Feasibility of Universal Access for Rural Connectivity

1. Feasibility of Universal Access for Rural Connectivity Abdelfattah ABUQAYYAS CoE/ARB Coordinator abuqayyas@itu.int ITU - BDT Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

2. Feasibility of Universal Access for Rural and Remote Communities Content • Introduction • Universal Access Definition • The First Mile of Connectivity • The Myth of Unprofitable Service • Funding Universal Access •  Rural Service Demand Analysis and Surveys Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

3. Introduction • The provision of Universal Access (UA) is an important objective of telecommunication policy and legislation in many emerging market countries • In Africa, it is common for there to be fewer than one telephone per 100 people, compared to 10 lines per 100 people in Latin America and over 64 in the United States • The concept and policy of UA must be sufficiently flexible to adapt to the changing needs of the country concerned. • There does not seem to be one common “prescription” for insuring UA Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

4. Introduction • The objectives of UA policies and programs focus on social and economic development of rural and remote areas • The provision of telephone lines and Internet services is a means to accelerate and support social and economic development • Objectives may also be tied directly to government goals for decentralization of governance to regional and district levels in order to provide more effective social service delivery and more effective local decision-making. • Decentralization requires that front line service delivery agents and local government officials have access to affordable and effective communication and information sharing tools. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

5. Introduction • It is generally acknowledged that telecommunication services stimulate social and economic development • The cost of commercial and household transactions, in the absence of telecommunication services, can be very high • Finding markets for rural produce, determining market conditions and prices, negotiating prices and transportation, and engaging supply chain services can be virtually impossible without access to telephones, faxes and (more and more) email and web services. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

6. Introduction • Access to knowledge and information about key social services such as health, education, agricultural extension, water, and sanitation, is very limited when there is no access to telecommunication services. • Telecommunication services are also vital to community safety and national security. • Through telecommunication services, security and protection services can be notified and summoned to take action in the event of criminal activities and natural and man-made disasters • It is important for national governments to play an active role to ensure that the provision of universal access is successful. • It is also necessary for such governments to examine how responsibilities can be appropriately allocated to telecommunication operators and local authorities, particularly in a competitive multi-operator environment Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

7. Universal Access Definition • Universal Service is a term used to refer to the policy of providing telephone service to all community members and is based on the concept of a telephone in every home • It is generally recognized that universal service, in terms of a telephone in every home will not be achievable (or desirable from the perspective of a commercial operator). • A more realistic goal is Universal Access where a working, affordable telephone is within reach of the whole population of a country. • Many telecommunication analysts prefer the term Universal Access over the term Universal Service because it more accurately reflects the provision of a group of lines at locations convenient to rural and remote residents. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

8. Universal Access Definition • Universal Access requires establishing a certain level of telephone service to meet the needs of communities where the existing telephone penetration is low or non-existent • This level is vary from one country to an other, as an example: 1 public telephone per 500 population, or 4 to 5 telephones (1 payphone plus 3 to 4 business or institutional lines) per village or have access to telephone service within a certain distance from the community … • The process of determining measurable targets for universal access is an important role for regulators: regulators must engage rural and remote stakeholders in meaningful dialogue to establish jointly agreed upon targets. Their absence results in services that do not meet their needs and therefore generate low revenues:a problem that perpetuates the belief that rural and remote telecommunication is unprofitable. It is important to create measurements with the direct involvement of the people who would benefit from universal access Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

9. Universal Access Definition • If regulators seek only to measure universal access in terms of teledensity (number of lines per 100 people) operators may be encouraged to deploy lines, regardless of location, people’s access, affordability or ease of use. • “Developing a definition of universal service and universal access can be mechanisms for agreeing national targets with the many stakeholders involved, which must then be monitored to ensure compliance. • Creating clear national understandings of the terms universal service and universal access is very important • Universal access and service definitions should be seen as ‘moving targets’ - when one level is achieved, a higher goal should be set.” Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

10. The First Mile of Connectivity • For many years, people working to enhance telecommunication infrastructure and applications have referred to rural and remote communities as being at the "Last Mile of Connectivity." • The concept of the "Last Mile" carries a lot of negative baggage and compels us to assume the perspective of an urbanite looking down at the rural margins. • We should instead think instead of rural communities as being at the "First Mile of Connectivity“ • This term expresses a more equitable and far less urban-centric view of the challenge of providing everyone with the option of connecting themselves to the rest of the world and all it has to offer. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

11. The First Mile of Connectivity • For a person living in a rural or remote community, telecommunication services provide a means for equalizing their community with urban communities. Telecommunication services provide means for: • Making better and more informed decisions • Staying in contact with friends and families who migrate to urban areas for work and education • Linking their businesses to the trade, transportation and commerce systems of urban areas • Accessing the services (health, education, information, etc.) that enable urban people to improve their lives • Managing the risks associated with remittance payment transfers from family members working in the city or family members working abroad • Enhancing personal and community security • To be financially sustainable and profitable, rural telecommunication technologies need to be designed with rural people as active participants in strategizing, planning, implementing, monitoring, and evaluating. Solutions for rural and remote connectivity are best developed in partnership with stakeholders from rural and remote communities. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

12. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

13. The Myth of Unprofitable Service • It is frequently assumed that universal access policies must be based on the “fact” that rural and remote service is expensive and therefore unprofitable. • Many regulators continue to believe in the myth of universally unprofitable rural and remote service. • Universal access policies are often designed only as means to extend service in order to achieve socio-economic development benefits for rural and remote communities. • Socio-economic benefits are certainly desirable, basing policies only political desires to be benevolent can actually deprive rural and remote residents of the quality and location of service for which they are actually willing and able to pay Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

14. The Myth of Unprofitable Service • Commercially managed telecom services in competitive contexts tend to provide users with the most affordable prices and highest quality of service. • Without a commercial imperative, operators of rural and remote services frequently lack the incentives to continuously improve service to anticipate and respond to user needs. • Anecdotes about locked public calling offices, unreliable lines, and abysmal customer service are common in regions where universal access policies force incumbent operators to provide lines. • In these cases, the goal of having telecom service generate socio-economic development benefits cannot be obtained, despite the existence of universal access policies and regulations. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

15. The Myth of Unprofitable Service • . Investigations of the commercial viability of rural and remote telecom services are neglected for many reasons: • Regulators may lack the resources to conduct independent and accurate assessments of commercial viability in rural and remote areas • Regulators may lack the broader policy imperatives that provide the motivation to accurately assess commercial viability before yielding to the myth of unprofitable rural service • Regulators may lack the in-house skill sets necessary for conducting or managing independent market research and demand analysis within the unique environments of rural and remote communities • Regulators have not examined evidence and experiences from other countries where rural and remote telecom services are commercially viable • Incumbent operators that do not want to face competition or lose territory (and do not want to be bothered with universal access commitments) may provide compelling and convincing stories and data about rural and remote ventures that have been costly and “unprofitable” • Stakeholders in rural and remote communities are not involved in collaborative planning to construct universal access policies. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

16. The Myth of Unprofitable Service • Without accurate and independent market research, the financial revenues and profitability of rural and remote services are typically assumed to be limited at best • Regulators must thoroughly examine the commercial viability of rural and remote telecom service before buying into the myth that rural and remote telecom services cannot be profitable. • Universal Access Policies should never be implemented without accurate and independent market appraisals and parallel involvement of rural and remote stakeholders in the design of universal access policies • Universal Access Policies should never be implemented without accurate and independent market appraisals and parallel involvement of rural and remote stakeholders in the design of universal access policies Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

17. The Myth of Unprofitable Service • Evidence strongly indicates that when managed in a commercial manner, telecom service can be a profitable business in poor rural and remote regions • This potential can only be realized through when regulators have accurate and rigorously collected data on rural/remote market demand • Armed with meaningful market demand data, regulators can design universal access policies aimed at attract private investors, providing them with a fair operating environment, and enabling them to serve market demand • Such policies will have the objectives of making rural and remote telecommunication services financially attractive investments, and of making the developed services fully available to their users • The demand for telecommunication services in rural and remote areas is often much higher than many people believe, and within an appropriate policy environment this sector can capitalize on that demand to achieve maximum commercial and socio-economic benefits. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

18. Funding Universal Service • Conditional Licenses: the telecommunication operator must provide service to rural and remote areas as a condition of the license. In Peru, for example, the telecom provider is required to contribute 1% of gross revenues to a rural telecommunication fund as a license condition. In South Africa, the national provider is obliged to roll out 1.7 million lines in disadvantaged areas during their 5 year exclusivity period. • Fee for Connection to the Backbone: new competitors may be required to pay certain charges to interconnect with the dominant telecommunication operator, with some or all of the charges being used to provide service to rural areas. • Incentives: provision of incentives to encourage operators to provide telecommunications in less profitable areas, such as: • Tax concessions • Removal of duty on telecommunication equipment targeted to rural and remote areas • Lifting of foreign exchange restrictions • Micro-credit Programs: Linking existing and successful micro-credit organizations with rural telecom operators to expand Public Calling Office (PCO) coverage in rural areas., such as those can effectively enable new ICT operators to establish PCOs which provide a variety of services including telephone, fax, email, the Internet, photocopying and word-processing services. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

19. Funding Universal Service • Build Operate and Transfer Arrangements: Government sanctioned concessions to equipment vendors, integrators and/or operators who deploy infrastructure in rural areas and operate a system for a fixed period of time before transferring the operation to an incumbent national operator, or other investors. • Cooperatives and Community-owned Systems: Cooperative organizations active in rural areas (e.g. electrical cooperatives, agricultural cooperatives, etc.) are provided with incentives such as periods of exclusive operation to encourage provision of service in poor rural areas. • Rural Development Funds and Universal Service Funds: One important approach to addressing the universal access challenge is the creation of special funds, typically obtained from the telecom sector. From a regulatory perspective, if subsidies are used to promote universal access, the amount of subsidies and their specific application should be measurable, identifiable and transparent to ensure that they are not regarded as anti-competitive. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

20. Rural Service Demand Analysis and Surveys • There is extensive evidence that with sufficient planning and analysis, the provision of rural telecommunication services can be profitable. • Given the potential economies of scale achieved by a well-planned rural telecom installation, investment in rural and remote telecom service can be a sound commercial and developmental strategy. • Critical to the profitability and sustainability of a rural telephone system is a demand analysis of telecom needs undertaken prior to the installation • Unless telecom initiatives are established to satisfy the information and communication needs of the intended users, technologies will remain underutilized and thus will not survive. • As with any other marketable service, cultural and gender considerations are key dimensions of a demand analysis. • Planning for Rural Telecom Service requires an understanding of the distinctive nature of rural telecommunication operation and service usage patterns. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

21. Rural Service Demand Analysis and Surveys • Rural service demand analyses have identified that: • The main demand for telecom services in rural and remote areas is for calls between small local communities and larger centers • Most calls are placed to communicate with community members who have moved to urban centers or overseas. In many cases phone calls play an important role in facilitating the transfer of financial remittances to family members residing in the rural communities. • Calls are also important for conducting business; accessing agricultural pricing information; communicating matters of illness or death; arranging travel and visas; and making educational arrangements. • Typically, telecom services are provided to low-density rural and remote populations via a small number of lines at centrally located access centers. These may be public call offices (PCOs), or commercial enterprises providing telephone services in addition to other retail or service offerings. Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004

22. Feasibility of Universal Access for Rural Connectivity Thank You abuqayyas@itu.int ITU - BDT Workshop on Visibility of Rural Connectivity Khartoum – Sudan, 5 – 7 September 2004