Telecom Growth in the Developing World

The idea of rural living is based on segmentation; physical distance or complicated terrain meant a lack of access to services such as electricity and telephones. The definition will have to change. Wireless technologies , as explained by the Washington Post, can be too easily deployed

Cellphones are the first telecommunications technology in history to have more users in the developing world — almost 60 percent — than in the West. Cellphone usage in Africa has been growing close to 50 percent annually — faster than any other region. More than 30 African nations have more cellphones than land lines. In only 11 years, Grameenphone — an offshoot of the Nobel Prize-winning micro-lending outfit — now covers 98 percent of Bangladesh and serves the majority of the country’s 30 million telephone users, only about a million of whom have land lines.

The economics of service are behind the sharp rise in use. Delivery of low cost devices to high numbers of customers, even with low margins, means the infrastructure investment is recouped in just a few months:

As demand rages among rural folk, Vodacom, which erected the Kgautswane mast, now has to kit out rural base stations with the same level of equipment as base stations in the city. Still, it made back the $164,800 outlay for the Kgautswane mast in less than six months.

People living in the area around the base station — which covers a roughly 19-mile radius —make between 20,000 and 30,000 calls a day, just over a year after coverage went live, according to Vodacom.

This is great news for the initial phase of service delivery, but sustaining revenue is even more important for infrastructure companies thinking about investing in rural areas. Customers pay the basic level of service to begin and then soon find the technology brings them more revenue. More revenue enables providers to offer long term plans and higher service levels.

Mhlapo says she spends as much as $25 on airtime some months. Margaret Chinhete, a Zimbabwean woman who lives down the gravel road says she spends about $13 a month on her new phone, but easily covers that with the extra cash she makes from selling crafts now she can contact customers by phone.

“When I bought this I had never made a phone call. Now I use it to call business contacts. It saves me from walking kilometers every day and I have doubled my monthly earnings,” Chinhete told Reuters, as she hauled home her wares.

Service does not have to be a one-to-one ratio. This is very unlike developed countries where cell-phone service is not only intended to be single-user it is preferred (this was the source of endless debates when I worked on mobile security at Yahoo! — what should happen to contacts and calendar, for example, when more than one user logged in/out of a phone). A business model can exist where one person gets the cell phone and then charges a small percentage for others in the area to use it. Perhaps at some point the cell phone providers will incorporate this as their own service but leaving it to local entrepreneurs has some interesting security implications.

They already have the ability to log who is using the phone, even with informal measures, whereas the provider would have no visibility. A system that tried to push unique identities to the users would face easy circumvention. There is no incentive for a shared user to assert their unique identity unless it benefits them directly, such as being correctly billed. The providers, on the other hand, will not want to put anything in the way of adoption. They obviously want to ease adoption and hope word-of-mouth marketing (no pun intended) will be linked into revenue, status, pride, etc. so more and more Africans will invest in having their own phone. Fraud will force regulators to step in and create barriers to anonymous or shared entry; until that time adoption will continue to be made as easy as possible.

The low-cost wireless option for telecommunications has now overcome just about every obstacle in rural areas. The cell phone user base grew twice as fast in Africa than in Asia from 1999 to 2004 and drove right through issues of security and stability that stalled other investments.

Five years ago [in 2000], for example, sub-Saharan Africa (excluding South Africa) accounted for one of every five mobile subscribers on the continent. That ratio has now doubled.

Executives of the MTN Group, another major African mobile operator, say the company’s Nigerian network cost 2½ times as much as its South African network because of lack of infrastructure. But demand is so intense that MTN is adding hundreds of base stations.

Congo was in the midst of a civil war when Alieu Conteh, a telecommunications entrepreneur, began building a cellular network there in the 1990s. No foreign manufacturer would ship a cell phone tower to the airport with rebels nearby, so Conteh hired local men to collect scrap and weld together a tower.

Now Vodacom, which formed a joint venture with him in 2001, is grappling with other problems. Its trucks get stuck in the mud. A crane is out of the question so it takes 15 to 20 men to haul each satellite dish into place with ropes. Base stations must be powered by generators. The exchange rate is maddening: Each morning, executives send instant messages to employees containing the latest rate for the plunging local currency.

Despite all that, Vodacom Congo has 1.1 million subscribers and is adding more than 1,000 daily.

There are no plans to extend land-line service to the surrounding steep mountains where Skhakhane lives, government officials in South Africa say. But that may not matter: Six months ago, Vodacom erected a cellular tower whose signal can be picked up in the hills. Now it logs 10,000 calls a day.

It all sounds absolutely amazing but if the developed market is any indicator of things to come there are at least two security challenges lurking. The first is energy. I suspect biodiesel, solar and even wind can easily resolve the need for power distribution. They also add to the growth of an economy centered around telecommunications. All of these can be developed locally, like wireless, and remove rural barriers to infrastructure development. The second is how new subscribers will behave in terms of privacy controls.

A continent laced with power and political instability, along with a history of ruthless authority, begs the question of privacy on handsets, towers and systems. Free markets also beg the question. A local service will have to compete with much larger providers and the market will be under pressure to keep their contracts, proposals and IP unique and confidential. Then there is always the question of simple fraud. Who will be able to listen to whom and how will identities be traced? It appears that the Africans may next face adoption of regulatory models and/or pay for enhanced privacy controls. Ghana, Nigeria, Tanzania, South Africa and Mauritius have started to require phones be linked to a formal identity.

All new mobile Sim cards – on contract or pre-pay – will have to be registered in the name and address of the user before they can be activated. Customers will have to verify their details with a form of identity or their bank details. [Regulators] argue they are needed because more people have been using prepaid mobile telephones to commit fraud and send malicious texts.

Studies have started to suggest that regulation not only puts a dent in African mobile phone adoption rates but also may start a reduction.

Whatever the reality, there’s no doubt that the law is harming Vodacom and MTN subscriber figures and hampering growth in new subscribers. Often, immigrants to South Africa lack the required official identity documents, and the outlets which record their details seem unprepared. This has lead to Masiza saying that MTN will lobby communications minister Siphiwe Nyanda for a relaxation of the rules governing the recording of private subscriber information. If no wiggle-room is granted to MTN and Vodacom, then the two operators face months of disconnecting subscribers who are unwilling or unable to confirm their details using the correct documentation.

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