Essential & Elusive: Micro Mobile Telco Business Model Scale

Imagine a dozen thought leaders from the technology and development fields in the UN Foundation conference room, all expressing ideas and options on how to expand ICT’s – in this case mobile phone coverage – in the developing world. That’s the Technology Salon experience, and April’s Technology Salon, Designing a Micro Mobile Telco was a particularly intense debate.

Lead by David Ferguson, we began with the broad consensus that expanding connectivity to rural poor would provide opportunity for economic development, and that while mobile phone coverage is expanding at a rapid pace. But its not homogeneously distributed, nor would it ever be if left to the current GSM providers.

rural micro mobile telco
Rural mobile phone entrepreneurs

There needs to be a micro mobile telco solution, an entrepreneur-led, small-scale business model to deliver connectivity to rural or underserved areas not seen as commercially viable by large GSM providers.

In this model, voice communication is the original “killer app” – the key functionality that drives early and widespread adoption and revenue. But should broadband data also be provided, even if there isn’t obvious demand? Broadband data connectivity is needed for many applications in virtually every development sector, from e-government to e-health, and is often central to any educational intervention. And as mobile carrier backhauls are almost always IP networks, the technology it there.

In fact, there was also consensus that technology was not the main micro mobile telco constraint – costs and functionality continue to develop to the advantage of potential effective solutions like WiFi mesh networks, WiMax technology, and GSM infrastructure. Each technology has its drawbacks – voice scale for WiFi, spectrum owners for GSM, and antenna power, tower security, and backhaul for all – but they could be overcome.

There have been specific development connectivity projects that have been reported to generated profitable, sustainable businesses from remote connectivity solutions. However, none have found a profitable micro-telco business model that can scale. Ultimately we need a business model solution that could have 100s of instances in a single country – scale in frequency (not in size) is critical. The franchise business model works well with scale in frequency, and sale to GSM providers as they expand would be a viable exit strategy.

With micro mobile telcos, the relationship with incumbent telcos is a critical success factor to leverage existing assets (spectrum, backhaul, and back office functionality) of GSM providers. Even if franchisees used unlicensed spectrum plus open source software and hardware, there needs to be a good relationship with GSM providers to keep them from undermining the franchise’s operations via homologation constraints.
cell-phone

Governments, regulators and/or incumbent telcos are also key to scale and there are interesting ideas on how they can “jump start” these models. Functioning Universal Service Funds can be a source of financing for rural expansion.

Local governments can be anchor micro mobile telco clients – both as consumers of the connectivity services but also consumers of the data that connectivity services can provide. From basic census data to health, tax, and education services, micro mobile telcos can offer value to entrenched interests, easing the telco’s growth. The consumer goods and agricultural input industries are other potential dual-role client – as a consumer of connectivity and the data the service can aggregate.

International development also has a role in educating governments on micro mobile telco benefits in expanding government services to rural areas. Development agencies can be honest brokers around technology and business models, with a focus on sustainability. An historical parallel is rural electrification development activities.

Yet, electrification efforts are still facing the same problem years later – scalable local solutions that can be replicated internationally – so exploration across the spectrum of micro mobile telco options continues, and your input is welcome – online or in person at the next Technology Salon.

2 Responses

  1. Dave Ferguson says:

    Wayan,
    Thank you for your excellent summary of a very wide ranging discussion on mobile micro telcos. I hope this will inspire some GSM providers, through association or individually to become more active in evalating expansion options into more rural territory that they currently believe they can serve profitably. There are many willing to help!

  2. Wayan Vota says:

    Dave,
    You may be interested to learn about the Mesh Potato by Village Telco: “an initiative to assemble and/or develop the cheapest, easiest-to-setup, easiest-to-manage, scalable, standards-based, wireless local do-it-yourself telephone company toolkit in the world.
    We believe this is achievable through the use of Open Source software and low-cost, off-the-shelf, consumer communication technologies. A Village Telco offers affordable voice (and data) services through the provision of WiFi infrastructure and phones.
    What makes the Village Telco different from other rural, low-cost WiFi projects, is it’s focus on voices services, both from the point of view of making them work as effectively as possible at as low a cost as possible but also from the point of view of creating a sustainable business model for entrepreneurs.”