The benefits of better services

Projects in PNG will show the viability of telecoms services in rural areas

Arturo Muente-Kunigami

The government of Papua New Guinea has introduced a Universal Access Scheme to fund the development of telecommunications services in rural parts of the country.

Access to telecommunication services can greatly improve economic growth. And this is especially the case in developing countries. According to the World Bank, an increase of 10% in mobile phone penetration results in a 0.8% increase in economic growth. And there are many potential benefits to a whole range of beneficiaries.

For instance, access to improved communications services reduces costs for small and medium-sized business because it becomes easier to conduct domestic and cross-border transactions. New services also open up new marketing and distribution channels and improve access to information about markets, prices and consumers. Farmers, many of whom live in remote rural areas can now gain access to similar information related to their particular business, along with updates on weather, agricultural extension services and electronic trading platforms.

The expansion of cell phone and internet banking services opens up new possibilities for service industries such as tourism too. And rural communities benefit from reduced travel time and cost savings because they have better access to health information, education services and job opportunities. They can also maintain closer contacts with distant family members and can send and receive money over large distances using secure methods. Women are often the greatest beneficiaries of improved communications services as female entrepreneurs take advantage of income-generating opportunities.

Better connectivity benefits government agencies too. For example, it allows them to exchange data on disease surveillance, for example, between national and sub-national offices. It also makes it easier for them to implement plans and administer budgeting issues. And in cases of disaster recovery, effective communications are vital.

Proof of concept

In Papua New Guinea (PNG), the Rural Communications Project will help to deliver these benefits through the improvement of telecommunications services in rural and low-income areas. Despite a recent expansion of the telecommunications industry, ICT penetration is still among the lowest in the world. The introduction of a more competitive sector in 2007 made cell phone services more accessible and lowered prices, but many people still lack internet access because of high prices and limited investment in the development of the necessary networks.

In 2010, the government introduced a new National Information and Communications Technology Act and established a regulatory agency, the National Information and Communications Technology Authority (NICTA). These, along with other legal and regulatory improvements, will lead to sector-wide reform and are likely to have a positive impact on investment and improve the delivery of services. The new Act formalises the introduction of the Universal Access Scheme (UAS) Fund.

The UAS Fund, which is made up of subsidies that come from a levy charged to all operators, is widely used in other countries to ensure that telecommunications services are delivered to rural areas, particularly to areas where incomes are low. Such funds were originally created in Latin America, and have since been implemented in Africa, the Middle East and East Asia.

The idea behind the funds is to bring telecommunications services to places where they would not be commercially viable because of the high cost involved in developing infrastructure and the lack of available income to recoup the costs. Without increased investment in such areas, a divide could develop between urban high-income, low-cost communities, and rural low-income, high-cost sections of the population. This would affect growth opportunities in poorly served areas, exacerbating the economic gap between the two sections of society.

UAS funds provide an efficient way to reach rural and low-income areas by requiring existing operators to tender for contracts to provide telecommunications services in these areas. The funds subsidise private sector investment and make it commercially attractive for companies to serve these areas.

First steps

When designing its UAS Fund, the government of Papua New Guinea asked the World Bank to assist them. The resulting Rural Communications Project (RCP) aims at creating the right set of skills within the national communications authority to deal with the UAS obligations and the design of future tender procedures.

The RCP has two main components. First, it will provide technical assistance to NICTA. This will help NICTA manage the implementation of telecommunications projects that are funded by the UAS and organise the eventual monitoring and evaluation processes. This technical assistance will also provide general regulatory support to NICTA, with emphasis on those issues that might affect the expansion of services to rural and low income areas.

The second component is the development of pilot projects. The RCP will finance the first three projects to be developed under the UAS to show the proposed ‘least-cost’ subsidy mechanism. The first two of these projects aim to increase mobile access in the provinces of Chimbu and East Sepik and install a public payphone for every 500 inhabitants. These two provinces were selected because of the potential impact development here would have, and because of their geographical diversity. It is expected that the projects will be replicated in other regions of the country.

Chimbu Province is in the highlands of Papua New Guinea. It has limited natural resources and very rugged mountainous terrain – which includes Mount Wilhelm, the highest mountain in the country. Coffee growing is the main economic activity, usually carried out by small farmers. East Sepik Province is totally different. It is a coastal region with quite a dispersed population. Economic activities include coffee and cocoa growing and, at a lower level, coconut cultivation [see table for a summary of the two projects].

These two pilot projects will provide internet access to approximately 60 district centres that currently do not have affordable telecommunications. This will give operators the opportunity to partner with local entrepreneurs to operate internet cafes, which will help to guarantee financial sustainability. By giving the public, local government and NGOs access to information – and, potentially to public services – this part of the project is expected to contribute to local economic and social development. It is also expected to support local business development.

Since it was set up in October 2010, NICTA has been quite dynamic in terms of reviewing policies and regulations. The RCP has just started, but work on the pilot projects is set to begin by the end of 2011 – providing rural communities with increased opportunities for economic growth through improved connectivity.

  Chimbu East Sepik
Total Population of Province 314,928 412,173
Number of beneficiaries from pilot projects 175,000 245,000
Number of people who will not benefit from pilot projects 3,752 71,702
Number of public access points (payphones) to be installed 310 400
Expected number of subscribers in project areas 20,000 16,500

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Arturo Muente-Kunigami is team leader for the Papua New Guinea Rural Communications Project at the World Bank.
(The findings, interpretations and conclusions expressed in this article are those of the author and do not necessarily reflect the view of the World Bank Group, its Board of Directors or the governments they represent.)

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Related resources

Economic Impacts of Broadband, in Information and Communications for Dev..., by Qiang, Christine and Carlo Rossotto. World Bank, 2009.

23 May 2011

Copyright © 2014, CTA. Technical Centre for Agricultural and Rural Cooperation (ACP-EU)