FACULTY OF ARTS, COMPUTING, ENGINEERING AND SCIENCES
BROADBAND INTERNET ACCESS IN DEVELOPING WORLD ECONOMIES:
AN INVESTIGATION OF THE FACTORS AFFECTING VIABILITY
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This research-based dissertation sets out to establish the factors which affect the ability of broadband Internet businesses in the Developing World to be viable. This attempts to answer the problem that is frequently observed: Internet connectivity is established as part of a Development project, funded by grants from donors such as USAID or DfID. When the project fails to generate sufficient revenues from users to fund ongoing costs, and donor funding ceases, the project also ceases.
A basic hypothesis behind the research is that if a profitable business model can be demonstrated, and it proves to be replicable, long term good quality connectivity can be provided without any donor funding. If the business model is proven to be replicable, then such a model may aid the diffusion of Internet access and make a significant contribution to bridging the Digital Divide.
As the bandwidth commonly available to consumers in the Industrialized Nations increases, so published content and applications on the Internet are getting more and more bandwidth-hungry. For example, the front page of www.apple.com decently featured the PC vs Apple Mac TV advert movies, which loaded by default. On the slow Internet connections commonly found in developing countries, increasingly bandwidth hungry content will become increasingly unusable, and users may be restricted to whatever content and applications still work on slow connections. The other side of this coin is that any business which makes significantly faster connectivity available will enjoy a substantial competitive advantage.
The dissertation discussed the definitions of sustainability and viability. “Sustainability” is a terms which is sometimes abused in Development circles. In particular, repayment and Return on Investment of the initial capital is sometimes neglected, and ongoing maintenance / refurbishment / upgrading is not always adequately considered.
“Viability” is defined in a business as meaning an enterprise which can survive long-term without any advantageous funding or external support other than that which would be available to any business within the same economy. This means that the cost of finance and expected repayment of loans / return on investment is at market rates, reflecting local economic conditions and risk factors. Proper provision is made for ongoing investment to ensure that the products and services offered remain competitive.
The basis of the research
A particular location was chosen for the research: post-tsunami Northern Sumatra in Indonesia. Initial research pointed to the selection of VSAT as the connectivity technology of choice, since the available dial-up and wireless services were considered to be overpriced and provided poor performance. A business model was designed which would consider economies of scale and efficient use of available bandwidth to optimize revenues. This was achieved by using half of the bandwidth purchased in an Internet café and half re-sold to local NGO’s and other businesses (delivered using point to multi-point WiFi.) The connection was designed to be the fastest in town. This proved to be a significant competitive advantage, drawing plenty of customers even though access was priced 20% above the average.
Working with a long established NGO in the region, investment capital was found to implement the proposed business model. After operating for six months, audited accounts were available. The research was therefore designed to examine the business and see if the assumptions made during planning were validated by reality. In addition, other factors where examined to see if there were additional lessons to learn.
The research comprised the following:
The demographics of an area can significantly impact the potential success of an Internet business. Better educated people are probably more likely to be users, and since there is often a correlation between education and income, they may also be better able to afford it. Conversely, illiterate people are unlikely to use the facilities. Affluence also affects factors such as mobility. People who own motorcycles will probably travel further to use an Internet café than those who must walk or cycle. Thus, widely available transport creates a geographically larger potential market.
In the research location, there was clearly an opportunity to generate more business amongst women. In different cultures, there may be different factors affecting the gender balance of users, but in Sumatra, it was thought that maybe having a different room for women might have helped to attract more.
Optimization of costs
There is still some way to go in optimizing costs. In some locations, the management and costs of electrical power supply is very challenging. It is thought that the use of thin client terminals and flat screen monitors can significantly reduce power requirements.
The manageability of the network is also a significant issue. Drive-by installs often associated with pornographic and hacker/cracker websites can make computers unusable until they can have their hard drives re-formatted and re-loaded. This creates work and reduces utilization levels. Two obvious solutions are:
Optimization of revenues
Further optimization is envisaged in a number of areas:
The research has allowed a reasonably good understanding to be gained of what works in a specific economy. It would be worthwhile repeating the research in other locations, to determine if the conclusions drawn about the underlying business model studies apply generally.
This research would seem to suggest that a transition from donor funded Internet connectivity in post-disaster situations, to privately funded for-profit businesses, may be accomplished relatively quickly after the disaster event. In the USA, this has implications for:
The business model used in this study has been embodied in a spreadsheet. With further validation, this could be a useful planning tool.
Some further work on the development of some demographic and economic indicators may also allow potential success and failure to be predicted.
Edited by the author for the web.
© Copyright, 2006 Rob Longhurst (email@example.com)