Troy Etulain leads the Digital Development Unit at US NGO FHI 360. He is passionate about demonstrating the business model for last mile connectivity and will be speaking at The Future Network Asia and available to discuss the economics, viability and assistance available to companies looking to provide rural coverage to connect the unconnected.
Troy Etulain, Director, Digital Development Unit, FHI 360: There is both an opportunity and a necessity for tower companies to begin evolving their business models to profitably serve the last mile. The innovative business models worth considering are not miniature versions of existing models. They involve new actors, technologies, investors and—most importantly—mindsets.
Tower companies are well placed to play a role in connecting the world’s four billion unconnected, especially in markets where they already have a presence. This is because of their existing relationships, legal status, the global trend of MNO’s divesting their infrastructure and, perhaps most importantly, the reduction in cost of base station equipment. Plus, many MNOs who report being pushed to expand coverage to rural areas are looking for cost-effective solutions and partnerships.
As tower companies consider potential expansion into more remote and less densely areas, they should consider the rich diversity of potential partnerships they could form with development organizations, including bilateral donors such as the US Agency for International Development, the UK’s Department for International Development; Australian Aid; the Japan International Cooperation Agency and non-profit, non-governmental organizations such as ours. According to the World Bank, annual total development assistance reached US$152.5 billion in 2015. These funds represent thousands of individual projects, most of which could benefit from and pay for increased connectivity.
Non-profit organizations like mine represent good allies, because our goals are complementary, not competitive to private partners and because we have been working in these remote, marginalised and logistically-challenging environments for decades. Non-profit organizations like mine are motivated by the social goal of connecting everyone for its development benefits, and are ready to collaborate with any company in support of this goal. Our decades of experience have shown that the most lasting, impactful projects involve profit-making ventures.
Development organisations are also technology-agnostic and ready to collaborate around last-mile experiments, especially in business models. Not only are we partner and market-agnostic, we have already been finding and highlighting the innovations we believe critical to connecting the world’s geographically and economically marginalised, work encapsulated in our Business Models for the Last Billion report. With our Last-Mile Connectivity Business Modeling Tool we have been trying to smooth the path for entrepreneurs considering GSM, ISP or combined business models in locations that have never had either.
Now, we are having conversations with mobile network operators about helping them up investment funds aimed at expanding connectivity in the markets they serve. Our idea is to facilitate expansion to the last mile by attracting additional capital that would spread risk amongst investors behind the MNO. These funds would invest in third-party connectivity providers and by default share their spectrum and connect them to their network. This would overcome what is commonly the biggest hurdle for last-mile providers: spectrum and interoperability.
These third-party operations would serve as sandboxes for experimenting with new business models and hardware, as well as alternative forms of backhaul which outside of MNOs’ core operations in these markets.
Investment funds also open up the opportunity for un- or under-served communities to play a role in solving their own connectivity issues. With the dramatically decreasing costs of base station equipment, one could imagine even tower companies, where an entrepreneur with comparatively modest means and experience could bring connectivity to their hometown. The closer investors are to consumers the more they could experiment with demand-side activities that would help ensure the profitability of these networks.
What role could tower companies play in MNO-led investment funds? How could they evolve their business models as infrastructure owners and providers to profitably deploy and operate smaller infrastructure in the markets where they already have a local presence and knowledge? It would indeed be possible for tower companies to set up large wholesale operations with active infrastructure, that would both complement and increase the size of their overall country portfolios. Moreover, the industry’s focus on small cells for dense urban markets plans could include ruggedised small cells aimed at connecting sparsely populated locations in developing country markets. And the growing trend of enforced tower sharing suggests the sooner they expand to rural areas, the better.
We are in a position to offer MNOs and tower companies a variety of forms of assistance to help ensure the success of this type of investment. We could help structure the fund, promote it to investors, study specific markets and, perhaps most importantly, provide assistance to these third-party businesses with business setup and operations. We can offer this assistance for free, because we are grant-funded and consider our mission accomplished when people are connected. As I said at the Facebook Telecom Infra Project (TIP) Summit in Santa Clara in October, companies interested in collaboration around last-mile connectivity should think of us as commercial partners, not beneficiaries of CSR.
In the past few years, tremendous momentum has built around the challenge of connecting the unconnected. In addition to research and advocating for dynamic spectrum usage (especially TV white spaces) Microsoft has awarded grants to promising startups through its Affordable Access Initiative. In addition to funding very useful population maps, Facebook has continued developing open-source OpenCellular base station hardware that will dramatically affect the economics of last-mile deployments. An OpenCellular base station, with solar gear included, will cost less than US$7000. After announcing last year that Canada-based Nuran Wireless will serve as its key retail partner for the equipment, which will be offered in 2G, LTE and SDR, the Telecom Infra Project has just unveiled a new grant competition which will see the awarding of base station (including solar) equipment to companies willing to share the insights they gain from test deployments.
These critical advancements increase our excitement about the combination of low-cost equipment with innovative business models to profitably provide connectivity to remote locations. Of the significant variety of business models designed to serve the last mile, four are worth tower companies’ closer examination:
1. Anchor tenant: In collaboration with development organizations and national institutions such as ministries of education or health, connectivity providers install infrastructure and provide service in locations where a school, etc. presents a consistent level of demand and revenue. Again, development organizations represent strong potential partners for this approach.
2. White-labeled/wholesale: A company installs its own GSM infrastructure, signing interoperability agreements with multiple MNOs for revenue sharing for traffic routed via this infrastructure. It is critical and fair that revenue is shared for both traffic originating and terminating in the wholesaler’s locations. Some wholesalers have found MNOs willing to pay for only what originates in remote locations, even though the introduction of new infrastructure provides new revenue by enabling calls to those locations.
3. Free WiFI with content at the edge: By deploying high-capacity storage devices preloaded with content in remote locations, providers can give consumers comparatively high-quality internet experiences. Business models for companies like BRCK actually don’t sell the equipment to providers and provide free Wi-Fi access. They focus on earning revenue from content providers and adverts targeting their users.
4. Connectivity-Solar Hybrid: Given the symbiotic relationship between power and connectivity in rural locations and the common demand for both, last-mile innovators often consider trying to deploy a diversified portfolio in order to collect as much profit as possible from rural expansion. Aside from the need to power the BTS equipment, most of the smart off-grid electricity meters contain SIM cards and require connectivity to be efficiently managed from remote locations. Even if two separate companies run parallel connectivity and power operations, they can coordinate to enter markets simultaneously, so that the provider sees mobile money (for paying electricity bills) contributing to the commercial viability of a tower.
There are indeed more models, as well as the unlimited potential of our creativity. In comparison to MNOs, tower companies have more flexibility to try new approaches, with new types of partners. And for this reason I am coming to the Asia TowerXchange/Future Network Meetup in Singapore to build bridges and to form partnerships with companies looking to connect the last-mile. The trend of increasing tower company ownership of communications infrastructure worldwide means the world’s tower companies and international development organizations have opportunities to collaborate across markets. The combined drivers of tower companies’ commercial need for market expansion and the development goal of connecting people for connectivity’s sake provide us a solid foundation for partnerships. Each successful deployment of an innovative business model sets a positive example that can we can emulate in other locations globally.
