Industry and analyst estimates vary but the consensus is universal – more than one billion of the world’s populations are not connected to a mobile network.
The traditional and much touted issue of handset affordability, as the single biggest barrier to a widespread growth in mobile connections across the developing world, has now largely been addressed. Through initiatives led by the ITU, the World Economic Forum and the GSM Association’s drive to ‘Connect the Unconnected’ and its Emerging Market Handset initiative, handset affordability is no longer the burning issue. In addition, market forces in the manufacture and supply of low-cost 2G handsets and, increasingly, the introduction of entry-level 3G handsets, particularly from ZTE, LG, Huawei and Samsung, as well as a glut of second-hand handsets, globally, have all made the handset affordability issue somewhat redundant in terms of a barrier to adoption.
So what then are the technical and commercial barriers that continue to deter mobile network operators (MNOs) from cost-effectively and profitably extending their networks beyond their urban strongholds to population centres in rural and remote regions throughout emerging market countries?
The answers we receive as a company from frequent meetings and interactions with many MNOs, globally, are that the three greatest barriers – or perceived barriers - to network expansion into rural and remote regions are: A - the high backhaul costs incurred to deliver voice calls and mobile data traffic to and from users’ devices and B - the high operational costs required to power high-energy base stations in off-grid locations Third, the high capital costs involved in deploying traditional infrastructure, such as telecoms towers, which operators perceive to be a pre-requisite for rural and remote deployments. As such, there is a prevailing sense of belief that all of these factors, both individually and combined, simply wreck any possibility for a positive business case or an acceptable return on investment for village and enterprise communities which present subscriber potential of between 500 and 1,500 users per community.
However, those early-adoptor / early-majority operators who have scratched below the surface of these perceived barriers have found a distinct difference between the perception and the reality in terms of the business case for connecting the unconnected – not only because low-cost, low-consumption, solar-powered, passively-cooled base station solutions now exist and have been successfully deployed in markets throughout the Middle East, Africa, South East Asia and Latin America, but also because these operators view unconnected communities differently.
In short, they see opportunity there – opportunity to truly add incremental subscribers to their network in low-subscriber-acquisition-cost and low, or near-zero, churn environments. There is a common belief that remote communities represent low-ARPU potential and that, at best, remote communities will only deliver ARPUs of less than half the prevailing national ARPU.
The reality, however, in the vast majority of cases that we have encountered and studied first-hand is that, when connected, even the most remote communities will generate and sustain ARPU levels on par with and, in very many cases, in excess of, the operator’s national ARPU through voice and SMS services alone.
So, what is driving this contradictory dynamic in common perception – the notion that remote communities defy common wisdom and logic in terms of their uptake and unexpected levels of usage? Firstly, simply because a community is remote does not mean that it lacks industry or that its residents are not tech-savvy.
During a recent commissioning in a remote community in West Africa, a community, which had hitherto had no form of telecoms infrastructure or means of internal or external telecommunications, the field installation engineers who arrived on-site to install and commission the service, discovered, to their amazement, that many of the villagers were already equipped with 2G and in many cases 3G handsets, which were being used for their MP3, camera phone, calculator and other such value added features. They fully understood mobile device technology, they simply had no coverage or connectivity to use their handsets for the very purpose that which those devices had been manufactured in the first place.
The second outstanding factor that is contributing to relatively high ARPUs and low-to-zero levels of churn in these newly connected remote communities is the ‘first-in-wins’ principle. Two or more operators cannot both sustain a viable business case if they choose to compete in subscriber communities of around 1,500. As such, the MNO which arrives and delivers mobile services to the community first, not only acquires total market share but is also assured of near zero levels of churn due to competitor absence.
The bottom line is backhaul
Whilst those operators who have and who are extending coverage beyond their high SAC, high churn and highly competitive urban markets are experiencing unexpectedly high levels of uptake, usage and a positive business case, backhaul - its availability and affordability - remains the one key factor for widespread network extension to rural and remote parts of Asia, the Middle East and Africa and Latin America. In these regions, fibre roll-out simply cannot be commercially entertained, while microwave backhaul brings its own challenges in terms of line-of-sight and build-out costs. Therefore, the only way is up.
Only satellite backhaul can deliver the reach, the economics and the ease of physical transportation to remote site locations in the form of small VSAT antennas and modems. Africa, in particular, has relatively widespread VSAT infrastructure already in place, and the imminent arrival of O3B Networks will further enhance ‘bandwidth in the sky’ throughout Africa. This, in turn, will help to hasten mobile network expansion across that vast continent and throughout emerging markets as a whole. Richard Lord is CTO at Altobridge.
Richard Lord is chief technical officer at Altobridge.