June 2008

World Resources Institute, USA

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Mobile telephony facilitates connectivity in rural areas and stimulates socio-economic growth and reconstruction process

Mobiles for development

Mobiles have had an undoubted impact on access to jobs, incomes, and emergency help, on personal security and social cohesion in households with migrant workers, and even on GDP growth and foreign direct investment. In fact, a recent review of the literature found dozens of studies documenting economic and social impacts of mobile telecommunications. Use of mobiles by local fishermen in India, for example, enabled them to sell their catch for higher prices and, for the industry as a whole, lowered transaction costs and eliminated waste and thus made it more competitive.

In Niger, mobiles enabled a more efficient market for buying and selling grain, generally lowering prices for consumers and raising profits for farmers-and may have helped avoid severe hardships during a 2005 food crisis.

A study in Rwanda found that mobiles enabled micro-entrepreneurs to develop more business contacts. Surveys in Latin America and in Tanzania found that mobiles were particularly important in finding work or employment possibilities. At a macro scale, there is evidence that the mobile industry generates significant number of jobs, facilitates wealth accumulation and foreign direct investment for a country as a whole, and that a rise in penetration of mobile phones by 10 phones per 100 people accelerates GDP growth by 0.6 percent, on average.

The rural telecommunication wave

The next wave of growth for mobile telecommunications in emerging markets is likely to come from rural areas. The growth will eventually bring new challenges, because the areas to be covered are much larger, the populations sparser, and incomes lower compared to urban areas. Can mobile telecommunications have the same impact in rural areas? Can mobile companies afford to provide coverage in rural areas?-an important question, since if rural networks are not profitable, companies will hesitate to provide services. This article will suggest that the answer to both questions is yes, although it may require mobile telecoms to adopt some radically new approaches.

The first question is relatively easy. A farmer who brings his or her produce to the owner of a market stall in an urban market often does not get paid until the next trip into town, which could be a month or more. If the farmer is paid the next morning on his or her mobile, it would make a huge difference. Likewise, if a rural household can find out market prices before bringing their produce to town, or even pre-sell it for the best available price, their income will rise.

The lack of other infrastructure-financial, electrical, transport-in many rural areas subtly implies that telecom infrastructure can be uniquely valuable. And this value will only increase as remittances and other financial transaction services, even mobile banking, begins to roll out over mobile networks.

But what about the second question? The capital investment required to build a cellular tower in a remote rural area, powered by a backup diesel generator, is very substantial. And more than half of the cost of operating that rural network, typically, is the fuel and maintenance costs of the diesel generator. Without as many customers as in an urban area, and with low penetration of phone ownership and relatively limited use, the mobile company may not see an adequate return on that investment.

The Vietnamese experience

Fortunately, there are a number of options for extending mobile networks into rural areas that can lower both the capital investment required and the operating expense. We are piloting one such option in Quang Ngai Province in central Vietnam. This heavily rural province has over one million people, and less than three percent of rural households own a phone-either because they lack coverage or don't think the benefits are worth the cost. Our pilot-a joint effort with a rural development project, the provincial government, and a Vietnamese mobile company, EVN Telecom, with support from USAID and AUSAID-covers some 15 villages in three communes, more than 15,000 people and a total of 127 square kilometres.

WiFi and rural networking

The technology involved is both familiar and yet amazing. It's WiFi, like that found in many urban hotspots. It is also advanced WiFi mesh that can provide service over an area of several kilometers from a single unit and automatically provide good signal quality and route traffic in the most efficient way. It also includes advanced WiFi backhaul that can send lots of data, up to 100 megabits per second over distances of up to 50 kilometres, so that even remote areas can be reached with several wireless links. The phones involved would be WiFi-enabled mobile phones-in effect, low-cost smart phones-that work either on the urban cellular network or the rural WiFi network. The voice service in the rural areas is provided over the Internet, which is much more efficient, but in a way that integrates seamlessly with the mobile network-users will not generally know that they are using the Internet for voice service. The network is a broadband network, so it also provides Internet access, wirelessly, to desktop and laptop computers, potentially at speeds far higher than those typically found in urban wired networks.

A win-win solution

Why build such an advanced, cutting-edge network in a remote, rural area? Because it is very inexpensive, compared to a conventional mobile network, and enables services that fit the needs of low-income, rural people. For example, it may make sense to provide local calling-within the WiFi network-for free, and charge normal pre-paid costs when calling into town via the conventional mobile network. Free local calling-typically about half of the traffic in rural areas-would be a big incentive to own a phone, probably resulting in larger penetration and ultimately in more customers and more revenue for the mobile company. And because the WiFi network is tied into the mobile network and uses mobile phones, it can deliver text messaging, mobile banking, and other advanced services. At the same time, such a WiFi network is potentially much less expensive to build than extending a conventional mobile network into rural areas, and-because it can be easily powered by small solar panels-avoids the operating expenses of diesel generators. So the WiFi solution can be more profitable for the mobile company, or profitable with far fewer customers, as well as allowing the company to 'green' its energy supply. It's a win-win solution.  

Reversing isolation

Other less radical approaches are also possible to lower the costs of extending mobile service into rural areas. However, if coverage is provided, it will bring the economic benefits to rural areas, where they are needed even more desperately than in urban areas. The WiFi solution also brings Internet access, permitting a wider range of services and application tailored to the needs of rural communities, including agricultural extension services, improved education at a distance, even remote medical diagnosis and treatment. Internet-based voice service enables easy migration of voice-based services to other dialects and languages-important in a country such as India. Most fundamentally, bringing mobile communications and Internet access to rural areas enables them to participate more fully in the evolution of their societies and in the global economy, ending the traditional isolation and easing the distance penalty from which rural communities have always suffered.

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