paper

Expanding Rural AccessWhite Paper

20 July 2007

ICT@USAID Offerings: Telecom Infrastructure Page 2 11 May 2006

Expanding Rural AccessManagement Summary

In the early 1980s, Sir Donald Maitland chaired the Independent Commission for World Wide Telecommunications Development. His “Missing Link” report issued in 1984 highlighted the telecommunications gap and triggered a range of subsequent initiatives. Since this report there has been a continuing evolution of initiatives aimed at closing this gap, with the “Digital Divide” (and more recently, “Digital Opportunity”) being the tag placed on this communications gap between wealthy and poor; urban and rural.

Perhaps the most dominant current initiative championing this theme has been the World Summit on the Information Society (WSIS). This effort is led by the United Nations (UN) through the International Telecommunications Union (ITU). In 2003 at a conference in Geneva, WSIS established a Declaration of Principles and an Action Plan focusing ICTs and their leveraging capabilities. At Tunis in 2005 this Commitment and Agenda was reaffirmed with some augmenting elements. These various WSIS documents reflect a broad-scale commitment to a range of ICT-related topics. With regards to expanding rural access, these commitments focus on expanding village-level connectivity across the globe by 2015. It is clear via the commitments make through WSIS and similar forums, those governments across the globe are committed to improving and empowering the lives of their citizens, especially those that are the most disadvantaged, through the leveraging of ICTs,

It is encouraging to note that these publicly-stated commitments have been complemented by actions. An expanding number of countries have adopted consistent national agendas that have led to on-the-ground action; specifically actions creating more enabling telecommunications environments. A growing number of countries now have competition in their markets. A growing list of countries have rewritten their telecommunications laws, established regulators, and written new regulations for supporting this expanding competition. Many countries have given up their government-owned and operated monopolies and have moved towards full privatization of the telecommunications sector.

With these improved enabling environments put into place by the public sector, the private sector has responded with an unparalleled build-out of telecommunication services, specifically mobile networks. It is estimated that 50% of the world’s population are currently mobile subscribers. An estimated 65% of these mobile subscribers live in developing countries. For the most part, this dynamic has taken place within just the last 10 years, and it continues to expand. Clearly the Digital Divide is currently in the process of being narrowed with regards to voice communications.

Yet as one would anticipate, even with these significant dynamics there remain several gaps needing attention. First, rural areas continue to lag well behind those living in the urban and para-urban areas. Second, in many locations the gap is actually expanding with regards to broadband Internet access. At the end of 2004 it is estimated that worldwide only 13.2% of the world’s population have access to the Internet. Of these, only 38% have broadband, with only 1 percent living in developing countries. There is much more to do in the area of expanding rural access and broadband Internet access.

This White Paper puts forward an integrated approach for addressing this remaining gap. It is based in part from lessons-being-learned through U.S. Agency for International Development’s (USAID’s) Last Mile Initiative (LMI). Over the last three years this LMI has supported approximately 30 country-level projects with valuable collective experience coming out of several of these projects.

As such, this White Paper puts forward a replicable community-focused build-out approach for bringing connectivity, both voice and broadband Internet, to those living in rural communities. The model builds heavily off of approaches that have worked in the past, and is comprehensive in that it integrates models for technology, business, and a funding-financing, while addressing required key

enabling environment components. The purpose in putting this forward is to expand upon this collective experience such that the approach can be enhanced even further and expanded to reach a growing number of rural communities across our planet.

Expanding Rural AccessTable of Contents

Management Summary................................................................................................................................... iTable of Contents...........................................................................................................................................iiAcronyms and Abbreviations.......................................................................................................................iii

Background/Introduction...............................................................................................................................1

Current Mobile Dynamics Applied to Broadband Internet............................................................................3Community Focused Build-out Model..........................................................................................................5Enabling Environment...................................................................................................................................6Technology Model.........................................................................................................................................7Business Model..............................................................................................................................................8Financing Model............................................................................................................................................9Beyond the Infrastructure.............................................................................................................................10Moving Forward..........................................................................................................................................11

Expanding Rural AccessAcronyms and Abbreviations

ICT Information Communication TechnologyIP Internet ProtocolLMI Last Mile InitiativeUSAID United States Agency for International DevelopmentUSF/USOF Universal Service Fund/Universal Service Obligations FundVSAT Very Small Aperture Terminal VoIP Voice over Internet ProtocolVoWiFi Voice over Wireless Fidelity (portable hand-held phone)WiFi Wireless FidelityWiMAX Worldwide Interoperability for Microwave Access WSIS World Summit for the Information Society

Expanding Rural AccessBackground-Introduction

he exclusive focus of this White Paper is connecting the unconnected, specifically those living in the more remote rural locations around the globe, and specifically with voice and broadband Internet. In many respects those living in these rural areas are currently without a voice; Invisible.

Often they exist without access to a set of communication tools that can contribute significantly to their socioeconomic well being. This Paper puts forward an approach whereby many, if not most all, rural areas can be connected.

TThe primary orientation of this White Paper is on telecommunications, though the broader and richer

aspect is “access” that goes well beyond infrastructure. Telecommunications is viewed as but a key building block, the infrastructure component upon which other value-added services can be delivered. These additional access-related content and services enrich and enable the community through expanded access to health services, education, government services, business-market related services, etc. While telecommunications-focused, this access ultimately seeks to empower each citizen living in these rural communities.

As mentioned in the Management Summary, to a considerable degree this White Paper builds off of several Last Mile Initiative projects. It also takes into account and incorporates other global dynamics currently taking place, including the following:

1. World Summit on the Information Society (WSIS)—in a simple statement reflected as paragraph 10 of the WSIS Declaration coming out of Geneva in 2003, those participating in the WSIS event state the following:

“We are … fully aware that the benefits of the information technology revolution are today unevenly distributed between the developed and developing countries and within societies. We are fully committed to turning this digital divide into a digital opportunity for all, particularly for those who risk being left behind and being further marginalized”

From these two global forums in 2003 and 2005, a range of actionable items were outlined, with a range of subsequent follow-up activities having been undertaken. The best single source for current information is captured in two WSIS status reports, one being issued in 2006, and one just recently issued in June of 2007.1 The WSIS Action Line C2. Information and Communication Infrastructure, relates specifically to the theme of this White Paper, though other action items are also discussed.

The follow-up action from the two WSIS events also establishes a Digital Opportunity Index (DOI) for measuring progress on the results being achieved on a country-by-country basis. As one would anticipate, connectivity plays an important role in this index. But while there are a lot of details associated with the WSIS activities, the over-riding thrust is that of expanding the access-availability of ICTs and the rich value-add potential they have for bringing about socio-economic improvements to those living even in the most rural-remote areas of our planet.

2. Next Four Billion Marketplace—another complementary and contributing component in our quest to establish a viable approach for expanding rural access is a recent study produced by the World Resources Institute (WRI) and the International Finance Corporation (IFC). This report titled, “The Next 4 Billion-Market Size and Business Strategy at the Base of the Pyramid.”2 This report provides detailed data on those four billion people on planet earth that make the equivalent of between $500 and $3,000 per year. This includes a market of $5 Trillion, and represents over 60% of the earth’s population.

1 http://www.itu.int/osg/spu/publications/worldinformationsociety/2007/2 http://pdf.wri.org/n4b_full_text_lowrez.pdf

The report’s content puts forward detail information on the purchasing patterns of this 4 billion population, with the broad realization that this is a sizable market with specific needs and with suggestions as to how these needs can be better satisfied in ways that will have direct and immediate impact on their productivity and incomes, and in doing so, this will empower them into the more formal global economy.

Within this report there is a focus on the ICT market (Chapter 3) which indicates a higher-than-anticipated level (as a percent) on ICT-related spending. This grows as an accelerated rate as lower income individuals advance through the income levels. This analysis is critical with regards to understanding several factors with regards to expanding rural access, including; 1) there is a market in these lower income levels, 2) there appears to be an unmet demand, where the availability is less than what individuals are willing to buy, and 3) this needs to be taken into account with regards to public policy, specifically as it relates to designing, implementing and operating a universal service fund.

3. Summary of Market Dynamics—Today’s global telecommunications marketplace is very dynamic with a range of complementary themes moving in a positive direction towards bringing about significant improvements. These include the following key components:

a. Market Liberalization—there is a tremendous dynamic currently taking place within many developing economies with regards to public-sector -led market liberalization. While taken into account there are still situations where additional progress and adjustments are required.

b. Mobile Telephone Growth—this liberalization in the marketplace is having a significant impact on allowing mobile telecommunications to grow at a very rapid pace. Yet in the more remote and less-populated rural areas these mobile solutions cannot be implemented to be economically viable. Expanding access to these areas is still a situation needing a new approach.

c. Universal Access/Service—a growing number of countries have adopted universal access/service funds through collecting a tax on telecom revenue and using these funds to cross-subsidize rural access. While these have had a significant degree of success, many are confronted with the sustainability issue and are looking for a more effective use of these funds.

d. Shared Access Centers—most Universal Access/Service funds are relying on shared access approaches, and these have had an element of success. However this success is uneven in low-population density rural situations. The high cost for delivering access to remote communities-village via satellite terminals and a phone or two, rarely becomes self-sustaining. There is a need for a better community model.

e. Information-Content Gap—with regards to narrowing the digital divide there are two components; communications and information-content. Data shows that while the communications (i.e., voice) gap is being narrowed, the information-content gap is still growing. Mobile is closing the communications gap, and the newer 3G networks hold promise for closing the information-content gap via faster access. But in most rural areas these technologies simply will not deliver the needed information-content through a normal mobile build out. Again, a new approach is needed.

This White Paper presents an approach for Expanding Rural Access that not only takes these factors into account, but also maps out a viable set of technology, business, and financing models that will allow for access to be delivered to the most remote areas on the planet. Further, it is flexible enough to be shaped to meet local situations, accommodate a range of business approaches, and fit within most existing telecommunication environments. In most locations it can also become profitable, ensuring long-term sustainability.

Expanding Rural AccessCurrent Mobile Dynamics Applied to Broadband Internet

he one area in telecommunications where this communications gap is being narrowed is in the area of mobile telephony. For the most part the growth of fixed lines has come to a virtual standstill, and wireless has become the dominant solution set. While there is some fixed-wireless growth in

certain locations, mobile-wireless has become the defacto standard for bridging the voice communications gap. At the end of 2004, the majority of countries (166) on this planet had more mobile lines than fixed lines. T

This growth has been nothing short of phenomenal. In 1994 there were less than 1.0 million mobile phone users world wide. By 2004 there was an estimated 1.8 billion mobile subscribers. Current estimates place the number at 3 billion, and by the end of 2007 it is estimated that there will be 3.25 mobile subscribers world wide. This number will total half, 50% of the world’s population. Further, of this total number of mobile subscribers, 65% live in developing countries. There is no indication that this growth is slowing down, but rather it is expected to continue with most of it taking place in developing countries.

This spectacular growth is due in large part to the increasing liberalized market, the use of pre-paid cards, and the lower cost and less time required to deploy wireless solutions. It is a direct private-sector response to telecommunications market liberalization. This liberalization has taken hold over these last 10 years with the result being a spectacular build-out of mobile networks.

While the focus of this White Paper is on rural broadband, it also includes voice communications as one of the critical services. Most all of the mobile growth is taking place in urban and para-urban areas, with the more remote-rural areas still not being served or under-served. With respects to Internet, while gains are being made, current estimates reflect that in 2004 only 13.2% of the world’s population had Internet access. And of these, only 38% were access to broadband services. Only 1% in developing countries.

Clearly there is the need to establish a revolution in the area of broadband Internet similar to what is currently taking place in the mobile marketplace. Towards this end, the following are considered some of the Critical Success Factors (CSFs) that have been essential for the current mobile growth. And any approach for expanding broadband Internet will have to incorporate similar CSFs if success is to be achieved.

1. Governments’ Triggering Action—in the case of mobile there was a critical tipping-point that sparked the revolution, a key action taken by the governments that was responsible for making the technology available. This created the enabling condition for the expansion to move forward. In today’s mobile expansion has been market liberalization. In context of our earlier discussion on WSIS, it is not until each of the governments signing on to the WSIS declarations and action plans actually take real on-the-ground action to create or enhance the enabling environment, that the revolution can get started. Only then will the ideals of WSIS become reality and have the intended impact-result.

2. Making Technology Available—it is important to note that mobile technology has been around for approximately 20 years. The technology is not what started the current revolution. Rather, it was the availability of cost-effective technology; the end of telephone monopolies such that other firms, competitors could enter the marketplace and offer mobile services.

3. Private Sectors’ Action—it is also important to note that it was the private sector that built the networks, not the governments. In most countries the government had the monopoly for a hundred years and didn’t do much with it. Private-sector engagement and engagement in a competitive environment is a common and essential factor for the revolution to truly take hold.

4. Dominance of Voice Services—it is also important to note that voice is the dominant telecommunication application. It was a hundred years ago and it still is even now. This is the

application people want and the application people are willing to pay for. It is affordable by the bulk of the population. It is also the application that cuts across the entire population of individuals, businesses, and governments. It is the essential ingredient for financial viability. And upon this basic service other value-added Internet services can be expanded. While data communications is beginning to gain momentum in mobile networks, this will always remain a secondary service, with voice being the dominant demand.

5. Massively Parallel—yet another CSF is the massively parallel nature of the mobile phenomenon is taking place around the world. Here there are hundreds, possibly thousands, of mobile networks being put into place world-wide cell-by-cell at the same time. Revolutions must be broad-based and small deployments are simply of marginal use, and typically not financially viable.

6. Community Focused Build-out— and finally, it is important to note the community orientation of these massively parallel implementations. Today’s mobile growth, while not focusing on the expansion of rural communities, it is in fact the expansion of urban communities—expanding access to those living within the community. For rural communities this is an essential difference between many of the existing rural programs now in place that take an approach of installing a single phone or two into a remote rural community, often using an expensive satellite terminal. This approach simply doesn’t create the needed community dynamics nor financial viability, not add critical value to all living in the community. It’s an add-on, not a systemic part of their community.

The above six CSFs provide a list of essentials that needs to be kept front-and-center for Expanding Rural Access. They provide a touch-stone for establishing a successful approach; a test as to the validity of what is being put forward.

While not the focus of this White Paper, it is interesting to note that the telecommunications revolution that took place a hundred years ago in the U.S. followed a very similar to what is currently taking place across the planet in the mobile telephony arena. The above CSFs are virtually identical and of special significance to our focus, much of this revolution took place in rural areas.

As a starting point, the telephone was invented in 1876 with two competing patents being issued, but this was sorted out with Bell being granted the patent. This gave Bell a telephone monopoly in the U.S. until 1894. When the patent expired in 1894 the technology became available to everyone. And between 1894 and 1902, in just 8 years, an estimated 3,000 non-Bell commercial systems were established in the U.S. By 1927, another 25 years, there were over 6,000, the result being massively parallel expansion.

With regards to growth, when the Bell patent ended in 1894 after 18 years of Bell having the monopoly, the Bell system had an estimated 270,000 phone installed on its various networks. Virtually all of these were in large cities. By 1907, just 13 years after the patent ended, there were an estimated 6,000,000 phones in service throughout the U.S. Teledensity in the U.S. went from 0.43/100 in 1895 to 6.67/100 in 1906, a period of just over 10 years. And perhaps even more important with regards to Expanding Rural Access, this teledensity was virtually even for urban and rural. The rural state of Iowa had a teledensity greater than that of New York City where Bell still retained a monopoly.

A couple more items of interest from 100 years ago: 1) The average number of phones on these over 6,000 systems was less than 200. These networks were community-based. 2) The technology at the time didn’t allow for long-distance transmissions or interconnection between these small networks. Yet those living within these rural communities placed a sufficiently high-value on these systems such that they built and operated them.

The above reflects critical elements that need to be taken into account as we seek an approach for Expanding Rural Access, with a special focus on broadband Internet.

Technology

Business

Fin

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Enabling Environment

Expanding Rural AccessCommunity Focused Build-out Model

The last of the CSF’s, “Community Focus”, center on an approach for a totally-networked community with a full complement of telecommunications and access to information-content. This is not a one or two phones approach, but rather a level of teledensity ultimately not substantially different than urban areas. That’s the target. This approach seeks to serve the entire community, in our case those living in the more remote rural communities. Those living in the community will be linked to the world by first linking to themselves. The orientation is to build a local community-based infrastructure where those living within the community have the ability to call others within the community, as well as calling-receiving calls to/from outside the community.

This Community Focus moves beyond the common shared-access approach of placing a single phone per community. Examples of this approach are found worldwide, be it in Eritrea, Vietnam, South Africa, Peru, etc. Taking the lessons of the U.S. build-in that took place in the late 1800-early 1900s, and the current global mobile dynamic, the approach here is to focus attention on meeting the local needs within the community first; ”first mile first.” The value of any network is the number of nodes on the network; network economics. What is the value to those in a community where it has but one node? Value?: yes; a lot of value?: no; Sustaining value?; unfortunately in many cases: likely no. This approach simply doesn’t add value to where there is the greatest demand—that of providing communications where it most naturally occur; within the community.

Even in developed economies with mature telecommunications networks, approximately 60% of the communications traffic is local. Again, the community oriented approach provides value where there is the highest demand and for a core service for which people are willing to pay. And, it cuts across the entire community, not simply one segment or sector (e.g., health, education, business, etc.). These are incremental value-added services that can be added to the core.

In our Community Focused approach, there are four interconnected components

Enabling Environment—this will influence how the other three components are implemented. Variables here are frequencies, interconnection, business structure, etc. For optimization there are likely some public-sector changes required.

Technology—the need is for an existing technology solution set that can provide a low-cost service, both in terms of initial capital investment and operating costs, and support broadband data and voice from a single network.

Business—there is the need to develop a business model that can be implemented in various structures (independent, franchise, mobile extension, or PSTN extension) and that can demonstrate a profitable operation to ensure long-term financial sustainability.

Financing—there is the need for start up funding. Funding must be based on a viable technology solution set and a business, as it seeks start up financing, be it private or public investment. If the Enabling Environment is suitable, then this will be from the private sector. Another financing option is through universal service funds, though there may be the need for moving from an on-going subsidy approach towards a public investment-oriented funding-financing.

The next four Sections address each of these components in more detail.

Expanding Rural AccessEnabling Environment

Building off of the CSFs established earlier, two elements are essential; 1) there must be some public-sector triggering event, and 2) there must be an opportunity for the private sector to take advantage of the opportunity and make the technology available to the marketplace. With these two pieces in place, the private sector is empowered to move forward my making needed investments.

In the approach put forward through this White Paper; 1) there are viable technology sets available today that can cost-effectively light up any remote village anywhere on the planet, 2) in most cases it will be possible to build a viable business plan that can demonstrate financial viability of these microTelcos, and 3) with these viable technical and business models, the potential to locate and secure financing becomes a real potential.

Here the focus is very targeted. From both an entrepreneur seeking to set up a rural microTelco or the government seeking to allow this to happen, the core questions are; “Is it allowed or happening…and if not, why?”, “What is in the way?? If it is not for want of a viable technology solution set, and it is not having a solid business plan, or the availability of financing, then what is it? Something in the government’s enabling environment simply isn’t as enabling as it needs to be.

Once the barriers are identified then the public policy makers who are committed to the ideals of WSIS and/or closing the digital divide must either; 1) commit to removing the obstacles, or 2) simply acknowledge this in fact is not a national priority. It is not a matter of the public sector “doing it.” Instead it is a matter of the public sector creating the enabling environment for the private sector to do it.

One of the distinct advantages of approaching the Expanding Rural Access from a community perspective is the fact that it narrows the focus of this discussion with regards to what changes are needed in order to create the needed enabling environment. In all likelihood there are few changes actually required. Rarely will there be the need for a wholesale rewriting of the telecom law and supporting regulations. Rather there is just the need to identify and create the triggering event that allows the private sector to expand the access to technology. The key is to use the Community-oriented model to identify those few things needing to be changed and then setting about changing them.

One key area of focus for possible change is to create a more competitive environment where the marketplace will become actively engaged in closing the gap, similar to what is taking place in the mobile arena. This in essence is aimed at minimizing the “friction” such that the private sector can operate freely by closing the “market gap.” The corollary to this is for the public sector to establish a comprehensive approach to close the “access gap” whereby a universal service fund is designed and put into place and operated such as to fill in those remaining holes where market forces will not make the required investments to expand access into more rural areas. This will require establishing greater unity between the telecom policy, legal, and regulatory environment and the USF with the goal being to enable the private sector to play a greater role in servicing rural communities, and to implement public financing only where the gap still exists.

Several other actions the public sector may need to take include: 1) cutting adoption time for new technology from the historic 20 years we saw in the two earlier examples to 5-10 years or less; 2) building a national backbone that can provide cost-based connectivity to rural areas, with fiber being the likely solution with wireless distribution off the backbone; 3) allowing ISPs to become carriers by providing low-cost Wireless and VoIP services, 4) requiring and aggressively enforcing a provision that existing carriers must interconnect to the microTelcos and provide realistic cost-based call termination fees in a timely manner, and 5) adding to existing carrier licenses a simple provision, that they either provide quality access services to the rural communities or they lose their exclusivity for these areas, thus

Darrell Owen Page 9 20 July 2007

allowing independent microTelcos to enter the local community markets. Making these changes should be quick, with the result being a near-immediate launch of the sought-after revolution in rural telecommunications.

Darrell Owen Page 10 20 July 2007

Expanding Rural AccessTechnology Model

he starting point for the Technology Model is to establish a technical solution set that is low cost and can satisfy the needs with the local community. It also must include connecting to/from the outside as a secondary focus. Further, it also needs to support the highest demand first, and that is

voice. Too often in recent years the focus in rural areas relative to introducing the Internet into rural communities is typically a single-purpose solution focusing on but a single sector. T

With regards to using available technology, our model is using wireless, either WiMAX and/or WiFi and Voice over IP (VoIP). These are relatively new technologies that have been available for approximately 5+ years. While the technologies are stable, their integration into a single solution for voice is pressing the technology envelope just a bit. Also, at this time pricing is remains higher than it will be as we have yet to reach economies of scale, especially with WiMAX. However this is rapidly changing.

Also, while the platform focuses on Voice, it is VoIP delivered over an IP Wireless network, thus providing the platform for expanded access to Internet-based information-content and services. Recall that worldwide this is still where the gap is going, and it is essential this be addressed in our technology model.

And finally, there is the need for an out-of-the-box integrated solution such that the solution can be easily replicated, is stable, low maintenance, and yet allows for tailoring to meet local situations.

As put forward in this White Paper, the Technology Model consists of two sets of complementary technology solution sets that combine into an integrated set of network services:

Central-Shared Services—these core services focus on the establishment of a central-shared set of services upon which multiple communities…hundreds, even thousands, can derive key services. This allows for the realization of economies of scale and scope, and in doing so, significantly lowers costs.

Key central-shared services include a shared backhaul, VoIP services, PSTN and Mobile interconnection, Internet connectivity, Internet services, as well as billing. The goal here is establish essential services though a central-shared approach in such a manner that they can be made available to a large number of remote-rural communities.

With regards to a shared backhaul, this will vary depending on the local environment. In many cases this will be a combination of fiber, satellite, and terrestrial wireless, both point-to-point and point-to-multipoint.

Depending on the nature of the Enabling Environment, these services can be provided by either a PSTN, mobile operators, or even an ISP with proper licensing. Whereas the individual rural communities may be locally-owned and operated, these central services are best provided through a single, national-level entity.

Community Networks—the technical solution here is to gain access to the shared backhaul, and through this, to the central-shared services. Within the remote-rural community the network consists of an edge-switch that will keep local voice traffic local, and an IP-based wireless network that provides coverage throughout the community. This is via WiMAX and/or WiFi, with the number of antennas dependent on the coverage area that is required. In most rural communities the approach will be to place the higher value-added access devices such as PCs, in one or more TeleCenters. Wireless VoIP (VoWiFi) phones will be distributed throughout the community to individual and/or businesses in much the same manner as mobile phones are used in more urban settings.

The key at the community level is that this solution set works out of the box. Also that it is operationally stable and requires minimum maintenance and operational support. Here the key is for a solution that can be implemented in a “massively parallel” approach.

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Expanding Rural AccessBusiness Model

he starting point for the Business Model is to pursue an approach that is private -sector based, and not the product of a public-funded development project, unless such a project concludes in privatization. Also, it is an in-country enterprise, possibly multiple, where there is a firm

providing the central-shared services, and possibly a franchise approach where each remote-rural community is independently owned and operated.

TThe focus at the community level is to capture all local community demand, specifically voice. In

that it is built on an IP network, it will also deliver Internet services and with it the range of “access” to key services. The business model is not limited to closing only the communications gap, but also the information-content gap.

The reason for Voice? It is the one service where the demand reaches across the community—to individuals, businesses, and government. The uptake by users is also rapid in that there are no language or computer literacy issues. It is also the one service for which the largest number of people are willing to pay.

The business model orientation is to establish a two-layered business model that parallels the technology model.

National Platform—first there is the need for a business that provides the national platform of central-shared services, and second there are local community-village businesses that provide the local community network and services. Ideally the national platform can be put into place by an existing Telco, in many cases most likely the mobile operator.

In many locations the legal and regulatory environment is such that existing carriers are already empowered to pursue an approach whereby they lead an effort to provide these services. And in many situations a business approach can be established whereby entry into this market is a viable and sustainable business initiative. In other situations there may be the need to seek some level of government approvals such as frequencies and possibly expanded services. It may also be that there is the need to seek access to universal service funds through established processes and procedures.

Community Level— the local community networks can be set up as either as branch offices, independently-owned business and/or franchisees. The business approach at the community level is one of delivering layered services. This includes; 1) using the technology model to support Internet and Voice access through shared-access TeleCenters, 2) delivering Voice services throughout the community to those seeking the service (moving beyond access to individual service), 3) delivering Internet services to local businesses, government, and international-funded NGOs working in the community, and 4) using an approach pioneered by Grameen through it’s “village phone operators” where individuals, typically women through support of micro-loans, provide shared phone access throughout the community to those who cannot afford a phone. The orientation is to capture the maximum potential demand from throughout the community, and in doing so maximize the revenue stream for ensuring long-term financial sustainability. To be a success, these community businesses simply must be profitable and sustainable.

Also at the community level, the key is to build a viable business plan. The starting point for this is the use of a common template and automated tool where differing local variables are plugged into the tool in an effort to facilitate localization for each specific community project. These in turn serves as a base set of replicable business-finance models that can be adjusted even further for other local communities. Variables that need to be localized include the initial cost of the network, population size, revenue projections, operating cost projections, estimated growth, loan repayment schedule, etc. The orientation is to have prospective local businesses or franchisees quickly develop a professional quality business-finance plan that is based off of others’ examples and is sufficient in details and completeness for the local entrepreneur to secure a loan to cover start up costs from a commercial lender, a venture capital fund, possibly even a repackaged public universal access/service fund.

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Expanding Rural AccessFunding-Financing Model

eeping with our focus on CSFs from earlier successes, and incorporating our new technology and business models, the focus here shifts to funding-financing, specifically start- up financing. To a degree how the funding-financing component is addressed will be influenced by the

governments’ enabling environment. K

A fundamental component to this enabling environment will be the issue of private ownership and a fully-functioning regulatory that addresses issues such as tariff setting, enforcing interconnection, frequency licensing, etc. But in virtually all countries currently-licensed carriers are able to pursue this approach through local offices and likely even through a franchise approach. In a growing number of countries ISPs have obtained a VoIP license and represent a viable business structure.

Regardless of the business structure, with a viable business plan the next step is to seek start up business financing.

Private Sector Funding Sources—with regards to seeking start up funding from private sources, the keys will be a business plan showing financial viability, some demonstration of management and operational strength, and assurance that the local enabling environment is sufficiently stable to ensure launch and operations without undue or overly burdensome obstacles. The key for the financier is one of managing risks. For a franchise approach set up by either a Mobile or PSTN operator, the likely financing source will be internal to the company. Another growing source of funding isinternational foundations seeking to promote the growth of small-medium businesses, specialized venture capital funds, and a growing number of investments funds that are committed to providing social responsible-related funding and thus willing to take on risks associated with emerging economies.

Public Sector Funding Sources—with regards to seeking startup funding from public sources, the foundation stones are the same as with the private sector sources: a solid business plan showing financial viability, some demonstration of management and operational strength, and assurance that the local enabling environment is sufficiently stable to ensure launch and operations without undue obstacles. Sources for funding from the public sector include specialized funds set aside by some of the multilateral banks such as the IFC with its small-medium business funds.

An ideal approach within the country is via the establishment of a country-level Universal Access/Service Fund (USF) that is postioned to enhance their operations to include the use of loans as a replacement or augmentation of recurring operational subsidies. The use of loans adds a project focus that in essence holds potential for turning USFs into a specialized public venture capital funds with the potential that they can support starting up hundreds, if not thousands of community-based microTelcos. These loans may have a concessionary component included with regards to delaying repayment and for lower-than-market interest rates. Again, we’re seeking massively parallel implementations. In most situations this will require legislative changes as many USF programs have not been structured in this fashion.

A key consideration for the governments is to recognize and take into account that while these UA/S fund loans would be made to community-based a microTelco, behind this microTelco is community enrichment and empowerment—expanded socio-economic services to their most rural and disenfranchised population. This allows the UA/S funds to play an increasing role in the nation’s regional or rural development initiatives.

Further, it is also important that this not be undertaken on a delivering telecom services at the lowest possible cost approach. Rather than the lowest cost, there needs to be an expanded focus by USFs towards maximizing the total value to be gained from these services being delivered to these rural communities, again, with community development seen as an integrated rationale for managing the funds.

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Expanding Rural AccessBeyond the Infrastructure

The focus of this White Paper has been to pull together a range of dynamics that intersect to provide a viable and sustainable approach for Expanding Rural Access into more remote-rural communities. It seeks to pull together lessons learned from earlier successes, and establishes an integrated set of technology, business, and financing models that hold potential for meeting a near-universal goal of bringing ICTs to those living in the more remote-rural areas of our world.

Yet while this White Paper has focused predominantly on the telecommunications component of expanding access, the most promising aspect of this approach is the value-added information-content services that this infrastructure brings to each rural community. Whether it is the access to improved health services, education, business-economic support, access to government services, or simply improved social interaction, the infrastructure is the foundation for launching a range of enabling and empowering information-content services. In many situations these also hold potential for bringing business and job opportunities to the rural communities, closing socio-economic gaps well beyond narrowing the digital-access divide. Here community development is at the core.

Several key value-added content services hold tremendous possibilities for bringing about socioeconomic gains in remote-rural communities, including the following:

e-Government—a fundamental value to the government and its citizens is to expand the delivery of government services to those living in rural areas. This enables the government to extend its sovereignty and influence, and at the same time provide value-added government services to citizens which at present are out of the reach of these services due to physical distances.

e-Learning—delivering high-quality education-related services to remote-rural communities is a significant challenge across the globe. With the network in place a wide-range of basic-to-advanced education can be delivered on-line. These can be constructed such as to meet specific community needs, be oriented towards job creation, or aimed at improving any number of in-community services.

e-Health—this has been a rapidly growing area where ICTs have been instrumental in delivering improved services into remote areas. This can include delivering sophisticated patient records at local clinics, to diagnostic capabilities using digital scanning/X-rays, as well as prescribing and monitoring treatment programs.

e-Business—a range of business-related services can be delivered over the Internet including not only training-learning opportunities, but also expanding the reach of markets for local products, marketing-advertising rural tourism-related offerings, building improved partner-supplier relationships, and extending a range of micro-finance related services.

e-Agriculture—because the remote-rural communities are frequently agricultural-based, the Internet provides rich opportunities for gaining information to improve agricultural practices, learn about new opportunities, and to gain current pricing information to improve income.

These are simply an initial set of examples where the broadband Internet infrastructure can be used to deliver value-added content services that hold promise for bringing about socio-economic gain to those living in remote-rural areas. The community-focused approach seeks to provide a single network into and across the community whereby these services are made available across the community rather than at a single point of delivery. Further, this community-focused approach is such that none of the organizations and users of these individual services have to absorb the total cost of the network. Rather, it’s shared with multiple uses, including voice, with the result being a resource that becomes financially viable for long-term sustainability. Expanding Rural Access: White Paper Page 14 20 July 2007

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Expanding Rural AccessMoving Forward

he approach put forward in this White Paper holds the potential to be implemented on a wide-range of levels, from an existing carrier seeking to expand their reach into more rural communities, to a government seeking to encourage the building of a national-level shared service

that can support thousands of franchisees at the community level. The focus is on obtaining the needed national-level scale while at the same time providing local community opportunities and empowerment.

TIdeally a logical starting point for traveling down this road is through an initial Assessment of the in-

country environment with regards to examining the country’s enabling conditions, and the prospects of market and potential for scale. This could be driven by the government, one of a number of international donors, an investment fund seeking socially-responsible investment opportunities, or as reflected above, a fixed line or mobile operator seeking a low-cost approach for expanding their customer base and/or meeting universal access/service requirements imbedded into their telecommunications license. This Assessment would provide a current reading of the local environment, roadblocks needing attention, and opportunities to be pursued. It should also seek to establish potential partners for undertaking such an initiative.

Assuming the Assessment shows potential, a second step would logically involved a limited scope demonstration effort to iron out the details of connectivity, business model, demand, possibly establishing a national franchise, establishing financing mechanisms, resolving possible interconnection issues, and also identifying and addressing potential limiting conditions needing attention and resolution. This is not so much an effort to determine if the approach will work, but rather an effort to optimize the approach and make the requisite local adaptations. It would also seek to gain implementing and operating efficiencies and effectiveness.

From this initial piloting effort the issue is simply one of developing a viable plan for national scale. Again, this can be through a private business supported via an investment fund, a franchise model with private or public investors, or establishing a new rural community business unit within an established fixed-line or mobile operator.

Those wanting to comment upon, seeking additional information, possibly wanting a fuller presentation, or are even planning to pursue an expanding rural access initiative are encouraged to contact Darrell Owen at [email protected].

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