Business Models

The concept of using business models in development projects became popular with the adoption of digital technologies in the sector. The euphoria of the dotcom boom saw some of the thinking and language of entrepreneurs rub off on development practitioners. Along with the concept came the imperative that development projects must be self-sustaining. Donors concerned about the future of the expensive computer systems installed in villages and slums insisted that NGOs and communities run the equipment as businesses to generate income to pay for connection fees and operating expenses as well as maintain a surplus fund for replacing hardware.

In instances where the push to set up self-sustaining businesses became the primary objective, important development considerations took second place. Some of the business models were so ambitious that they would not have worked even if applied in developed country settings. Development practitioners whose strength lay in altruistic processes became so occupied with trying to be entrepreneurs that they did not have the time to do what they were good at. Instead, they struggled to replicate dotcom business models that they did not empathise with. And the users who should have benefited the most from the new technologies could not use ICT to the full because they could not afford to pay the prices the business models required. This swing towards profitability shows the weaknesses of being driven by hard-nosed business priorities in initiatives that have overriding development goals. It also shows how expensive computers and Internet access can be in terms of the incomes of the intended developing country users.

The search continues for an appropriate business model. It may be the most difficult piece of “technology” to invent in the whole suite of ICT for development. In its absence, the valid fears of the donors will come true: equipment will eventually fail and telephone bills will pile up and lines get disconnected because there is no money to buy replacement hardware and to pay for connection fees. We review briefly three well-known business models that have worked effectively in the right conditions. They are the telecentre, the village phone of Grameen Bank, and public funding.

Telecentres

Telecentres are a logical extension of the public call office that brought telecommunications services to millions of villages across India and other parts of South Asia. In the case of the public call office, villagers at first set up business with just a telephone line and handset and charged users a fee for making calls from the telephone. The business usually comprised no more than a telephone, a table and a couple of chairs. A fax machine was added later when fax became ubiquitous. Telecentres added several Internet-enabled computers to this milieu, as well as a faster telecommunications line where it was available and affordable. The business model remained very similar to the pay-as-you-use formula of public call offices.

Telecentres operated by development projects have found their overheads high, and they commonly run short computer training courses and provide website design and other desktop publishing services to earn extra income. The training element is at the same time meeting the goal of most development projects of building local capacity in using software applications. Commercially run cyber cafés, on the other hand, have discovered online gaming the most profitable part of their business.

The track record of telecentres has been mixed. Like cyber cafés, they tend to do well in more urbanised areas with users who can afford the price and have a reason to go online. Telecentres in rural areas have been challenged by users who are interested in using their services but are unable to pay for them. They also have to contend with frequent disruptions in both power supply and telephone connection. The search continues for a business model to serve poor users. The search is perhaps in vain as business models inherently exclude people without the money to pay for services.

Village phones

The Village Phone Programme of GrameenPhone – a company of Grameen Bank, famous for its micro-credit financing schemes – has expanded rapidly across Bangladesh. The programme is designed for women who have participated in Grameen Bank’s loan schemes. Selected women are provided with a loan to buy a GSM mobile phone and trained to use the phone to run a public call-office service in their neighbourhood. The loan is for an average of BDT 12,000 (US$208) to pay for a handset, the telephone subscription fee and incidental expenses.

The programme was launched in 1997. There were 45,421 village phones subscribed by the end of 2003 and 58,000 phones as of April 2004. The average revenue for each village phone subscriber is double the telephone charges of the average business user. The revenue from village phones for GrameenPhone itself has been growing significantly over the years, starting with BDT 530,000 (US$9,200) in 1997 increasing over the years to BDT 2,070 million (US$36 million) at the end of 2003. The village phones in operation now provide telephone services to more than 60 million people living in the rural areas of Bangladesh. More than 68,000 villages in 61 districts have been covered under this programme. A case study posted at the GrameenPhone website (2004) reported that one of the earlier
subscribers to the programme was able to earn BDT 3,000 (US$52) a month after deducting all her costs.

An analysis of the programme found that village phone subscribers were provided with 50 percent rebates on the cost of calls made from their mobile phones (Digital Opportunity Initiative, 2001). This allowed the women operating the public call offices a reasonable income from their investment. GrameenPhone was effectively subsidising village phone subscribers with revenue generated from their urban subscribers. The analysis also found that two groups of people made the most use of the village phone. The first group comprised farmers checking on prices for their produce and making arrangements to ship their produce in a timely manner so as to minimise spoilage. The second group was made up of people using the mobile phone to arrange for remittances from relatives who were working abroad.

Public funding

Public funding used to be a familiar “business” model. It had gone out of fashion in recent years but made a surprising comeback in 2004 among some of the richest communities of ICT users. Cities in Silicon Valley of California, stretching from San Jose to San Francisco, as well as many other cities in the USA, have begun providing broadband access to all their residents. WiFi antennae are set up on lampposts and other vantage points to create hotspots in central parts of the cities. The long-term plan of many of the cities is to provide WiFi coverage across entire cities.

Public funding continues to be the dominant model for educational and development broadcasting. Many governments recognise the importance of dedicating parts of the airwaves to carrying information and content vital for the progress of the population. Some governments have at the same time privatised some television and radio stations. Experience has shown that privatisation tends to lead to the conversion of previously development-supporting channels into stations that are focused on entertainment so as to maximise revenue from advertising inserted between such programmes.

Asia-Pacific countries that have progressed the fastest with the deployment of ICT are also those that have made the most significant public investment into infrastructure, services and R&D. South Korea and Singapore are among the richer Asia-Pacific countries that have pumped billions of dollars into the ICT sector in the form of infrastructure, R&D grants, and incentives to businesses. Public funding has a definite role to play in closing the digital divide, especially in poorer communities, which are becoming increasingly isolated by the liberalisation of the telecom¬munications sector.

Funds from governments and donors should also be invested in developing low-cost hardware suitable for both illiterate and literate ICT users. Computers will remain beyond the reach of many hundreds of millions of potential ICT users in Asia Pacific for decades to come, just as the simple telephone has eluded many millions of people before that. Appropriate low-cost hardware may range from better and cheaper radio receivers to WiFi VoIP handsets. It is time to progress beyond PCs and keyboards.

The efficacy of “public” funding, in the true sense, can be seen in the case of the Indonesian VoIP service described earlier. Members of the public have self-financed the establishment of WiFi networks, servers and other supporting infrastructure to make the country’s VoIP network one of the most vibrant in the region without any form of support from the government. Admittedly, this has been achieved mainly among Indonesians with a reasonable income rather than the poorer communities.