduced using low-maintenance, small-footprint media gate-ways. Call switching is moved closer tothe end user, thereby reducing backhaul-ing costs. The NGN architecture supportsthe management and control of widelydistributed physical ports using a single,centralized call server, enabling opera-tors to place switching capabilities inareas that would have been uneconom-ical to serve due to the high cost of build-ing and operating a mobile switchingcenter (MSC) site. The result is an opti-mized network cost and an improvedsubscriber quality of service - a winningscenario.NGNs will bring further opportunities fordeveloping countries, enabling green-field players or new entrants to distrib-ute a wide range of value-added servic-es and applications, while minimizingtheir OPEX, thus contributing to relativeeconomies of scale. Fixed/mobile conver-gence and IP-based services like VoIPcould be interesting technological evolu-tions for emerging markets.Telecommunication operators in develop-



Going beyond the technological issues, deregulation has a consid-erable influence on an operator’s mode of operation.Through a process known as “local-loop unbundling,” governmentregulators around the world are forcing incumbent operators toopen their doors to rival companies. Once inside the exchange,these alternative carriers should be able to compete for local cus-tomers by taking direct control over the “last mile” of copper. Thisis leading to increased competition between incumbent operators,incumbent operators operating outside their traditional regions,and new network operators, which all want to win the most valu-able customers with the highest spending on telecommunicationservices. NGNs are well suited to supporting the network architec-tures and business models enabled by deregulation.

Impact of geographical extension of local loop unbundling inFrance in the past few years

(Source: ARCEP)

Within two years, broadband access has significantly increasedthanks to local loop unbundling. The number of sites rose from130 in 2001 to 900 in 2005, or 50 percent population coveragecompared to 11 percent in 2003.

1/1/2003 1/1/2004 1/1/2005

Source: : ARCEP

THE IMPACT OF AN APPROPRIATE REGULATORY FRAMEWORK

New technology combining Voice overInternet Protocol (VoIP) and dual-modephones, with both cellular and WiFiconnectivity, can offer a sophisticatedservice to users in a very simple and easyto understand package. Convergedfixed/mobile solutions help protect mar-gins by using optimized routing to theoperator’s benefit, routing calls on themost efficient network (taking intoaccount the change of tariff, incremen-tal operating expenses, and the costand revenue from interconnection fees).In addition, it allows the arbitraging oftariff distortions, for instance, generat-ing revenue from incoming calls throughhigher interconnection fees.More importantly, combined fixed/mobilesolutions allow operators to move intothe VoIP business, making it unnecessaryfor their customers to move to an alter-native supplier. Dual-mode phones, com-bining cellular and WiFi / Bluetoothconnectivity with VoIP, require appropri-ate network solutions to realize their fullbenefits. Depending on the targetedusers (residential or enterprise) and thenature of the operator (fixed, mobile,MVNO), various solutions are possible.All these solutions are now available withcurrent wireless access technologies(mostly WiFi), and will evolve to take intoaccount new technologies such asWiMAX.

Internet Telephony

The IT world has deployed many comple-mentary technologies for the networksused to connect computers and applica-tions: mainframes, UNIX systems, Linuxsystems, PCs, Relational Database Man-agement Systems (RDBMS), CustomerRelationship Management (CRM), etc.Ultimately, the Internet has been adopt-ed as the standard technology to connectcomputers across networks.The idea of the Internet is to take advan-tage of the computing capability of theconnected systems (“host” is the gener-ic term for a system, terminal or serverconnected to the Internet), so that thenetwork only has to carry packets. EachIP packet consists mainly of the address-es of the sender and the receiver, and asmall number of bytes (typically 1500).Host A sends the IP packets for host B to

ing countries face many challenges. Oneof the biggest and most important is howto cope with network evolution, giventoday’s scenario of low available invest-ment, uncertainty, stagnating demand,political crises, etc. In the current stateof the market, it is difficult for an oper-ator to justify investing in a networkmigration plan. Today, many operatorsface severe debt, telephone tariffs fixedby the government, and an uncertainpolitical and economic future. Obtaininginvestment in these conditions is almosta “mission impossible”. However, it is possible to help an opera-tor create an evolutionary plan which,based on today’s needs, defines the stepsthat are needed to achieve future networkevolution. In particular, the key drivertrends on which the evolutionary planshould be based need to be identified.Nevertheless, few operators realize that,in the future, NGN services will be offeredover the broadband infrastructure theyare currently deploying. This is a crucialpoint that should be considered whenplanning broadband deployment.

Fixed/mobile telephony

As communications services evolve, usersare increasingly faced with a confusion ofdevices, subscriptions and numbers; theyare crying out for simplicity.

Many users have a fixed-line telephone athome, a phone in the office and a mobilephone, but most simply want just onephone for fixed and mobile telephonywith a common directory, a commonvoice mailbox and a common set of serv-ices when at home, at work or traveling.They do not want to have to worry aboutwhich network is available, which tariffthey should select, or have to carry mul-tiple devices for every eventuality.



BT BLUEPHONE PROJECT

In May 2004, a consortium of seven companies including

Alcatel was selected to launch BT’s groundbreaking “Project

Bluephone,” the first stage of BT’s fixed/mobile convergence

strategy. The pioneering attempt, set for launch in 2005, will

see BT offer customers a handset that will connect to its own

fixed-line system at home or in the office, but switch auto-

matically to Vodafone’s wireless network when on the move.



the first router, which forwards it toanother router, and so on, until it reach-es B. The network carries IP packets inan inexpensive way, using its best effortto provide the required speed and reli-ability. It has no memory between pack-ets, each of which is handled separate-ly, with the result that packets travelingbetween A and B may take differentpaths. No circuit is set up. If reliability isneeded, the hosts use the TransmissionControl Protocol (TCP), which createsreliable end-to-end data streams over IP

packets, inserting index numbers tocontrol the order in which packets arereceived, and to ensure no packets havebeen lost. If there is no reliability con-straint, the User Datagram Protocol(UDP) is used to carry basic messages.The network itself is only IP-aware.As telephony is simply another Internetapplication, any company, even if it is notan access provider, can provide a teleph-ony service. Microsoft MSN, Yahoo, AOL,AT&T Call Vantage and Skype arealready active in this market.

IAD

POTS/ISDNPOTS/ISDN

Softswitch

Softswitch

LocalExchange

AccessGateway

TrunkGateway

TrunkGatewayLocal

Exchange

PSTN

PSTNBB Access

NB Access

PSTN

Data Network

Data Network

POTS/ISDN POTS/ISDN

VoIP in Access

VoIP in Long Distance

Source: Alcatel

VoIP Network Architecture

Key players involved in the process of ICT devel-opmentPublic bodies

The role of the public sector in the hightechnology content of telecom services issupplemented by regulation policies andstandardization activities. Public bodieshave a very important role to play in theprocess of ICT development, to fosterinfrastructure roll-out in un-served areasand enable universal service provision.It has been proved that the creation of aseparate regulation authority has a pos-itive impact on the efficiency of the tele-com sector and can accelerate networkdevelopment.ICT policies and strategies should targettaxation to allow telecom operators tobring tariffs down, and open markets tofacilitate market entry for new private play-ers. Since medium/high income consumersare the most lucrative markets, specificlicenses and funding will need to be madeavailable to convince investors and privateplayers to go rural. Specific licensing forunder-served regions has been imple-mented in South Africa, and is understudy in other sub-Saharan countries.Government and public administrationsare themselves the first potential cus-

tomers; indeed, the means to access pub-lic documents, to ease administration, toshare administration information, and toestablish connections between citizensand the administration, are all being heav-ily promoted by e-government initiatives.

Operators

Existing operators (telecom and ISP),especially in SSA, have not yet investedmuch in access delivery in rural andremote areas, even if they are supposedto do so according to Universal Serviceobligations. Rural markets are oftenconsidered risky, due to high entry costsand smaller revenue opportunities (lowincome/low population density) com-pared to urban markets. However, realfuture growth for African telecom oper-ators will come from low-ARPU (AverageRevenue Per User)/rural markets ashigh-end segments (urban/high ARPUcustomers) start to saturate. By deploy-ing infrastructure in rural areas, opera-tors can increase their customer baseand revenues; lower margins will be off-set by higher-volume revenues.

Services and applications providers (SAP)

SAPs design value-added services target-

47

Chapter 5: Understanding the Value Chain

Operators

Applications Fixed Mobile WISP Local Community

Wireless Complement to Incumbent Incumbent Communities ReducingDSL ADSL in low Competition Competition "Digital Divide" density areas (regional)

Backhaul for In low density Incumbent Reducing ReducingWLAN areas independancy "Digital Divide" "Digital Divide"

Nomadic/Mobile New service New serviceDSL

Source : Alcatel

WiMAX provides new business models for operators

Operators can be subdivided into two groups:- Operators interested in mobility, such as mobile operators and Wireless Internet Service Providers

(WISP), as it is a strong differentiator compared with fixed connections;- Operators not interested in mobility, like fixed operators and local communities, whose main concern

is to provide DSL connections (wired or unwired) to the maximum number of households.


ing end users. Scalability of service canbe achieved if SAP establishes partner-ships to capitalize on the distributionchannels of telecom operators. Bothservice providers and operators benefitfrom these new forms of agreement,which allow them to reach a critical massof users. Commercial agreementsbetween SAPs and telecom operators arenot yet highly developed in Africa, butcould have a positive impact on theavailability and affordability of servicesfor end users.

End users

End users are individuals and profes-sionals that could potentially become ICTusers if they can have access to a termi-nal at a reasonable cost. Mobile penetra-tion in most developing countries leavesroom for major growth, and demand willgrow as tariffs decrease, and new hand-sets appear with design and featuresadapted to the needs of low-incomeusers. To accelerate uptake of ICT andits benefits (improved quality of life,access to knowledge and information),efforts should also be made, maybe bypublic authorities, to help people tofamiliarize themselves with ICT andhave access to credit.In addition to the providers in the valuechain listed above, other stakeholdersalso have a role to play.

Public facilities

Public facilities would benefit from havingaccess to technological innovation, whichcould improve the quality of public serv-ice, offset the lack of resources at remotesites, and help to connect rural and urbanareas. In some cases, economies of scale(staff and equipment/material) can also beachieved by using new technologies ratherthan traditional methods (digital radiolo-gy for example).Giving Internet access to rural users,through collective or shared infrastruc-ture (schools or telecenters), even if it willnot bring fast profits, will have a strongimpact on human capability and localeconomic development.ICT can be seen as a tool for achievingsustainable economic growth, enhancedpublic welfare, improved transparency,and social and economic stability. Public

facilities could be used to run communi-ty information and promotion programson the use of ICT to develop human capa-bility and raise empowerment, through“cybercafés” or “telecenters” for example.

Donors

Donors can share the risks of financingrural access, making the cost of entry lessdissuasive for telecom operators. Fundingcould come from the private sector (tax ontelecom operators) and national bodies, set-ting commitments in terms of universalservice provision, or local players interest-ed in boosting the attractiveness of a spe-cific region. Part of the financing could alsocome from international donors: develop-ment agencies and international organiza-tions (United Nations, World Bank, Euro-pean Commission, African DevelopmentBank, etc). Financial support could direct-ly target end-users, helping to decrease ter-minal acquisition costs, or indirectly,meaning that the service provider wouldbenefit from the funding.As described in the “Rural ICT Toolkit”report from African Connection, a smartsubsidy is an initial subsidy given to theprivate sector that is result-oriented, doesnot distort the market, and encouragescost minimization and market growth. Ithelps to “kick-start” a project or servicedelivery, using contracts that tie pay-ments to the benefits actually deliveredto target beneficiaries.In addition, outside funding, possiblypublic, would be justified when:

• A project could make a profit but is consid-ered only marginally viable and marginal-ly attractive to investors in the short term,and/or low priority, without the incentive ofa rural subsidy;

• A project will be commercially viable if highstart-up costs (capital-intensive infrastruc-ture) are partly funded.

Women

Women should also be involved in thevalue chain due to their ability to quick-ly adopt and promote ICT. Numerousprojects involving women as key interme-diaries have already been implemented:to set up and run businesses (GrameenPhone), or to develop and manage virtu-al trade communities using Internet plat-


Understanding the Value Chain

while the term “healthcare” highlightsthe benefits of service like Pésinet,offered by Senegal’s Saint Louis hospitalto those in the poorest areas.This development model shows howboth local players and local residents canachieve a genuine “leap forward” eco-nomically, politically and socially, basedon two converging virtuous circles.

The model shows that:

• Lack of infrastructure and illiteracy aretwo prime causes of sustained poverty;access to information to take care ofoneself, feed oneself, communicate withpeers, develop projects, etc. can be a life-line for isolated communities.

• ICT is unquestionably the most realisticinvestment in communication, because ofthe quicker return on investment comparedwith alternative, costly infrastructures.The Internet cannot replace the roads thatare so sadly lacking, but suitable Internetservices will make it possible to make bet-ter use of what few means of transport areavailable.

• Economically, ICT will help to create local,more transparent marketing channels, solimiting speculation and the risk of artificialshortages, and improving the distributionof margins between the various links in thevalue chain of each sector, from producerthrough to consumer. Time and moneysaved in this way can be ploughed back intoproductive new activities, helping to boostthe local economy and leading to the cre-ation of jobs. This will, in turn, justify more

forms. There is a need for a pro-activeapproach to include women in ICTawareness as they are sometimes exclud-ed from using common public areas(such as telecenters) in certain cultures.

Creating value for ICT development in under-served areasA new development model based on ICT

How can communication tools, like theInternet and telephone, contribute to thelocal development of communities thatare often disadvantaged by the lack ofeven basic facilities, such as drinkingwater, roads or electricity? Why, in thissituation, should ICT investment be notonly useful or a priority, but even eco-nomically realistic?Various case studies like Manobi andPésinet show how it is possible to devel-op “proximity” services, that is, servic-es that meet the basic, everyday needs ofthe local economic and social organiza-tions and the poorest people. Such serv-ices must be defined locally, taking intoaccount people’s way of life, real needsand incomes. The model presented in the next figuresets out ways in which ICT could con-tribute to a lasting, integrated develop-ment process. It is mainly based onoffering high local added-value proxim-ity services, unlike the standard use ofthe Internet in the industrialized coun-tries. Here the term “transparent mar-ket” refers to local trade, such as theactivities of producers and fishermenusing Manobi services for example,



Demand for Telecommunication Services

Social Development Local Economic Development

Information Needs

@Affordable

Communication Infrastructure

Lack of Infrastructure, Illiteracy, etc

Poverty

Healthcare Transparent Market

Savings in Time and Expenses

Job Creation

Education

GovernancePublicFunding

PrivateFunding

Rural Stability

Source: Alcatel

New Development Model based on ICT

communication resources, and so on.This is the first virtuous circle.

• The second virtuous circle is of a socialand political nature, in which ICT canbe used as a tool to support theimplementation of healthcare initia-tives in which information campaignsare so important. In the areas of edu-cation and how society works, theInternet has the potential to improvecommunication between publicauthorities and local people, as well asbetween central authorities and localauthorities. It will facilitate greater trans-parency in how institutions are run, mov-ing towards the objective of good gover-nance, and offsetting the lack of transporta-tion infrastructure and local governmentpresence.

Infrastructure implementation strategy based on

usage

In developing countries, the main barri-er to setting up telecommunication infra-structures is the lack of available invest-

ment; this problem is even more criticalin rural areas that are still very poorlyserved. Thus an approach is requiredbased primarily on usage and services,and in which the technology is not con-sidered as an end in itself but more as atool. There is enormous potential inthis area, comprising a multitude of ini-tiatives based on individual competencesor small creative and dynamic organiza-tions that can develop new proximityservices. Such initiatives warrant support



Economic & Social Model

Large scale deployments

Pilot projects

Local experiments

Attract Publicand Private Funding

… seed money

… encourage initiatives

3

2

1

Source: Alcatel

Taking up the Challenge of the Digital Divide

ITU LAUNCHES NEW DEVELOPMENT INITIATIVE TO BRIDGE THE DIGITAL DIVIDE

In June 2005, the International Telecommunication Union launched a major new development drive designed to bring access to infor-

mation and communication technologies (ICT) to the estimated one billion people worldwide for whom making a simple telephone

call remains out of reach. Called Connect the World, the initiative is a global, multi-stakeholder effort established within the con-

text of the World Summit on the Information Society (WSIS) to encourage new projects and partnerships to bridge the digital divide.

By showcasing development efforts now underway, and by identifying areas where needs are most pressing, Connect the World will

create a critical mass that will generate the momentum needed to connect all communities by 2015. At present, ITU estimates that

around 800,000 villages (30 percent of all villages worldwide) are still without any kind of connection. Connect the World places strong

emphasis on the importance of partnerships between the public and private sectors, UN agencies and civil society. The initiative com-

prises three key building blocks (Enabling Environment, Infrastructure & Readiness, and Applications & Services) that together con-

stitute the primary areas that need to be addressed when developing concrete measures to accelerate ICT development. All Connect

the World funding partners have current development projects in one or more of these areas. They will be encouraged to develop

new partnerships and initiatives, while additional partners will be actively sought in areas not adequately covered to ensure under-

served communities get what they need where it is needed most.

At present, the 942 million people living in the world’s developed economies enjoy five times better access to fixed and mobile phone

services, nine times better access to Internet services, and own 13 times more PCs than the 85 percent of the world’s population liv-

ing in low and lower-middle income countries. But while figures do show a clear improvement over the last ten years in bridging

the gap between information “haves” and “have-nots”, they nonetheless fail to paint a true picture for many rural dwellers, whose

communities are still often unserved by any form of ICT.

This initiative has 22 funding partners, including leading corporate players such as Alcatel, Huawei, Intel, Microsoft, KDDI, Telefóni-

ca, Infosys and WorldSpace, whose CEOs have all embraced the goals of the initiative. Partners also include governments and gov-

ernment agencies including Egypt, France, Senegal and Korea, regional and international organizations including UNESCO, the Uni-

versal Postal Union (UPU), the European Commission, the International Telecommunication Satellite Organization, RASCOM and the

United Nations Fund for International Partnerships (UNFIP), as well as a range of organizations from civil society.

Source: ITU

dled with licenses to provide services inmore lucrative markets. For example,underserved counties in Uganda arepackaged into three separate “UniversalAccess Regions” for licensing purposes.Each Universal Access Region bundlestogether a mix of counties with differentlevels of market potential.Bundling can also combine rural licens-es with rights to offer more profitableservices such as international long-dis-tance and cellular mobile services. In suchcases however, regulators should ensurethat anticompetitive cross-subsidizationdoes not lead to predatory pricing thatdrives out of business competitors that arelicensed only to provide rural local serv-ices. One way to avoid this is to make such

and mentoring. To this end, the publicauthorities will have a key role in creat-ing conditions that favor the lastingemergence of such potential.The second step is to nurture the mostpromising initiatives and set up larger-scale trials or pilot projects. This type ofproject could be usefully financed by pub-lic start-up funds, possibly in partnershipwith private financing through Public-Private Partnership (PPP) schemes.A pilot project’s essential goal must be tostudy the economic viability of the pro-posed service platforms, if balancedbusiness plans are to be drawn up.Lastly, when as many “demonstrationpieces” as possible have been set upthrough the pilot projects, potentialinvestors (public or private) can committo the large-scale deployment of infra-structures based on conventional cost-effectiveness criteria.

The importance of Public-Private Partnerships

Diverse models can be implementeddepending on national regulation, localcommunity access objectives, and localconditions. Projects include not onlyoperators, service providers, wholesaleoperators and telecommunication suppli-ers, but also new actors, such as civilworks and construction companies, util-ities and financial institutions.Public-private partnerships can generatenew types of consortia, in which theseactors may become partners or investorsin the deployment and operation ofregional or local broadband networks,for example. Private and public partnerscan share initial capital expenditures(infrastructure, civil works) and futurerevenues.

An appropriate regulatory framework Universal Access and rural licensing

Abstract from ITU Trends in Telecommu-nication ReformIn countries with large imbalances intelecommunication development amongdifferent regions, regional licensingenables governments to target under-served areas with specialized licenses ormore favorable treatment of rural areas.Potential licensees in these areas may beattracted, for example, by exclusivelicenses. Rural licenses can also be bun-



RURAL MOBILE LICENSING IN VENEZUELA

Venezuela was one of the first countries where mobile subscribers

outnumbered fixed-line subscribers. This market development,

which occurred as early as 1998, had its roots in an event that

occurred 10 years earlier, when the state-owned telecommunica-

tion company CANTV introduced the first AMPS network in the coun-

try and, in fact, in all of Latin America.

In 1991, another national AMPS license was auctioned to Telcel in

the 800 MHz band, introducing competition in the Venezuelan

telecommunication market. The licenses of both CANTV and Tel-

cel included requirements to cover the 40 largest cities (reaching

at least 100,000 subscribers) within three years after being grant-

ed. As it happened, sharp demand allowed the carriers to exceed

those mandates.

The two carriers, along with Venezuela’s fixed-line incumbent, large-

ly concentrated network construction in urban centers however, and

neglected rural areas. In a drive to establish universal service nation-

wide, the government decided to grant three new mobile service

licenses, one in each of three regions. A 1997 comparative bid

process, focusing on technical, economic, and legal criteria, award-

ed the three licenses to Digicel, Digitel and Infonet. These carriers

were allowed to provide basic residential and public telephony in

rural communities, which were defined as areas with 5,000 or fewer

people. Within their service areas, the winning bidders could pro-

vide mobile telephony, paging, private network services, data and

value-added services, satellite communications, vehicle localization,

and telemedicine. The rural carriers have expanded their networks

to cover more than 75 percent of the population in the three regions.

Source: ITU Trends in Telecommunication Reform 2004/2005

(http://www.itu.int/osg/spu/casestudies/)



bundling available to all rural providers.By contrast, a licensing approach thatauthorizes certain carriers to offer serv-ice only in rural areas raises a number

of concerns. The ability of any such car-rier to attract large-scale capital invest-ment could be questionable. There maybe doubts about the long-term sustain-ability of rural providers, given thelower revenues they can generate inthese areas. For this reason, some coun-tries have tried to start small, by focus-ing their licensing approach on encour-aging small and medium-sized enterpris-es to enter rural markets by loweringentry barriers, compared with theprocess for entering urban markets.Governments can implement someoptions that make entry into rural andunder-served markets more attractive tosmall and medium-sized enterprises.They can lower rural licensing hurdlessuch as non-recurring fees, and large per-formance bonds that are normallyattached to licenses for the provision ofbasic telecommunication services andfacilities. They can also relax perform-ance mandates designed to maintain ahigh quality of service, and they canreduce stringent tariff requirements.Rural licenses for small and mediumoperators could also be subject to lowerannual licensing fees and exempted fromcontributions to Universal Service funds.Spectrum for the deployment of cost-effective wireless broadband technologiescould also be offered to rural licensees,at reduced fees or through auctions orreverse auctions, in order to encouragetheir deployment. In some countries,arguments have been made for imposingasymmetrical termination chargesbetween the incumbent operators andrural licensees. Such an approach wouldallow rural licensees to command larg-er termination charges than they wouldhave to pay to the incumbent operator.

SOUTH AFRICA’S “UNDER-SERVICED AREA LICENSE”

Under the South African Telecommunications Act 103 of 1996, no

entity can provide telecommunication services without a license.

The Act gave incumbent Telkom an exclusive license to provide pub-

lic switched telecommunication services, including national long-

distance service, international service, local access service and pub-

lic pay-telephone service.

In November 2001, amendments to the Act created a new license

category, the “under-serviced area license” (USAL). The goal was

to spur the growth of telecommunication services in underserved

areas. Under the scheme, certain small and medium-sized enter-

prises are allowed to apply for licenses to provide telecommuni-

cation services in geographic areas with a teledensity of less than

5 percent. It should be added that big operators are not allowed

to bid, and that the licensed operators receive some subsidies from

the government or regulator.

The USAL allows them also to offer services such as VoIP, fixed mobile

service, and public pay telephones. USAL licensees are neverthe-

less required to transport their long-distance traffic through the trunk

networks of any of the national fixed and mobile operators and,

internationally, through three designated international gateway

licensees. The first four USALs were awarded in November 2004.

It is important to note, however, that on 17 September 2004, the

South African Department of Communications (DOC) awarded a sec-

ond national operator (SNO) license to an alliance of companies,

allowing them to compete with Telkom in the provision of PSTN serv-

ices. Earlier, on 2 September 2004, the DOC had issued new poli-

cies aimed at accelerating the telecommunication liberalization

process. Some services, such as public payphones, would be liber-

alized by February 2005. The DOC also noted that it was even con-

sidering removing licensing requirements for payphone operators.

Source: ITU Trends in Telecommunication Reform 2004/2005

DOC (http://www.doc.gov.za).

This chapter highlights financialinnovation and cost-reductionstrategies that may convince tele-com operators to roll out infra-

structure profitably in rural areas, and toexercise pressure on public policymakersthat may have previously granted licenseexclusivity to one operator which is unwill-ing to serve rural areas. As mentionedbefore, telecom operators in sub-SaharanAfrica have not invested much in ruralareas, due to the heavy investmentsrequired and low margin opportunitiescompared to lucrative urban markets.However, Universal Service provision willsoon be a commitment for telecom oper-ators with financial support from dedicat-ed resources (Universal Service Fund), andnew business opportunities in urban mar-kets have started slowing down. Therefore,it could be interesting for operators to con-sider rural areas that have not yet beenserved, and could become a mass market,if they are well understood and addressedwith appropriate localized solutions. Forservice providers, the key consideration ishow to optimize both CAPEX (capitalexpenditures: all costs related to initialinvestments) and OPEX (operationalexpenditures: annual cost of running thenetwork) to boost revenues from existingand new customers, and achieve a fastreturn on investment.

Financial innovation for operatorsThere are different financial schemesand innovative payment options foroperators depending on their needs,and according to their financial capabil-ities and strategy. Telecom equipmentand infrastructure suppliers are able tooffer customized solutions.

Innovative vendor/operator partnerships

Innovative vendor/operator partnershipsoffer the possibility to develop the net-work following traffic growth or cus-

tomer base increases, on a “pay as yougrow” basis. The operator in this casewill pay for the used capacity.Telecom suppliers and operators can alsochoose to share revenues from runningservices, either for specific applications, orfor all revenues and commercial risks.

Innovative financing options

Innovative payment options are alsoavailable that allow operators to focus ontheir core business: the delivery of com-petitive subscriber services, customercare, marketing, branding and develop-ment. This could be achieved with zeroCAPEX; for example, the operator candecide to retain ownership of the net-work and outsource running tasks to anoutside contractor: hardware operation,software management, network opti-mization, personnel training, etc.Ownership can alternatively be kept bythe telecom equipment supplier (turnkeyproject), with the operator purchasing

53

Chapter 6: Developing Sustainable Business ModelsFor Rural Network Operators

NETWORK OPERATION AND MAINTENANCE IN BRAZIL

Increasingly, operators consider technical network operation

to be a task they can outsource to partners. Outsourcing lets

them off-load non-core activities to their services partner,

reallocate resources to areas they consider key to their ongo-

ing business, and focus on their market and customers.

As well as supplying infrastructure products, telecom equip-

ment suppliers can offer services ranging from consultan-

cy, network architecture design and planning, OSS integra-

tion, network integration and deployment, to network oper-

ation, optimization and maintenance, and strong project

management capabilities.

Many organizations and telecom operators in Brazil have cho-

sen to outsource their operation and maintenance services.

Among them are Telemar, Oi, Brasil Telecom fixed and

mobile, TIM, the Presidency of the Republic, Suzano, and

Caixa Econômica Federal.


level of coverage, capacity and qualitywithout being involved in day-to-dayoperational activities. The operator canin this case negotiate an option to buy theequipment. Deferred payment optionscan also be agreed to support the oper-ator in the set-up phase.

Total Cost of Ownership (TCO) reductionDelivery of access to rural areas shouldbe cost-efficient, and maximize use of theoperator’s three major assets: subscriberbase, base station sites and spectrum(licensed and unlicensed). Equipmentsuppliers are now able to provide solu-tions that fit all types of areas and theirassociated constraints.Cost-efficient solutions aim to lower thetotal cost of ownership for telecom oper-ators, making the extension of the net-work to rural areas possible and prof-itable if the customer base is sufficient.The need for low-CAPEX products thatenable an operator to provide competi-tive services (reduced CAPEX is essentialfor financial reasons) is at the heart of asignificant shift in technology focus. Theability to increase network capacity inthe future therefore depends almostentirely on the availability of low-costequipment compatible with a low Aver-age Revenue Per User (ARPU). Networksolutions based on a full product portfo-lio are shaping the future evolution ofthese markets: narrowband and broad-band switching and highly-scalableaccess nodes must be available at a verycompetitive price.

Cost-reduction strategies

There are different ways of reducingcosts affecting both CAPEX and OPEX, inother words achieving reduced networkinvestments and operational expenses.CAPEX efficiency can be achieved bypreserving the initial investment, forexample re-using existing sites when amobile network is extended or upgrad-ed. Network OPEX can be optimizedwith new core network features such asremote upgrade via software, reducingmaintenance costs. Power consump-tion is another opportunity for costreduction. Indeed, since power require-ments are a critical consideration intechnology selection for rural areas,

devices should always be designed forminimal power consumption.

Tailored, cost-efficient solutions for rural areas

Improvements to core network, accessand backhauling solutions are constant-ly being developed through R&D toreduce costs. Adaptations to suit ruralapplications result in the design of cost-efficient solutions with enhanced capac-ity and coverage.

Shared network infrastructure

Network infrastructure costs can also beshared among several operators inter-ested in addressing different segmentsor services within the same region.Existing operators could also resellpart of their capacities to alternativeoperators (see Mobile Virtual NetworkOperators).


TAILORED SOLUTIONS

Different BTS are offered to fit each type of environment: Urban,

Suburban, Rural, Isolated/Remote areas. Technical adjustments are

necessary to adapt to local constraints (power supply, climate, geog-

raphy, topography).

BTS for rural coverage are compact and their specific design (tower

and antenna) allows extended cell features (right solution for low

traffic density areas): the higher the antenna height, the higher

the cell range.

Alternative sources of power supply are also used in rural environ-

ment to combat electricity infrastructure constraints. Solar panels

allow partial BTS autonomy; efforts are currently underway to

achieve full autonomy.

Satellite backhauling can be used to reach remote areas and does

not require cellular network adaptation.

COST-REDUCTION STRATEGIES

Reducing the cost of each BTS site consists of using improved com-

ponents, and reducing the number of sites by enlarging coverage

and capacity. Telecom equipment suppliers are now able to pro-

vide radio base stations with higher capacity, reducing the num-

ber of sites by 30-40 percent. This enables distinct economies of

scale without reducing performance and quality. The use of shel-

terless sites also has the advantage of securing the base station,

which is placed up in the tower instead of on the ground. This makes

site acquisition easier, and can cut site costs by up to 40 percent.

Civil works accounts for more than 40 percent of BTS site costs,

which is why savings on site engineering are crucial. Initial invest-

ment can be partly public-funded.

Developing Sustainable Business Models For Rural Network Operators

Case studiesThis section will draw on our previousconclusions to show how ICT deploymentin low-income areas (rural and remote)could be profitable if markets are wellunderstood and correctly addressed.As expressed earlier, all is a question ofthe availability and affordability of theservices for rural users.GSM and WiMAX have been chosen asaccess technologies, because of theircost-efficiency and capabilities in ruralenvironments, allowing the fast andefficient roll-out of voice and data serv-ices, with sufficient bandwidth (in thecase of WiMAX) to support enhancedapplications for collective use. As dis-cussed earlier, GSM best suits voice anddata applications (at low bit rates) andis widely deployed in Africa. WiMAX isa growing standard offering broadbandInternet access, and is an alternative towired technologies (DSL, cable, fiber),where no copper infrastructure exists. Calculations and assumptions are basedon Alcatel’s documentation on radio accesssolutions for low-ARPU areas. We alsoused data from WiMAX Forum, especial-ly “The Business Case for fixed WirelessAccess in Emerging Markets”, June 2005. We took the case of Mali, which is one ofthe most challenging countries in SSA,considering its current levels of GDP percapita and mobile penetration, espe-cially in low-density areas. Mali remainsone of the poorest countries in theworld, with 65 percent of its land areadesert or semi-desert, and with a high-ly unequal distribution of income. About10 percent of the population is nomadic,and some 80 percent of the labor forceis engaged in farming and fishing.

Key figures on Mali*

• Area 1,241,000 km2

• Population: 11.5 million (2004)• GDP (Purchasing Power Parity): US$ 11 bil-

lion (2004 est.)• GDP per capita (PPP): US$ 900 (2004 est.)• Literacy: total population 46.4 percent

(+15 years old), male 53.5 percent• Population below poverty line: 64 percent

average, 30 percent of total population liv-ing in urban areas, 70 percent of total pop-ulation living in rural areas (2001 est.)



MOBILE VIRTUAL NETWORK OPERATORS (MVNO)

MVNOs represent the next trend towards mass-market

wireless services, especially in mature markets like Europe

and the Unites States. They borrow the strength of an exis-

ting consumer brand to attract customers to their service,

using the network resources of an existing wireless carrier,

becoming a service wholesaler. The best-known example of

an MVNO is Virgin Mobile, launched in the UK in 1999 (4 mil-

lion active subscribers today), and which extended its busi-

ness to the United States in 2002 (3 million subscribers by

early 2005).

MVNOs do attract customers from established telecom car-

riers, but also provide new wholesale opportunities for these

carriers, allowing them to optimize network infrastructure

by selling minutes of airtime without the costs of acquiring

these new customers. In fact, MVNOs also target consumers

who may not meet the established operators’ standards for

creditworthiness.

“The introduction by MVNO providers of low-cost wireless

access and mobile phones, along with the needs of wireless

connectivity wholesalers to make efficient use of their well-

developed network capacity and to continue to build out that

capacity, have served as drivers of the industry as it

expands towards market saturation for wireless services”

This new business model could also be used in emerging

markets, with national operators leasing or reselling minu-

tes of airtime to alternative operators interested in niche mar-

kets such as low-income users in rural areas.

There are various GSM Base Station Subsystem (BSS)products and solutions that meet the requirements ofrural systems. Rural area networks are primarily charac-terized by large coverage areas and low traffic. The mostcommon way to improve coverage is to increase the basestation output power to enhance the downlink signal.However, user handsets have a limited output power.There are enhanced solutions that meet the operators’coverage area requirements, while also offering out-standing output power and reception sensitivity.

Source: Alcatel

Each specific area has its…

Low density and rural areas

Sub-urban area intropical regions

Dense UrbanArea

Specific needs

Small BTS, CAPEX optimizedMinimum number of sites

Medium/large capacity BTSMinimum BTS site cost

BTS/BSC of very large capacitySatisfy various subscriber class

BSS solutions for low-ARPU networks

*Last data from World Bank,ITU and CIA Fact Book

ICT at a glance*

• Telecommunication, revenues as percent ofGDP: 2.71 ( 2002)

• Telephone mainlines in use: 56,600 (2002)• Telephone lines per 100 inhabitants: 0.53

(2002) • Telephones (mobile cellular): 250,000

(2003)• Internet hosts: 187 (2003)• Internet service providers: 13 (2001)• Internet users: 25,000 (2002)• Internet users per 100 inhabitants: 0.24

(2002)

GSM business case for rural coverageWe first considered a business case focus-ing on two segments that have not beenaddressed: “low-urban” and “low-densi-ty areas”. From the mobile operator’s per-spective, these areas can be considered aslow-ARPU segments. As shown in thetable, these two segments represent about80 percent of the total population.

Market assumptions

The mobile penetration assumptionsare based on a Credit Suisse modellinking adoption rate with the percent-age of mobile expenses (ARPU + hand-set) by GDP/capita, as follows:

• Three users sharing one mobilehandset/line;

• ARPU (i.e. per line): US$ 4 per month (low-urban) and US$ 3 per month (low-density),with 80 percent of revenues coming fromvoice and 20 percent from data (mainlySMS);

• Prepaid 100 percent, churn rate (annual) 10percent;


Category

D < 3 inhab/km2

3 ≤ D < 15 inhab/km2

15 ≤ D < 100 inhab/km2

100 ≤ D inhab/km2

Surface

55%

24%

19%

2%

Population

3%

22%

59%

16%

Average inter-villagedistance

90 km

20 km

11 km

NA

Community

Low density areas

Low urban areas

Dense Urban area


Bamako

Kayes

Koulikoro

Ségou

Mopti

Gao

Taoudenni

0 200

0 200 400 mi

400 km

Kidal

Sikasso

Tombouctou

Mauritania Mali

Western Sahara

Algeria

NigerBurkina

Faso

Côte d'IvoireSierraLeone Nigeria

BeninTogoGhana

Guinea

Map of Mali

0

5

10

15

20

25

1997 1998 1999 2000 2001 2002 2003

Personal Computers Telephone Mainlines Mobiles Phones Source: World Bank

Mali at a Glance

*Last data from World Bank,ITU and CIA Fact Book

tribute to faster mobile adoption, likedecreasing tariffs and targeted value-added services and applications.

Overview of revenues and margins

After CAPEX and OPEX assumptions, notdetailed here, we see a positive EBITDAcontribution in years 2-3.

Overview of free cash flows

After an initial investment of US$ 141 million,free cash flow break-even is reached betweenyears two and three, with an average posi-tive contribution of US$ 50 million per yearover the period. Coverage extension of low-urban & low-density areas generates an NPVcontribution of US 11.88M over 15 years.Investment payback occurs in year seven.

• One single radio network deployed, result-ing in one network provider (maybe incum-bent), offering possible access to Mobile Vir-tual Network Operators (MVNOs);

• Handset average selling price of US$ 40 in2006, decreasing by 5 percent annually;

Overview of mobile penetration evolution for the

two segments

CAGR refers to combined annual growthrate. As shown in the figure, mobile pen-etration is expected to grow from 0 percentto about 20 percent in low-urban areas,and from 0 percent to about 15 percent inlow-density areas. As mentioned, mobilepenetration will be influenced by growingGDP/capita as well as by decreasing hand-set costs. Other parameters can also con-



0

5

10

15

20

25

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

%%

0

5

10

15

20

25

Low urban areas

Key assumptions• Population covered: 5.64 m, CAGR: 3%• GDP/cap: USD 300, CAGR: 4%• Average density: 25-30 inhabitants / km2; 4-6 line/ km2

Low density areas

Key assumptions• Population covered: 1.24 m• GDP/cap: USD 150, CAGR: 4%• Average density: 4.5-6 inhabitants / km2; 0.5-1 line/ km2

Overview of mobile penetration evolution for the two segments

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(40)

(20)

-

20

40

60

80

100

120

Revenue Interconnection Bad Debt

General & Administrative EBITDA

Marketing, Distribution & Customer service

ContentNetwork O&M

Revenue and EBITDA (in USD Millions)

Concluding remarks

Overall payback is reached in sevenyears, which is quite long compared toclassic projects in urban environments.Internal Rate of Return (IRR) is also farlower than usual telecom projects, whichaverage 25-30 percent. However, itshould be observed that the low-densitysegment complicates the business case,due to insufficient subscriber densityper BTS site (less than 500 subscribersover the period, vs. 1000 usually neededto reach profitability). The business casecould be improved with a focus on areashaving more than 10 inhabitants/km?.In addition, as described in the introduc-tion of case studies, Mali is one of thepoorest countries of SSA. The business

case focusing on “low ARPU” segmentscould be improved with countries hav-ing higher GDP/capita.Thus, to make the business case insome rural and remote regions attrac-tive for telecom operators, it would berelevant to consider reasonable publicintervention to decrease initial CAPEX.

WiMAX Business Case The WiMAX business case focuses on acluster of villages in Mali. The goal of thislocal study is to evaluate the cost of bring-ing connectivity, in the sense of provid-ing broadband Internet access, to a ruralarea already covered by GSM. By givingaccess to rural communities, intermedi-aries and maybe individual users, the



2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019(150)

(100)

(50)

-

50

100

EBITDA Capex Working Capital Variation FREE CASH FLOW

Free Cash Flow (2005-2020) (in USD Millions)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(200)

(100)

-

100

200

300

400

500

FREE CASH FLOW CUMULATED FREE CASH FLOW

NPV(15% WACC)

5 Year10 Year

15 Year

(MUSD)

-107.6-36.85

11.88

IRR

5 Year10 Year

15 Year

(%)

-16.810.0

16.1

Time to:

FCF PositiveFCF Payback

NPV Payback

(Years)

1.87.0

13.6

Funding

2005 (YO)PEAK (Y2006)Av/year untilFCF Positive

(MUSD)

140.6146.0

-82.4

Financial Dashboard

Cumulative Free Cash Flow (2005-2020) (in USD Millions)

capacity around 500 Kbit/s to 1 Mbit/s(ideal for shared usage: hospital, educa-tion, administration, cyber centers etc.).WiMAX will offer backhaul of both GSMand Internet traffic.

Other advantages

• Cost-efficient alternative to rural DSL;• Shared infrastructure (part of backhauling

and antenna) with GSM;• Easy extension of existing marketing and

services;• Subsidies could be available for digital

divide.

ambition is to reduce the digital divideand contribute to local development.WiMAX is a powerful radio accesssolution that offers users broadbandwireless access at data rates of multi-ple Mbit/s and at distances of severalkilometers, a characteristic critical forserving people who are dispersed overa wide geographic area where wirelinesare nonexistent.Voice is offered through GSM, with acapacity of around 500 subscribers persite. Data and Internet access are offeredthrough WiMAX cards/modems, offeringa few shared access points with a total

59


Abis TrafficTo WiMAX BTS

Data/WiMAX

Voice/GSM

Around15kms

End Users Traffic

Self Backhaul

BTSRadio Site

BSC

GSMBTS

WiMAXBTSGSM Core

IP Transport

Source: Alcatel

Coverged Voice/WIMAX wireless solution

ASSUMPTIONS

Population

Coverage area

Users density

Individual subscribers

Public subscribers

SME subscribers

ARPU individual

ARPU public

ARPU SME

Penetration rate individual (1)

Penetration rate public (1+2+3)

Penetration rate SME (1+2+3)

INITIAL (2006)

10 000

700 km2

About 15 inhab/km2

50

5

10

$5

$20

$20

0,5%

80%

50%

2016

12 680

700 km2

About 15 inhab/km2

1000

6

24

$10

$40

$40

7,9%

100%

100%

Market assumptions

The service provider will have a 100 percent market share, and we assumed 4 percent annual churn.




CAPEX/OPEX assumptions

For such subscriber numbers, one BTS willbe enough, with a possible upgrade dur-ing the project. We assumed that thebase station can be backhauled to theexisting core network by means of a sin-gle long-haul, point-to-point microwavelink at a cost of US$ 15,000, requiring nofurther investment in edge, core, or cen-tral office equipment.

BTS site costs breakdown follows:

• WiMAX equipment (BTS cost)=$40K• Backhaul=$15K• Civil works=$10K• Installation=$4K• Total costs= $69K

We did not integrate any licensing feesin the business case, assuming that thegovernment telecom regulator couldallocate frequencies at low or no cost,within the context of its Universal Accesspolicy. We also assumed a transparent,non-corrupt business environment, andthat there would be no marketing oradvertising campaigns.Most of the OPEX relates to CPE (Cus-tomer Premises Equipment) subsidies bythe operator or another sponsor, if onechose to co-finance CPE acquisition.

Concluding remarks

The overall payback period for WiMAXintroduction is still longer than the averagefor telecom projects. However, it should beobserved that this solution may be of

interest when connecting public facilities,since it can be implemented to improvecommunity life in specific target areas.When studying this business case, thefocus should be not only on the financialimpact from the operator’s perspective,but also on other community benefitsthat could be financed otherwise bylocal authorities: improved quality ofsocial services (health, education),human capability, and opportunities foremployment, trade, etc. The logical way to build WiMAX net-works is to start in a high-density area,expanding over time into lower-densityareas as revenues permit. However,decreasing terminal and CPE costs fromnew technology, and improving regula-tory frameworks (rural licensing andappropriate frameworks for WiMAX)will help its introduction in emergingmarkets and rural areas in the nearfuture. As mentioned earlier, new busi-ness models will also emerge with next-generation networks, enabling operatorsto offer combined services: voice (over IP)and broadband Internet access at verylow prices.Finally, rolling out WiMAX pilot projectsmight identify opportunities for newservices that address pent-up demandsunforeseen in this report or by opera-tors during the planning process. Thisis exactly what we want to encourage,and is a major point of this report. Wecall this demand-led aspect of servicedevelopment “grass-roots innovation.”



2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-0,1

-0,05

0

0,05

0,1

0,15

0,2

CAPEX OPERATING COSTS Tax (35%)

REVENUES

License Upfront Fees

FREE CASH FLOWWorking Capital Variation

Free cash Flow Analysis for WiMAX (1)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-0,15

-0,1

-0,05

0

0,05

0,1

0,15


NPV(11% WACC)

5 Year10 Year

14 Year

(MUSD)

-0.10.053

0.2

IRR

5 Year10 Year

15 Year

(%)

15.9

28.9

Time to:

FCF Positive

Breakeven(Payback Period)

(Years)

3.0

6.7

Funding

Year 0Peak

Av/year untilFCF Positive

(MUSD)

0.00.1

0.0

Financial Dashboard

WIMAX broadband: Free Cash Flow (1)

Penetration rates are those indicated in the initial table (market assumptions).

1) Scenario without CPE subsidies

Under these assumptions, payback occurs after 6.7 years.



-0,1

-0,05

-0,15

0

0,05

0,1

0,15

0,2

0,25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


REVENUES

License Upfront Fees


Free cash Flow Analysis for WIMAX (2)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-0,15

-0,2

-0,1

-0,05

0

0,05

0,1

0,15

0,2


NPV(11% WACC)

5 Year10 Year

14 Year

(MUSD)

-0.10.056

0.2

IRR

5 Year10 Year

15 Year

(%)

14.0

27.9

Time to:

FCF Positive

Breakeven (Payback Period)

(Years)

4.4

7.1

Funding

Year 0Peak


(MUSD)

0.00.1

0.0

Financial Dashboard


In this case the operator subsidizes 50 percent of CPE. This increases OPEX buthas positive impacts on the penetration rate (+30 percent), bringing higher revenues.

2) Scenario with 50 percent subsidy by the operator for CPE acquisition




-0,1

-0,05

-0,15

0

0,05

0,1

0,15

0,2

0,25

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


REVENUES

Public subsidy


Free cash Flow Analysis for WIMAX (3)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-0,15

-0,1

-0,05

0

0,05

0,1

0,15

0,2

0,25


NPV(11% WACC)

5 Year10 Year

14 Year

(MUSD)

-0.10.088

0.3

IRR

5 Year10 Year

15 Year

(%)

217.322.6

36.3

Time to:

FCF Positive

Breakeven (Payback Period)

(Years)

5.7

6.4

Funding

Year 0Peak


(MUSD)

0.00.1

0.0

Financial Dashboard


Operator still subsidizes 50 percent of CPE but gets a 20 percent subsidy (on totalcost of project) from a public donor to co-finance initial BTS-related investment andcustomer acquisition costs. Total project cost is about $123K. This smart subsidyimproves the penetration rate while guaranteeing faster payback for the operator.

3) Scenario with 50 percent CPE subsidy by the operator and 20 percent subsidy (on total proj-ect costs) by public donor



At the turn of the 20th centu-ry, the world was on the cuspof a major social change asthe result of an emerging

technology. No fewer than 500 compa-nies had formed to produce this technol-ogy, and early adopters had alreadybegun to embrace the new invention,but it took the vision of one man to seethe market potential for it. This manwas Henry Ford, and the technologywas the automobile. Ford is reported to have said, “There area lot more poor people than wealthy peo-ple.”1 His innovation was to lower thecost of technology relentlessly, so that itwas within reach of the mass market. Inso doing, the automobile changed froman expensive toy for the wealthy to anindispensable cog in the production lineof nearly everything produced today,including leisure. Now, at the beginning of the 21st centu-ry, history is repeating itself. Informationand communication technologies havechanged, from a way for rich people tocommunicate, to essential factors in theproduction of almost every good or serv-ice. It is generally agreed that ICTs area “key factor in promoting economicgrowth.”2 Many of the less-developedcorners of the world have embracedthese emerging technologies and, in sodoing, have become important players inthe global supply chain, but sub-Saharan

Chapter 7: Making It Happen:Enabling Environments for ICT in Sub-Saharan Africa

Africa has mostly been a notable excep-tion to this phenomenon. This chapterwill explore the policy and financialpre-conditions necessary to facilitatethe rollout of ICT infrastructure in SSA. It has been said that the main challengeto the popularization of the Internet isin fact neither illiteracy nor cost, butlack of relevant content. Without suchcontent, the benefits of the Internetremain unclear for the majority of thepopulation. In addition to the paucity of contentavailable in local languages, the price ofaccess - whether to IP networks or GSMnetworks - remains a constraint ongrowing to scale. Without regional back-bones and Internet exchange points,international tariffs on traffic will remainhigh. Fortunately, there are signs of progressin this regard. The Infinity WorldwideTelecommunications Group of Compa-nies (IWTGC) has announced plans toinstall a second fiber-optic cable alongthe west coast of Africa, to competedirectly with the current SAT-3 (SouthAtlantic Telecommunications Cable No.3) transcontinental cable. The new cable,dubbed Project West Africa, hopes to sellbandwidth directly to service providers,thus lowering the cost of entry for serv-ice providers who, in order to gainaccess to the SAT-3 cable, must receivethe unanimous consent of the entire

“In the final analysis, this exercise has proven three important points: namely, that the

headcount ICTs divide is narrowing fast; secondly, that the LDC ICTs sector is growing

and becoming profitable; and thirdly, that the market is capable of generating suffi-

cient cash flow to provide the financial resources for the expansion. This is all positive

news for the LDCs. By increasing ICTs headcount it will precipitate diffusion and

absorption levels, hence stimulating economic growth, this reducing poverty. It is now

up to governments, donor agencies, and the private sector to do their part.”

“The Application of Information and Communication Technologies in

the Least Developed Countries for Sustained Economic Growth,”

2004 Edition, p9 International Telecommunication Union

to force incumbents to allow access totheir networks through reasonable inter-connection fees. Without a functioningregulatory agency to enforce contracts,investors will continue to be reluctant toinvest in foreign infrastructure.

2. Develop national ICT policies that encourage

competition

Historically, telecommunications marketsin SSA have consisted of a state-runmonopoly. This is changing, broughtabout by converging technologies such asVoIP and WiFi, and most countries seethe benefits of competition in this sector,but the attraction of economic rentsaccruing to governments has slowedthe process. A second-order conse-quence of emerging technologies such asVoIP is the trend toward unified licens-es and away from discrete licenses forfixed, mobile and IP services. This topicwill be addressed in detail later in thischapter.In the past, regulation usually took theform of capping tariff prices and telecomoperator ROI, but future regulatoryemphasis should focus on improvingaccess to networks. The use of MobileVirtual Network Operators (MVNOs)should be encouraged. According toPyramid Research, a technology consul-

consortium. The Project West Africacable, expected to cost US$ 500 million,will be financed entirely by the privatesector.3

According to Russell Southwood of Bal-ancing Act, “Historically, the level ofinternational traffic has been suppressedby high tariffs for international calls andfor Internet bandwidth. Two key con-straints have led to this suppression oftraffic growth: monopolies over interna-tional gateways, and limited supply lev-els of fiber and satellite transmissioninfrastructure. As the exclusivity ofincumbents over international trafficdraws to an end in at least a third of thecountries in sub-Saharan Africa, dereg-ulation is granting new internationalgateway licenses to SNOs, alternativeinternational operators and mobile oper-ators.”4

Policy and Regulatory Environment An effective policy and regulatory envi-ronment is critical for the deployment ofICT-enabled information and communi-cation services in developing countries,particularly as technologies converge.Kenya’s Information and Communicationminister Raphael Tuju said, “ICT integra-tion should increase competition, reducetransaction costs, enable firms to exploiteconomies of scale, enhance regionalinfrastructure, and encourage ForeignDirect Investment in the sub-sector.”5 Mr.John Waweru, chairman of the Associ-ation of Regulators of Information andCommunication in East and South Africa(Aricea), has said that the search for anideal regulatory environment hadbecome more imperative given the grow-ing digital divide between rural andurban Africa.6

Below are several characteristics of aneffective policy and regulatory environ-ment:

1. Set up an independent regulatory authority

The characteristics of a well-regulatedmarket are well known, emphasizingtransparency, accountability, dueprocess, and secure property rights.Regulatory agencies should be inde-pendent of the industry to be regulated,and should possess the power necessary

65

Making It Happen: Enabling Environments for ICT in Sub-Saharan Africa


SOMALIA ILLUSTRATES THE BENEFITS OF COMPETITION AS WELL

AS THE NEED FOR REGULATION

In the past decade, Somalia has moved from one incumbent

telecommunication operator to five operators. As a result,

the cost per minute of an international phone call is now

“five or six times lower than most African countries.”7 In a

country with no official banking or postal system, most Soma-

lis do have access to a fixed phone line, but a lack of inter-

connection agreements means that many cannot call out-

side their network, and there is in fact over-capacity.

The UNDP reports that Hargeisa, the capital of Somaliland,

is “wreathed in coils of chaotic telephone cables snaking

along roadsides and tangling in overhead spaces.”

Fierce competition in IP networks has produced value-added

services in Somalia. Entrepreneurs have created custom soft-

ware packages to handle overseas remittances, and students

use the Internet for e-learning through universities overseas.

tancy, “MVNOs represent a tremendoustool to drive growth further in emergingmarkets.”7 However, Guy Zibi, the authorof the Pyramid study, points out that inthe less than perfectly competitive mar-kets found in SSA, network operatorshave little incentive to open their net-works to MVNOs, often preferring tohoard network capacity to accommodatefuture demand. Only when operators areforced to assume the full cost of theirinfrastructure are they motivated toexploit unused capacity. To provide aviable business model, MVNOs must bemore cost-efficient than the networkoperator, while at the same time offeringa differentiated service, or extending themarket into areas the operator cannot orwill not enter, such as rural areas.

3. Make universal access a priority

Universal access to ICT - particularlytelephony - is of greater concern asmarkets are opened to competition.Operators in a competitive market willbehave rationally, and first connect high-density, largely urban, richer customers,while ignoring rural, poorer customers.Therefore, regulatory agencies must cre-ate environments where operators willrationally serve rural markets.

Several methods of offering incentives toprovide universal access have been sug-gested, including specific licenses forrural areas, as tried in South Africa, and

“perishable” licenses, which mandatethat if operators have not providedaccess to a particular region in a givenperiod, then licenses for these areas willbe re-sold, perhaps through an auc-tion. Governments have successfully andefficiently induced network roll-out via“reverse auctions,” whereby operatorscompete to accept the lowest possiblesubsidy to acquire the license. Vodacom has protested the latest set ofcompetition framework changes in Africa,stating that they were likely to be off-put-ting to investors. The company argued fora phased and managed approach with noquick changes, allowing new markets todevelop.∗ Vodacom went on to say, “Priceregulation should not be seen as the met-ric of ‘successful regulation’”. Regulatorstended to try to drive prices down byaddressing interconnection fees. Instead,argued Vodacom, it makes sense to man-date open access to more mobile opera-tors (in the form of MVNOs) and letcompetition do the job.8

In Connecting SSA9, the authors identi-fied three “core pillars” of the WorldBank’s ICT strategy in SSA:

1. The Core Reform Agenda:• Market liberalization• Regulation• Capacity-building• Privatization• Postal sector reform

2. Addressing Market Failures:• Rural access• National backbone• Post-conflict countries

3. ICT for Development Applications:• E-commerce• E-government• Civil society applications

The authors of this study called upon thedevelopment community to focus on thecore reform agenda, stating that thisagenda is “the foundation for sustainableICT sector development and rollout of itsinfrastructure... Significant evidenceexists to support the fact that liberalizedmarkets based on pro-competitive poli-cies and regulatory frameworks providestrong support for improved access.”10



WWhhaatt iiss mmeeaanntt bbyy UUnniivveerrssaall AAcccceessss GGaapp??

In order to discuss a universal access gap, one must first

define terms such as “access” and “gap.” Access means

something very different in developing countries than it does

in developed countries. In the United States, with roughly

65 telephones per 100 people, approximately 94 percent of

all households have a telephone, whereas Burkina Faso has

defined its goal of universal access as having pay phones

within 20 kilometers of most people.

Furthermore, the “gap” has been broken down into two com-

ponents: a “market efficiency gap,” which refers to commer-

cially-feasible but as-yet-unmet demand; and an access gap

per se, which refers to “commercially-unfeasible” unmet

demand. It is our contention that the “commercially-unfea-

sible” portion of the access gap is smaller than previously

thought, and getting smaller still.

* It interesting to note thatmobile operators facing chal-lenges from IP networksexpress the same concernsthat the incumbent telecomoperators did when they firstfaced competition frommobile operators.

Spectrum licensing schemes offer sever-al advantages. First, by bringing theentire usable spectrum under one regu-latory body, issues of radio interferencecan be addressed quickly and easily. Sec-ond, operators will have clear propertyrights to portions of the spectrum. Third,single regulatory agencies frequentlypermit arbitrage among license-holders,enabling spectrum-consolidating andwealth-creating transactions. Such con-solidations may lead to economies ofscale, as technology providers (bothhardware and software) are able to takeadvantage of greater market reach.Fourth, a single regulatory agency can bemore efficient in negotiating conflicts atthe periphery of a regulated environ-ment, such as with neighboring coun-tries. Finally, with a single, convergedlicense based on spectrum frequencyinstead of technology or service, and theability to re-sell unused spectrum, incen-tives exist to utilize existing infrastruc-

With respect to addressing market fail-ures, particularly for the issue of ruralaccess or the establishment of a nation-al backbone, the authors of ConnectingSSA acknowledge that some public-sec-tor financing may be necessary, butthey also sound a cautionary note:

“It is critical, however, that public sup-port does not distort competition ingrowing ICT sectors—policy and regula-tory interventions that can influencemarket development should be exploredbefore public financing solutions areapplied. For instance, the introductionof output-based aid (OBA) schemes forrural access or backbone infrastruc-ture development in less reformed envi-ronments is a risky proposition, unlessit is preceded by detailed impact analy-sis to avoid subsidizing what could oth-erwise be commercially viable operationsif the regulatory environment was set upcorrectly.”11

4. Open the spectrum for emerging technologies

The rapidly-changing business environ-ment in which technology providersoperate highlights the policy implicationsof the trend toward convergence, partic-ularly in a country with a UniversalAccess policy. Because technologychanges so rapidly, convergence dic-tates that regulation be technology-neu-tral in order to avoid stifling innovation.

However, technology neutrality is impos-sible in the absence of correspondingservice neutrality. Service-limiting licens-es are de facto technology-limiting. (Theone caveat to this statement arises ifcompetitors are not in fact perfect sub-stitutes for each other, as in the case ofan infrastructure-owning telephoneincumbent and a mobile virtual net-work operator.). The recognized need forthese two attributes - technology neutral-ity and service neutrality - has given riseto so-called converged licenses. Con-verged licenses recognize that the serv-ice offerings of operators are increasing-ly becoming substitutes, and in factoperate using the same finite resource,the frequency spectrum. Such licensingschemes bring the entire spectrum underthe jurisdiction of one regulatory agency.

67Promoting


EEvveerryytthhiinngg tthhaatt rriisseess mmuusstt ccoonnvveerrggee

The past decade has seen considerable convergence of infor-

mation and communication technologies. Largely the result

of increased service delivery over IP channels, convergence

manifests itself in several ways. First, the hardware itself has

converged; computers offer telephony and mobile phones

deliver data. Additionally, the service providers themselves

have combined their services; in the US, for example, Ver-

izon offers fixed-line telephony, mobile telephony, and Inter-

net access. Verizon also illustrates delivery channel conver-

gence, since fixed-line telephony and broadband Internet

access are both delivered on the same copper wires. Final-

ly, there is market convergence, which describes the

increasing substitutability of services, as Internet service

providers or value-added service providers (such as Skype)

offer services that are substitutes for traditionally unrelat-

ed services, such as fixed-line telephony.

The sources of this convergence are both hardware-and soft-

ware-driven. As broadband became increasingly affordable

for consumers in developed countries, manufacturers creat-

ed hardware to take advantage of this increased bandwidth,

and software developers did likewise, with video-conferenc-

ing applications such as Go2Meeting but one example. Anoth-

er source of convergence can be attributed to simple mar-

ket forces. As ARPUs started declining for mobile operators,

these businesses chose to diversify their service offering.

ture efficiently, since unused capacitycarries an opportunity cost. This has profound implications for rollingout infrastructure to rural and other cur-rently underserved areas. In countriessuch as Mali, the incumbent telephoneoperator has little incentive to re-sell itsunused capacity, and may in fact be jus-tifying hoarding capacity, based on antic-ipated future demand for its services.While future needs may be a legitimatereason to reserve capacity, this penalizespotential customers who would be willingto pay for services now, and there may beMVNOs willing to service this low-ARPUmarket. In a regulatory environmentwhere spectrum reselling is permitted,predatory or vindictive hoarding isreduced.

Uganda has been singled out as anespecially favorable regulatory environ-ment. Local operators agree thattelecommunications regulation there is“much more progressive than anywhereelse in Africa”, that the Uganda Commu-nications Commission is “fair and equi-table”, and that contracts and agree-ments are generally honored. One oper-ator commented, “I can concentrate ongrowing my business, not sorting outbureaucratic problems.”12

5. Improve access to capital

A basic goal of regulatory policy shouldbe to enable resources to go to their high-est-valued use. Currently, many SSAcountries have restrictions on the per-centage of foreign ownership in telecom



PPoooorr ppoolliicciieess bbllaammeedd ffoorr ssllooww ggrroowwtthh ooff IICCTT

Africa’s policy for Information and Communication Technology (ICT) has not kept pace with technological advancement, a regional

stakeholder forum heard last week. Top on the agenda of the meeting was integration of ICT policies in the region to help bridge

the digital divide. Mr. Erastus Mwencha, the Comesa Secretary General, said harmonization of ICT policies was aimed at encourag-

ing investment and fostering regional integration.

The initiative that is sponsored by the European Development Fund brought together the region’s ICT regulators. Information and

Communication minister Raphael Tuju urged participants to come up with an ICT model that fits the region’s needs.

“ICT integration should increase competition, reduce transaction costs, enable firms to exploit economies of scale, enhance region-

al infrastructure and encourage Foreign Direct Investment in the sub-sector,” he said.

Mr. John Waweru, the Director General of the Communications Commission of Kenya, said technological advancement had facilitat-

ed convergence in the ICT sub-sector, making traditional methods such as pricing telecommunication services by the minute, mile

and usage irrelevant. He gave the example of broadband technology, which uses an Internet platform for telephony.

He said that new tariff structures were needed for such services to avoid unfair competition.

Waweru, who is the chairman of the Association of Regulators of Information and Communication in East and South Africa (Aricea),

commended African governments for recognizing the role of ICT in development. In Kenya, he added, two private Global Mobile Per-

sonal Communication via Satellite (GMPCS) and five commercial Very Small Aperture Terminals (VSAT) operators have been licensed.

He said the search for an ideal regulatory environment had become more imperative given the growing digital divide between rural

and urban Africa.

Mr. Mike Jensen of Catalyzing Access to ICTs in Africa (Catia), a DFID-sponsored project, said that while 70-80 percent of the African

population lives in rural areas, 90 percent of fixed lines are in capital cities and secondary towns. “Most rural people have to travel

long distances for access to telephone and Internet services adding onto the costs,” he said. Jensen urged African governments to

eliminate the multiplicity of licenses that stand in the way of investment in the ICT sector.

Mr. Geoff Daniell, a consultant based in South Africa, urged African governments to make use of low-cost satellite systems to improve

access to ICT in the region. He allayed fears that such technological advancements posed a threat to national security.

“Wireless devices are able to detect use of military radar, and automatically drop the connection to prevent interference,” he said.

(Source: Wekesa, Bob: The East African Standard, August 3, 2005 Quoted at http://allafrica.com/stories/200508020985.html August

2, 2005)

content. Additionally, low literacy ratesnot only impede uptake of ICT serviceson the demand side, but also hinder therollout of infrastructure and the creationof content on the supply side. Address-ing issues of literacy and education arebeyond the scope of this paper, butworth mentioning. One way in which the private sector, par-ticularly telecom operators, couldaddress the issue of human capacity isto adopt a vertical integration approach.Operators should harness their formida-ble marketing abilities to promote value-added services on their networks. Therehave been successful examples of this inthe United States, as network operatorssell handsets with value-added servicessuch as AOL’s Instant Messenger alreadyinstalled. Sonatel could try the sameapproach with Manobi’s value-addedservice in Senegal.Public-private partnerships (PPPs) canalso be beneficial in improving humancapacity through investment in trainingprograms at university level in order todevelop demand for ICT services, as wellas in the workforce to support suchtechnologies. Such an approach shouldalso spur innovation and content creationon the supply side, creating a virtuouscycle in the manner first illustrated byJean-Baptiste Say in 1803.16 In particu-lar, donor organizations can attempt toredress inequalities in access to ICTsbetween genders through training pro-grams geared toward women. Finally,donor organizations, whether throughPPPs or alone, can serve as businessincubators for value-added serviceproviders.

ConclusionPolicy and financial environments canhave a profound influence on the spreadof ICTs in SSA, particularly in as-yetunserved rural regions. Regulatory policiesshould focus on encouraging investment,including foreign investment. With thisgoal in mind, regulation should be technol-ogy- and service-neutral, and should becharacterized by transparency, clarity,fairness, and flexibility in anticipation offuture technological developments such asVoIP and WiMAX. Regulation should alsoseek to minimize the need for litigation.

operators. Such restrictions only hinderinfrastructure rollout, as it shrinks theavailable capital. Similarly, taxing hand-sets as luxury items constrains con-sumers’ access to affordable hardware.As demonstrated by the experience ofProject IKON and Manobi, access tocapital remains a serious constraint tothe growth of ICT infrastructure. “Largeinvestors have a much easier time of itthan smaller operators, which enjoyless ready access to senior governmentofficials,” states Russell Southwood.13

Public-private partnerships, throughsuch organizations as the InternationalFinance Corporation (IFC) and the CDCgroup (formerly the CommonwealthDevelopment Corporation), have hadsome success in stimulating infrastruc-ture roll-out directly by providing accessto capital, but the record is decidedlymixed. It has been stated by some tele-com operators that development assis-tance is “at best a waste of time and atworst an active impediment.”14 UgandaTelecom, for example, has inherited apatchwork of incompatible legacy sys-tems, all built with donor assistance tiedto the use of particular suppliers, muchof which is now fit for nothing butscrap. None of the highly publicizedregional government- and donor-ledinfrastructure projects appears to bemaking anything more than minor blipson the radar screen. As one Tanzanianoperator says, “75 percent of assistedprojects just don’t work. If a project isviable, it’s commercially viable andshould be done commercially.”15

6. Ease access to credit for low-income groups

One successful example of a public-pri-vate partnership is in the creation ofmicro-credit initiatives, as in theGrameen Village Phone. Alternatively,donor organizations could provide fund-ing specifically for rural and un-servedareas, using an Output-Based Aid (OBA)approach.

7. Increase human capacity

Several project managers among thosestudied for this paper noted the lack oftraining in ICTs at university level, andthe difficulty of finding qualified appli-cants to service networks and to create




1 Watts, Steven, “The People’s Tycoon: Henry Ford and

the American Century”2 “The Application of Information and Communication

Technologies in the Least Developed Countries for

Sustained Economic Growth,” International Telecom-

munication Union, Edition 2004, p. 743 http://www.itworld.com/Tech/4535/

050815transcont/4 http://www.balancingact-

africa.com/news/back/balancing-act_245.html5 Wekesa, Bob East African Standard, The August 3,

2005 Posted to the http://allafrica.com/sto-

ries/200508020985.html August 2, 20056 Ibid.7 “MVNOs in Emerging Markets: Developing the Busi-

ness Case for the MVNO Model” Pyramid Research

(www.pyramidresearch.com), 20058 http://www.balancingact-

africa.com/news/back/balancing-act_255.html9 Connecting Sub-Saharan Africa: A World Bank Group

Strategy for Information and Communication Technol-

ogy Sector Development10 Ibid., p. xii11 Ibid., p. xii12 Quoted in http://www.balancingact-

africa.com/news/back/balancing-act_66.html13 http://www.balancingact-

africa.com/news/back/balancing-act_66.html14 Ibid.15 Ibid16 Say, Jean-Baptiste A Treatise on Political Economy,

1803

Above all, enabling environments shouldseek to foster competition. It is up to eachcountry to find the balance between pro-tecting the property rights of license hold-ers and promoting innovation in ICTs.These issues apply to all countries, but thepotential benefit of relaxed control over theuse of the spectrum is greatest in under-developed countries such as those foundin sub-Saharan Africa.



Infrastructure deployment in rural sub-SaharanAfrica can be profitable.In the chapter entitled “Developing Sus-tainable Business Models,” this paperpresented two illustrative case studies(GSM & GSM/WiMAX) supporting thisclaim. Although payback periods will belonger in rural markets than in urbanmarkets, it is generally understood thatthe demand for ICT is strong among therural poor of SSA.

Input from stakeholders at every step of thevalue chain is essential.Infrastructure rollout within rural areasof SSA will largely be demand-driven.Network operators need input from theircustomers regarding what services theyare willing to pay for. In turn, serviceproviders must pay careful attention tothe needs of end users. Local experi-ments and pilot projects financedthrough public-private partnerships canprove there is an unmet demand insuch areas. Without “buy-in” from endusers, network roll-out based solely ontechnological concerns has no guaranteeof success. Operators must ensure theyare offering infrastructure in the quan-tities and qualities consumers want andcan afford. When Manobi lobbied Sonatelto build a tower in Kayar, for example,the result was a larger mobile footprintfor all consumers and a large number ofsubscribers added to the network.

Mature and new technologies offer a chance toleapfrog the lack of legacy infrastructure in ruralSSA.Mobile technology offers a chance forsub-Saharan Africa to deploy networksthat overcome the lack of legacy fixedtelephone lines. The challenge of ensur-ing universal access to not only telephoneservices but also to the Internet can ben-efit from new technological develop-ments. For example, technological evo-

lutions such as packet radio offer reachand capacity in various situations (fromdense urban to very low-density ruralareas) while reducing the Total Cost ofOwnership (TCO) for operators. Addition-ally, network convergence through intro-duction of IP packet technology in thecore, and eventually access, portion ofnetworks will open the way for fixed-mobile convergence and IP telephony.

Financial innovation will allow operators todeploy more aggressively into rural SSA.This report highlighted several innova-tions that allow operators to obtain suf-ficient financing to cover the cost of infra-structure deployment. For instance, apay-as-you-grow scheme allows an oper-ator to pay for network capacity only asdemand warrants, and to avoid payingfor unused capacity. Under-ServicedArea Licenses (USAL) and Output-BasedAid (OBA) schemes can also sustainsuch inroads by operators into ruralareas. In addition to USALs and OBA, policy-makers and regulators can do much tofacilitate further infrastructure rolloutamong the rural poor. Below are someissues for policy-makers to consider:

Encourage market entry by a full range of oper-ators, including large-scale and micro-entrepre-neurs.Spectrum licensing and the reselling ofunused spectrum can promote the effi-cient use of existing infrastructure andshould stimulate competition amongoperators, by granting micro-entrepre-neurs access to networks without theneed for infrastructure investment.Impediments such as prohibitions on for-eign ownership should be removed, toencourage investment in infrastructureas well as in service providers.

Chapter 8: Going ForwardIn the course of completing this study, several key themes emerged that can provide

the basis for broad guidelines to policy makers and network operators.


Going Forward

Encourage public-private partnerships to createan enabling environment.These efforts should include training forend users in the use of ICT-enabledservices, and the marketing of value-added services on existing networks. Forexample, REOnet is providing training toindividuals in the use of ICTs for telemed-icine, as well as programming in aLinux environment. Additional fundingfor training would stimulate demand forservices similar to Project IKON. Accessto financing for service providers is alsoa critical issue that has to be addressedby policy makers. Private sector invest-ment has an important role to play in ICTdevelopment, and all sources of fundingmust be considered, including thoseoffered by public-private partnerships, inorder to lower the cost of small businessloans for ICT-related services, andincrease access to private equity.

Ensure technology- and service-neutrality ofregulatory policies.The dizzying pace of change in informa-tion and communication technologiesvirtually ensures that regulations that aretechnology- or service-specific will

become out of date very quickly. Techno-logical evolution in the telecom sector willcontinue to bring further opportunities fordeveloping countries. Regulatory frame-work flexibility should allow a wide dif-fusion of these emerging technologies.

Above all, ensure that the regulatory environ-ment is transparent, pro-market, and fair.Regulators should simplify existinglicensing procedures to ease marketentry and operations. By combining reg-ulatory authority for telephony and IPnetworks, developing countries can fos-ter innovative service offerings at com-petitive prices.Africa’s next ICT consumers will demandservices that enrich lives and increaseaccess to information in ways that onlythey can anticipate. By easing regulato-ry friction, regulators can hasten the daywhen even the rural poor in sub-Saha-ran Africa have access to informationand communication technologies, andcan contribute to solutions to the vexingissues outlined by the Millennium Devel-opment Goals. Children in Senegal andtuberculosis patients in South Africaare ready.


Access Part of a telecommunication network closeto the subscribers. It is the link betweenthe subscriber’s terminal and the local,national and international core networks.

The access network is that portion of apublic network that connects access nodesto individual subscribers.

ADSL ADSL (Asymmetric Digital Subscriber Line)transforms an operator’s existing coppertwisted pair investment into a multimediabroadband distribution system. Working onan existing copper telephone line, ADSL’stransmission speed is up to 200 timesfaster than today’s analog modems. ADSL’sspeeds range up to 12 megabits per sec-ond. ADSL supports high-speed data com-munications on top of traditional telephoneservice, on a single telephone access line.

Allocation, planned by an international ornational authority, of a frequency band toone or more radiocommunication servicesor to radio astronomy, under specified con-ditions. A formal definition is given in theITU Radio Regulations.

ARPU The Average Revenue Per User (ARPU)measures the average amount of moneyspent by a customer per month for a givenservice such as a cellular phone, pager, etc.

Backbone A larger transmission line that carries datagathered from smaller lines that intercon-nect with it. At the local level, a back-bone is a line or set of lines that localarea networks connect to for a wide areanetwork connection or within a local areanetwork to span distances efficiently (forexample, between buildings). On theInternet or other wide area network, abackbone is a set of paths that local orregional networks connect to for long-dis-tance interconnection. The connectionpoints are known as network nodes ortelecommunication data switchingexchanges (DSEs).

A network that uses high-speed transmis-sion paths and provides connectivity forregional networks and other subnetworks.The two English terms “backbone net-work” and “core network” are often usedas synonyms. They both refer to the actu-al heart (or core) of the telecom network.This network should be able to transmitand handle a huge amount of informa-tion. Normally when using the term “corenetwork”, the operators refer to bothrouting and transmission. The term “back-bone network” refers only to the transmis-sion resources needed to support the net-work. In order to offer efficient communi-cations, operators need a huge transmis-sion capacity at the core of the network.Backbone networks are used to intercon-nect cities, regions, countries or even con-tinents. The Internet was initially based onthe interconnection established in the latesixties between universities and researchcenters within the United States. Lack ofappropriate interconnection is, at the samelevel as lack of universal access, at theroot of the Digital Divide. Some Africancountries have an interconnection capacityto the Internet that is equivalent to thatavailable to an individual broadband userin a developed country.

Backhaul (1) In wireless network technology, totransmit voice and data traffic from a cellsite to a switch, i.e., from a remote site toa central site.(2) In satellite technology, to transmit datato a point from which it can be uplinkedto a satellite.(3) To transmit data to a network back-bone.

Bandwidth The maximum amount of data, measuredin ‘bits per second’ or bit/s, that can travela communications path in a given time,usually measured in seconds. Usuallynoted with a K for 1000 bit/s, M for 1 million and G for 1 billion bit/s.

Broadcasting A form of unidirectional telecommunicationintended for a large number of unidenti-fied users having appropriate receivingfacilities, and carried out by means ofradio or by cable networks. In English, itshould be assumed that “broadcasting byradio waves” is intended where the word“broadcasting” is used without qualifica-tion. Examples include sound or televisionbroadcasting, time signals, weather reportsto ships, teletext, and news agency bul-letins.

BSC Base Station Controller. The part of thewireless system’s infrastructure that con-trols one or multiple cell sites’ radio sig-nals, thus reducing the load on theswitch. Performs radio signal manage-ment functions for base transceiver sta-tions, managing functions such as fre-quency assignment and handoff.

BSS Base Station Subsystem. The system ofbase station equipment, including BaseTransceiver Stations (BTS) and BaseStation Controllers (BSC), which isviewed by the Mobile Switching Centrethrough a standardized interface, asdefined in the GSM series ofRecommendations, as being the entityresponsible for communicating withmobile stations in a certain area.

BTS Base Transceiver Station. The name for theantenna and radio equipment necessary toprovide wireless service in an area. Alsocalled a base station or cell site.

Telecommunication over a network ofmetal or optical cables for distributingsound and video programs, and possiblyother signals, to a number of users whoare usually identified.. Some users mayhave access to return channels.

CAPEX Capital Expenditure. Capital expendituresare expenditures used by a company toacquire or upgrade physical assets such asequipment, property, or industrial build-ings. In accounting, a capital expenditureis added to an asset account (i.e. capital-ized), thus increasing the asset base.

CDMA Code-Division Multiple Access, a digitalcellular technology that uses spread-spectrum techniques. Unlike competingsystems, such as GSM, that use TDMA,CDMA does not assign a specific fre-quency to each user. Instead, everychannel uses the full available spectrum.Individual conversations are encodedwith a pseudo-random digital sequence.

Cell An area of radio coverage, locally definedas seen by a mobile station with a basestation identity code, and uniquely definedas seen by the network with a cell globalidentification (GSM/GPRS or with a cellidentification (UMTS).

CPE Customer Premises Equipment, a genericterm used to describe all customerdevices, including modems, IntegratedAccess Devices (IAD), Residential Gateways(RGW), and terminals.

Core networkA network that uses high-speed transmis-sion paths and provides connectivity forregional networks and other subnetworks.The two terms “backbone network” and“core network” are often used as syn-onyms. They both refer to the actual heartof the telecom network. This networkshould be able to transmit and handle ahuge amount of information. Normallywhen using the term “core network”, theoperators refer to both routing and trans-mission. The term “backbone network”refers only to the transmission resourcesneeded to support the network. In order tooffer efficient communications, operatorsneed a huge transmission capacity at thecore of the network.

Access to the Internet via a modem or anISDN connection, allowing bit rates up to64 Kbit/s on a single twisted pair.

DSL Digital Subscriber Line (DSL) technologyworks on the existing copper telephoneline already in a home, also known as a“twisted pair”. It uses sophisticated digitalcoding to utilize more of the existing spaceon the wire, without interfering with thenormal phone conversations. It is extreme-ly fast. With Asymmetric Digital SubscriberLine (ADSL) download speed at up to 8Mbit/s, it is 200 times faster than tradi-tional analog modems. DSL technologycomes in different flavors, with ADSL andVery high speed Digital Subscriber Line(VDSL) the best known.

DVB-RCS Digital Video Broadcast Return Channel bySatellite. International standard for two-way broadband IP communication by satel-lite.

e-Commerce e-Commerce, electronic commerce, refersto the online buying and selling of prod-ucts and services. e-Commerce alsoincludes the selling and buying of productsand services offline. e-Commerce is a com-ponent of e-Business.It is defined as transactions that take placeon-line where the buyer and seller areremote from each other.

EDGE Enhanced Data rates for GSM Evolution.Enhancement to the GSM and the USTDMA wireless communication standardsthat increases data rates up to 473 Kbit/s.EDGE is a full part of the family of thirdgeneration (3G) standards that will enablevoice, video and multimedia transmissions.The first generation of mobile communica-tions systems was analog. First used forvoice, it was launched in the late 1970sand early 1980s. Introduced in the 1990s,second-generation (2G) systems use digitalencoding and include GSM, US TDMA andCDMA. These second-generation systems

Dial-up(access)

Cable distribution

Backbonenetwork

Allocation (of a frequency

band)

Accessnetwork

Appendix A: Glossary of Terms


Appendix A

have been used mostly for voice. Betweennow and the arrival of 3G, a variety oftechniques are being employed to improvethe speed of data for mobile Internetaccess. These technologies include packetenhancements for GPRS and improved datarates for GSM and TDMA (EDGE).

Fixed/Mobile Convergence (FMC) is a sub-ject that covers two main aspects: infra-structure and services. The infrastructureportion refers to the capability of differentnetwork elements: switches, IntelligentNetwork (IN), or Next-Generation Network(NGN), and TelecommunicationManagement Network (TMN) or CustomerCare and Billing System (CC&BS) to supportfixed or mobile applications. The servicesportion refers to the different Fixed/MobileConvergence services that can be offeredto end users.

A continuous set of frequencies lyingbetween two specified limiting frequen-cies. A frequency band is characterized bytwo values that define its position in thefrequency spectrum, for instance its lowerand upper limiting frequencies.

The range of frequencies of electromagnet-ic oscillations or waves that can be usedfor the transmission of information.

GPRS General Packet Radio Service. A packet-based wireless communication service thatpromises data rates up to 114 Kbit/s andcontinuous connection to the Internet formobile phone and computer users. GPRS isbased on GSM and will complement exist-ing services such as circuit-switched cellu-lar phone connections and the ShortMessage Service (SMS).

GSM Global System for Mobile communications.A study group created in 1982 by theEuropean Conference of Postal andTelecommunications Administrations underthe French name “Groupe Spécial Mobile”for defining pan-European digital cellularmobile radio service. The GSM study groupwas incorporated into ETSI on its creation in1988, and its main function is to producedetailed specifications. The present Englishname was coined in 1991 to fit theacronym GSM. GSM is the world’s mostwidely used digital mobile telephony sys-tem.

The Internet Protocol is part of the TCP/IPfamily of protocols. IP governs the format-ting of variable-length packets (datagrams)as well as their addressing scheme. It pro-vides a connectionless service. IP hasbecome the universal network layer proto-col upon which most of the upper layertransport and application infrastructuresand services are built. IPv4 is its widelyused version. IPv6 is its new version thatis slowly being introduced.

ISP An Internet Service Provider (ISP) is a com-pany or organization that provides Internetaccess to the public or to other organiza-tions, usually for a fee. Most offer a fullset of Internet services (access to e-mail,newsgroups, File Transfer Protocol (FTP),and Telnet, at a minimum) for either anhourly rate or for a flat fee for a fixednumber of hours of access.

IXP Internet Exchange Point. An InternetExchange Point is a physical infrastructurethat allows different Internet ServiceProviders (ISPs) to exchange Internet trafficbetween their autonomous systems bymeans of mutual peering agreements. IXPsare typically used by ISPs to reducedependency on their respective upstreamproviders; furthermore, they are used toincrease efficiency and fault-tolerance.

LAN A Local Area Network (LAN) is a group ofcomputers and associated devices thatshare a common communications line andtypically share the resources of a singleprocessor or server within a small geo-graphic area (for example, within an officebuilding or a group of buildings). Usually,the server has applications and data stor-age that are shared in common by multi-ple computer users.

Local loop Local loop refers to the access linkbetween the subscriber and the accessprovider network.

MMS A service - standardized by the 3rdGeneration Partnership Project (3GPP) - forsending multimedia messages including acombination of text, audio, graphics,image, animation, and video.

MSC Mobile-service Switching Centre. The MSCis an exchange that performs the functionsof switching, routing and control of thecall, as well as charging and accounting,and controls interworking with fixed net-works. It is in charge of managing the cir-cuit switching communication betweenmobile handsets, the transmission of ShortMessages, and handover (when needed).

MVNO Mobile Virtual Network Operator. A MobileVirtual Network Operator is a mobile oper-ator that does not own its own spectrumand usually does not have its own net-work infrastructure. Instead, MVNOs havebusiness arrangements with traditionalmobile operators to buy minutes of use(MOU) for sale to their own customers.

NGN Next-Generation Network. Behind theNext-Generation Network term, there aretwo concepts: the first relating to multime-dia service evolution for public networks,the second to the separation of controlplane signalization and transport plane sig-nalization. Next-generation networks aredesigned to provide the advanced servicesthat are needed by the convergence ofvoice, video and data applications over asingle unifying network model.

Node In networks, a processing location. A nodecan be a computer or some other device,such as a printer. Every node has a uniquenetwork address, sometimes called a DataLink Control (DLC) address or Media AccessControl (MAC) address.

OPEX Operating expenses before depreciationand amortization of tangible and intangibleassets and before amortization of actuarialadjustments in the early retirement plan.

Optical fiber A filament-shaped waveguide made of dielec-tric materials intended to guide electromag-netic energy in the form of optical waves. It isgenerally made of a core surrounded by acladding, then surrounded by a coating.

Peering Peering is the arrangement of trafficexchange between Internet serviceproviders (ISPs). Larger ISPs with their ownbackbone networks agree to allow trafficfrom other large ISPs in exchange for traf-fic on their backbones. They also exchangetraffic with smaller ISPs so that they canreach regional end points. Essentially, thisis how a number of individual networkowners put the Internet together.

POP Point of Presence. The node at which anInternet Service Provider connects a sub-scriber to the Internet.

SMS Short Message Service. A service for send-ing text messages of up to 160 charactersto mobile phones that use Global Systemfor Mobile (GSM) communication.

A coaxial or optical cable designed forwideband or high digital rate transmissionunder the sea. This definition is restrictivein that it describes a modern cable which,although it is also used for telegraph anddata transmission, is sometimes called a“submarine telephone cable” to distin-guish it from the older “submarine tele-graph cable”.

TDMA Time Division Multiple Access, a technolo-gy for delivering digital wireless serviceusing time-division multiplexing (TDM).TDMA works by dividing a radio frequencyinto time slots and then allocating slots tomultiple calls. In this way, a single fre-quency can support multiple, simultaneousdata channels. TDMA is used by the GSMdigital cellular system. TDMA is a compet-ing technology to CDMA.

The combined indirect and direct costs ofowning a piece of hardware or software.

TRX Transceiver (in GSM). A network compo-nent that can serve full duplex communi-cation on eight full-rate traffic channels.

UMTS Universal Mobile TelecommunicationsSystem. Technology for 3G mobile services(next generation of GSM (Global System ofMobile communications)). In addition tovoice and video telephony services, UMTSsupports data transfer rates up to 144Kbit/s in rural environment and 2 Mbit/sin indoor environment.It is also the European implementation ofthe ITU-R-defined family of IMT2000 stan-dards based on Wideband Code DivisionMultiple Access (WCDMA) technology.

VAS Value-Added Service. A service provided bya telecommunication network encompass-ing data processing at higher layers of theOSI reference model.

VoIP VoIP (voice over IP - that is, voice deliv-ered using the Internet Protocol) is used inIP telephony for a set of facilities for man-aging the delivery of voice informationusing the Internet Protocol (IP). It meanssending voice information in a packetmode rather than in the circuit mode usedby the Public Switched Telephone Network(PSTN).

VSAT Very Small Aperture Terminal. An earth-bound station used in satellite communica-tion of data, voice and video signals,excluding broadcast television. A VSAT con-

Total Cost of Ownership

Submarinecable

IP (InternetProtocol)

Frequencyspectrum

Frequencyband

Fixed/MobileConvergence


Broadband Wireless Access (BWA) networks. WiMAX802.16 technology is expected to enable multimediaapplications with wireless connection, and enable net-works to have a wireless last-mile solution. IEEE802.16 covers the fixed and mobile wireless accesstechnologies (known as LMDS) with radio from 2 to11 GHz. IEEE 802.16d covers the Fixed Wireless Accesstechnologies (known as WIP) with radio below 11GHz. Frequency bands covered are: 2.4 & 5.8 GHz(both unlicensed) and 2.5 (MMDS) & 3.5 GHz (bothlicensed). IEEE 802.16e is supposed to add mobility to802.16d. IEEE 802.16q adds network managementfacilities for IEEE 802.16d/e.

WIP solutions carry packetized data over a high-speedradio link. It can be used as an access technology toconnect broadband users, or as a transmission technol-ogy between remote network elements.

Way of provisioning local loops without wires. Localloops are the lines between a customer and a tele-phone company. Such systems are being deployed inAsia and other developing countries to avoid the costsof wires and cables.

Source: Alcatel Terminology Glossary

Wireless Local Loop

Wireless IPsolution

sists of two parts, a transceiver that is placed outdoorsin direct line of sight to the satellite, and a device thatis placed indoors to interface the transceiver with theend user’s communications device, such as a PC. Thetransceiver receives or sends a signal to a satellitetransponder in the sky. The satellite sends andreceives signals from a ground station computer thatacts as a hub for the system.

WAP Wireless Application Protocol is the current de factostandard for providing Internet communications on dig-ital mobile phones, personal digital assistants andother wireless terminals.

WiFi Wireless Fidelity. WiFi has been adopted as a commonname for Wireless Local Area Network (WLAN) tech-nology based on the IEEE 802.11 standard. At thesame time, WiFi is an initiative from the industry todefine a set of interoperability tests for WLAN productsbased on the IEEE 802.11 family of standards, and toprovide such products with a WiFi marking logo andcertificate of interoperability.

WiMAX Worldwide Interoperability for Microwave Access.WiMAX is a wireless industry coalition whose mem-bers organized to promote IEEE 802.16 standards for

ISSUES IMPEDIMENTS

Relationship between policy maker and regulator - Political interference in running of regulator - Function ambiguity between regulator and policy maker- Function ambiguity between regulator and competition authority- Function ambiguity between regulator and Universal Service agency- Lack of political commitment- Interventions in regulatory decisions by policy maker overly-influenced by its relationship with operators

Accountability of regulator - Inadequate mechanisms for holding regulatory members accountable for their decisions

Autonomy of regulator - Over-reliance on government/external bodies for funding- Political interference in remuneration, appointment and dismissal of regulator’s members- Regulatory capture or excessive influence by a particular group

Participation in decision-making processes - Inadequate consultation mechanisms for involvement of external parties in processes- Over-reliance on informal (non-orthodox) lobbying of regulator

Transparency of decision-making processes - Lack of explanations provided in public and to operators for decisions

Predictability of decision-making processes - Poor enforcement of license conditions and/or legislation- Lack of consistency in decision-making

Effectiveness of regulatory policy tools in key areas - Policy tools do not achieve their objectives (e.g. ineffective price caps, universal service targets, licensing procedures,ineffective dispute resolution procedures etc)

Regulator’s organizational structure and resource - Inappropriate organizational structurerequirements (human, financial) - Inadequate financial resources

- Inadequate regulatory/administrative/business management skills of key staff

* This table was taken from B. Guermazi and D. Satola, Creating the ‘Right’ Enabling Environment for ICT” in Robert Schware, ed. E-Development: From Excitement to Efficiency, The WorldBank, Global ICT Department, November, 2005

Appendix B: Possible Impediments to Regulatory Effectiveness*


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