Taking risk out of local hands

Local entrepreneurs are important players in the effort to establish connectivity in rural areas. It is important that they have the skills to run ICT services, however, and just as important, they must have the ability to develop sound business cases to attract investors and subsequently set up and maintain successful and sustainable businesses. Unfortunately, this is not always the case. According to Orange, the French telecom operator, nearly two-thirds of local ICT businesses ultimately fail. The good news is that there are innovative ideas that can mitigate some of these risks, as the case of ‘universal service funds’ in Pakistan demonstrates.

There are also other simple but effective actions that can be taken to further save costs, such as switching off equipment at night to save on energy costs and using cheaper bandwidths. Other ideas include green solutions, such as solar-powered base stations, to build sustainable connectivity services and using TV white space as old analogue broadcasts are switched off across Africa. This solution would provide cheap last-mile connectivity.

Another suggestion made during the session on ‘Broadband’ is a ‘Pay as you grow’ rather than ‘Pay as you go’ model. This solution would help people who cannot afford connectivity to get started. Connectivity has been shown to lead to inclusive economic growth. The idea behind ‘Pay as you grow’ is to give the initial support so that people without means can have internet access, and charge for the service later as their incomes grow.

Connecting remote Pakistan

The Pakistan case in this session presented a solution called ‘universal service funds’. The idea behind universal service funds is to have all licensed telecom operators contribute a percentage of their revenue to a fund managed by a third party, such as a government or an independent public–private enterprise. The third party then uses the fund to subsidise infrastructure and connectivity in economically less profitable areas.

The example of an agriculturist named Hamed Khan Achakzai living in the province of Balochistan in Pakistan illustrates the need for this service fund. Achakzai owns apple orchards and transports his produce to other parts of the country, including the port city of Karachi in the south of Pakistan and regions further north. Ideally, he needs to plan the transport of his produce well and decide which routes are the most cost effective. Based on that, he would then need to harvest his fruit at exactly the right time, so that it coincides with the planned transport times. This kind of information is hard to come by in remote areas, however.

It is in situations such as Achakzai’s that universal service funds can step in. These funds have to be well managed, however. Indeed, it is not always a given that a government – which can be inefficient and overly bureaucratic – is the best agency for the job. Pakistan administers an innovative universal service fund through a non-profit, independent company working as a public–private enterprise called USF. The company’s independence is safeguarded by a board of directors that represents all stakeholders, including politics and industry. As a counterbalance, the company employs directors from both the public and private sectors.

In the first five years of its existence, USF has achieved a number of successes in its effort to build an ICT infrastructure and provide connectivity in remote rural areas. It has provided broadband to 260 small towns and cities (which amounts to nearly half a million working subscriptions). These subscriptions include more than a thousand schools and libraries and 300 community broadband centres. More than 4,000 km of optic fibre cables have been laid in rough remote regions connecting 67 of the hundred-plus unserved sub-districts. And USF has provided voice telecom services to more than 4,000 unserved remote villages.

Through its effective strategies and sound governance, USF has shown how the concept of a universal service fund can begin to provide four key ICT needs: availability, awareness, affordability and attractiveness.

USF has managed to take the risk of investing in ICT infrastructure in remote areas out of the hands of local entrepreneurs. Better infrastructure and improved connectivity have benefited remote communities by creating awareness about new business opportunities and by bringing together producers and new buyers. These improvements have also led to better farming practices and provided opportunities for further improvements for farmers such as Hamed Khan Achakzai through customer feedback, such as timely pruning, watering, packaging and categorising.

Related links

Universal Service Provision Fund of Nigeria

www.uspf.gov.ng

National Broadband Strategy of Kenya

http://goo.gl/WsCLlt

Universal Service Fund of Pakistan

www.usf.org.pk