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CCHHAAPPTTEERR 8
Community Internet Access in Rural Areas:
Solving the Economic Sustainability Puzzle
Michael L. Best Introduction
Media Lab Asia T elecommunications companies, entrepre-
MIT Media Lab
Colin M. Maclay
neurs, and policymakers have regarded
rural and poor markets with some combination
of too-complex-to-serve and not-interesting-
Center for International Development at enough (politically or economically) to be
Harvard University worthy of sustained attention. But times--and technologies--
have changed, leaving what have been perceived as backwaters
poised to become significant growth areas in the next decades.
Stakeholders are beginning to recognize the political and
economic significance of the more than half of the world's popu-
lation that lives in largely untapped rural markets. Governments
and nongovernmental organizations are increasingly concerned
with addressing economic development goals and stability,
stubborn deficits in rural health and learning, urban migration,
environmental degradation, and other related trends. The
private sector craves new consumers, producers, ideas, and
synergies in our rapidly globalizing environment. What most
have yet to understand, however, are the tremendous opportu-
nities to address these challenges through new information and
information communication technologies (ICTs). Increasingly
powerful, flexible, and economical, ICTs present staggering new
opportunities for social and economic integration. Achieving the
promise of ICTs does not require sacrifice on the part of busi-
ness, government, or civil society, but it does demand their
vision, cooperation, and action to create the environment and
7766 mechanisms necessary for ICTs to flourish in the rural areas of
the developing world.
One force necessary--albeit insufficient--for the establishment
of pervasive and sustainable readiness for the Networked World,
especially in developing and rural areas, is the market. It is
commonly assumed that effective rural ICT access requires
economic subsidy and financial loss; however, ICTs should be
economically viable if they are to gain wide, robust, and long-
lived usage. While the path to realizing such economics will vary
across countries, settings, cultures, and technologies, we
consider one critical issue: Internet for rural regions of devel-
oping nations.
In researching and studying the economic self-sustainability of
the Internet in rural areas (particularly in India), we have iden-
tified some criteria for success--something of a laundry list.
This list suggests that there are at least six broad categories1
CHAPTER 8 Community Internet Access in Rural Areas:
Solving the Economic Sustainability Puzzle
Figure 1: Nature and Level of Interactivity Between Factors Affecting Rural Internet Sustainability
Costs Revenue Networks Business Models Policy
Capacity LOW: HIGH: MEDIUM: MED/HI: MED/HI:
Unless access to Business, IT and More users ease Capacity Education,
computer maintenance outreach skills key awareness raising and suggests training
is limited for new industry training limits of model opportunities
Policy HIGH: HIGH: MEDIUM: HIGH:
Competition, taxes and VoIP alone is Policy broadly affects Decides potential for
tariffs, requirements significant Readiness, users RSP and franchisees,
for entry, spectrum, become political public sector as
interconnection constituency network client
Business Models MEDIUM: LOW: LOW:
Appropriate models Location guides clientele Little direct
reduce costs and applications connection
Networks HIGH: HIGH:
Metcalfe Effect costly to Size and scope drive
leverage (or else it would content, utility of
be done), scale economies medium
grow with network size
Revenue LOW:
Except specialized
services requiring extra
investment (copier,
camera), assuming
always on connection
Source: Information Technologies Group, Center for International Development at Harvard
that must be considered for economic self-sustainability: costs, enabled digital appliance for himself or herself, each village or
revenue, networks, business models, policy, and capacity. The community might have shared resources that are financially
groupings are imperfect due to the interrelationship and inter- sustained through some combination of user fees and outside
dependence among categories, which make consideration of any revenue. This basic model is often realized through some form
one category ineffective. A more accurate way to think of the of community access point for information and communications
categories might be to imagine them as a balloon, which when services, often known as a community telecenter or telekiosk.2
pushed in one area, bulges in others. For instance, policy will While community computer facilities (also known as shared
affect cost, which in turn influences business models and there- models) are discussed most directly in the business models 77
fore revenue and on down the line; this leads us to the not-so- section below, their basic structure and resource needs underlie
profound conclusion that everything affects everything else. many of the arguments made here. This paper gives primary
consideration to existing models, but telecenters will certainly
In Figure 1 we have artificially isolated the relationships evolve in the coming years to include mobile and wireless
between some of the diverse factors affecting economic access via handheld devices, thus offering a new set of oppor-
sustainability for rural Internet, but it should be noted only tunities to enhance sustainability and value. The shared model
when the system is taken as a whole can we describe it accu- has been applied to ICTs in recent times and to other resources
rately. We are only beginning to understand the complex nature in the past, and we feel that, in many settings, it is not only
of these relationships, but have attempted to suggest the level financially appropriate, but also culturally acceptable.
of interaction and provide an indication of the type of effects
we might expect to see. Telecenters in the developing world have, thus far, been prima-
rily sponsored and undertaken by governments, multilateral
One important assumption underlying many issues in the effort institutions, and nonprofits. Because of the desire to create
to achieve self-sustainable Internet service is that, in a poor what is essentially a public good (access to information and
rural setting, the Internet is likely for some time to be deliv- communications services), only secondary attention has been
ered as a community resource, rather than a personal one. In paid to entrepreneurism and sustainable business. There have
other words, rather than each individual having a network- been significant achievements under challenging circum-
CHAPTER 8 Community Internet Access in Rural Areas:
Solving the Economic Sustainability Puzzle
stances, but generally we have been better at learning about network (PSTN) often carry high fixed costs.3 Both fixed and
and making mistakes with telecenters than we have been at mobile wireless technologies fundamentally change cost struc-
creating economically sustainable models and universal access ture because they reduce the time, effort, and expense of last
to ICT in rural areas. While we agree that access to ICTs is mile service delivery, which typically comprises the majority of
important and that it can, and should be, supported by the all infrastructure costs.4 Moreover, wireless allows new entrants
international development community, we suggest that collec- to compete against incumbent providers with their own facili-
tive support for it should come in new forms that focus more ties, and the operator has an increased incentive to maximize
on enabling others, rather than on sustaining them. We also the number of users because the marginal cost for each addi-
suggest that the private sector, from large corporations to grass tional user is lower than with wireline networks.
roots entrepreneurs, has the most significant role in creating
and broadening effective use of ICT. New low-cost network technologies are fundamentally rewriting
equations of economic self-sustainability for rural Internet
This paper offers early thoughts on some of the challenges connectivity. Those rural communities within microwave radio
policymakers, the private sector, the international development reach of existing fiber optic cable links can effectively make use
community, and others face in unleashing the power of markets of Wireless Local Loop (WLL) last mile solutions (Kibati and Krairit
to better serve information and communication needs in rural 1999). At today's price of under US$300 per subscriber line, WLL
and poor areas. It is our firm belief that the diverse interests solutions such as the corDECT technology can provide both tele-
of all the stakeholder groups converge around sustainable rural phone and Internet connectivity up to 10 km away from the base
ICT, and that a market approach driven by the private sector station, and 25 km from a relay base station. The corDECT system
and entrepreneurs is the fastest and most efficient way to is engineered primarily for low price, rather than added (and often
include rural communities of developing nations in the unnecessary) features, and is therefore designed for developing
Networked World. world needs. The system offers 35.5/70 Kbps simultaneous
voice/data transmission (http://www.tenet.res.in).
Keeping Costs Low
It goes without saying that one of the keys to achieving For rural communities too distant from fiber backbones or in
economic self-sustainability is keeping capital and recurrent terrain too rough for the line of sight required between terres-
costs low. Capital costs include hardware, software (if trial microwave antennas, Very Small Aperture Terminal (VSAT)
purchased), network equipment, the physical premises, setup satellite is a common approach for connectivity. Today's prices
license and connection fees, and the like. Recurrent costs lie for send/receive units range from about US$4,0005 to over
mostly with Internet and telephone usage fees, electric power, US$10,000, thus making this approach inappropriate for many
rent, maintenance and repair, and salaries. poor or small communities.
Reducing capital costs with new devices and wireless VHF or UHF wireless solutions are a potentially compelling option
At present, the most significant capital costs in offering commu-
for narrowband connectivity that can also function in remote and
nity Internet are for hardware and network access equipment.
rough terrain (e.g., see http://www.arrownetworks.net), or
78 relatively depopulated, settings. These can cost under US$800 per
A range of low cost Internet-enabled digital appliances have
subscriber line, transmit over 200 km distances, and provide
been developed, and these can be far cheaper, and indeed,
upwards of 9.6 Kbps connectivity.
better adapted to the developing world context in their form Using appropriate technologies to reduce recurrent costs
and function, than traditional desktop computers. While they
remain the dominant access device, personal computers (PCs) The main factors contributing to recurrent costs include
are inappropriate for the developing world across many dimen- telephone, Internet access, power, and personnel costs. These
sions, due to relatively high cost, low reliability, unsuitable costs are primarily related to issues of government policy and
user interface, environmental sensitivity, and high power competitive environments, and we will only address them to
consumption. Handheld appliances such as the Simputer the extent that they directly affect economic sustainability.
(http://www.simputer.org) or Pengachu (http://www.media.
mit.edu/~rehmi/pengachu/v3_ document.htm) have shown Telephone toll charges can make up a heavy percentage of recur-
that network-enabled computers can today be priced at under rent costs if a regular telephone call is necessary to connect to
US$300. Longer-term research, at the Massachusetts Institute the Internet, particularly given the prevalence of time-metered
of Technology (MIT) Media Laboratory and elsewhere, prices calling and Internet Service Providers (ISP) that require long-
next generation appliances at dollars or even pennies. distance calls. Telephone and Internet access technologies that
separate voice and data, such as the corDECT system, can reduce
Additional high fixed costs are due to the network infrastruc- costs by handing voice off to the PSTN while switching data
ture. Connections achieved via the public switched telephone directly to an ISP (Jhunjhunwala 2000). Such a simple techno-
CHAPTER 8 Community Internet Access in Rural Areas:
Solving the Economic Sustainability Puzzle


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