ifnb access whitepaper a4 b30100437wp2009071en 0

8/2/2019 IFNB Access Whitepaper A4 B30100437WP2009071EN 0

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Affordable access:The first step to mass internet use

in emerging markets

White paper


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Affordable access: The first step to mass internet use in emerging markets2

Contents

3 Executive Summary:

A wider internet is emerging

4 The lure of the internet

4 Access part of the affordability challenge

5 Voice to data, urban to rural

6 Access to data, from shared to personal

7 Solving the affordability versus profitability conundrum

9 The affordability challenge in rural regions

9 Deploying and running mobile infrastructure

10 Tower reducing the number of sites required10 Power efficiency is the key

10 Backhaul the importance of technology selection

12 The emergence of network sharing

13 Adopting innovative business models

15 Innovation in marketing to rural customers

15 The dual-market urban strategy

16 Mobile internet access provides ultimate affordability

17 Shaping the individual communications experience

18 Conclusion:

The internet without restrictions

19 References


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Affordable access: The first step to mass internet use in emerging markets 3

Executive Summary:A wider internet is emerging

In mature markets, using the internet

has become as much a part ofeveryday life as watching television

or listening to the radio. While there

may be dark sides to the internet,

its advantages for individuals and for

national economic development are

overwhelming.

The internet holds untold benefits for

billions of potential users in emerging

markets. Affordable internet access

can change the lives of people in these

countries as much as, and probably

more deeply, than the rapid spreadof mobile voice communications is

doing today. A recent World Bank

Group report says that for every

10 percentage-point increase in high

speed Internet connections, there is

an increase in economic growth of

1.3 percentage points.1)

Yet first must come affordable access.

Consumers must be able to reach the

internet at a price level and with a tariff

structure that matches their spending

power before they can see the benefitsfor themselves and invest time and

money in developing their online skills.

There is huge future business

potential for communications service

providers (CSP) that invest in

deploying affordable access to the

mass populations of emerging

markets. Success will take innovation

new technologies, novel business

models, flexible regulation and fresh

marketing concepts.

Shared access is already a well-proven

and popular business with internetcafs catering for millions of users.

By leveraging mobile technologies to

provide personal access to the

internet, we will see simply huge

growth. The sheer volume of users

will be profitable for CSPs despite the

lesser revenues that lower income

users in rural and urban areas will

generate.

On the technology side, the latest low

power, flexible base station site and

backhaul solutions are helping CSPsto build mobile network coverage

with significantly lower capital and

operational costs than has been

possible before. Costs can be cut

further with new practices such as

network infrastructure sharing and by

the advent of flexible regulation that

allows the use of frequency bands

that can provide highly cost effective

coverage.

On the business side, involving local

communities and enthusiasticentrepreneurs in the running of rural

mobile networks can bring down

costs even further through better site

security and by the outsourcing of

key aspects of network operations.

Innovative funding schemes also hold

potential for helping CSPs to benefit

from capital-intensive renewable

energy developments.

Ultimately, the success of any

strategy for providing widespreadinternet access in emerging markets

will depend on matching the services

that are provided with the needs of

consumers, both in terms of cost and

in terms of providing the right

information that people can use to

improve their lives.

All the right conditions are in place

today and we already see the early

signs of how CSPs can win substantial

new business and how consumers can

enter the internet age.


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The lure ofthe internet

In mature markets, internet access

has spread widely, touching the livesof almost everyone. Using the internet

has become as familiar to many

people as watching TV or listening to

the radio.

In many emerging markets, though,

internet access remains the preserve

of the few, predominantly businesses

and higher income consumers in

urban areas. Yet providing the right

conditions are in place, there is no

reason to believe that accessing the

internet on a daily basis will notbecome as common in these markets

as it is elsewhere.

There are one and a half billion

internet users globally, but more than

4 billion mobile users. There is clearly

a vast untapped resource of people

who are already familiar with basic

communications technology but who

are starved of internet access.

There are already signs of the

potential growth in emerging markets.Mobile internet connections in Chile

jumped by 315 percent in 2008.2)

Meanwhile, in early April 2009 it was

reported3) that China Telecom had

gained more than 10,000 registered

users in just one week during a free

trial launch of 3G mobile services in

Jiangsu province.

An April 2009 report4) predicts that

mobile broadband adoption in Africaand the Middle East will grow faster

than the global average over the next

five years, with the subscriber total

increasing at a CAGR of 33 percent to

reach 32.2 million by 2014.

Access part of the

affordability challenge

Of course, people must first be able to

reach the internet. The infrastructure

must be in place and accessible toenable first-time internet users to

experience the possibilities of online

services. The right consumer devices

must also be made available. With the

vast bulk of users accessing

communications via mobile phones

and with a lack of fixed infrastructure

across large swathes of emerging

markets, it is likely that most users will

access the internet from their mobile

devices or via shared devices.

Even a simple browsing capability will

bring benefits. A growing market willstimulate the development of local

content and services and the entire

internet ecosystem will start to

blossom in that market. In turn, this

will create greater demand for access

and a growing source of revenue for

communications service providers

(CSP), supplementing their existing

voice and SMS business. As markets

mature, experience shows that CSPs

become more focused on hunting out

new revenue sources to offset declining

voice ARPU (Average Revenue perUser) and to control churn.

3G mobile internet services will constitute

the majority of African broadband growth in

the coming years. Mobile broadband will

account for more than half of the continents

broadband subscriber base by 2012.

Source: ITNewsAfrica5)


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In this white paper we explore how

internet access can be brought to themass population in emerging markets.

Access is one part of the jigsaw.

Affordability, motivation and

competence are the other key issues

as shown in figure 1. Together these

elements make up the key challenges

to consider when offering internet

services once the access barrier has

been addressed. Another Nokia

Siemens Networks paper6) discusses

the four key elements that need to

be considered when launching

sustainable services in emergingmarkets, while a third7) looks in detail

at competence and motivation.

Voice to data, urban to rural

In most emerging markets, recent years

have seen phenomenal growth in the

mass adoption of communications.

China alone added nearly 94 million

subscribers in 20088). Even this rate of

growth is outstripped by India which

added 15.41 million mobile users inJanuary 2009 the nations biggest

monthly growth9).

With basic affordable voice connectivity

being established, these high growth

rate markets are the most likely

candidates to see accelerating

consumer demand for data services

and internet access.

Competence

Affordability

Access

Motivation

Figure 1. The four key challenges to widespread internet use in

facing emerging markets are affordability, access, competence and

motivation. Source: Marja-Liisa V iher 1999 (adapted).

Getting in ahead of competitors by

providing affordable internet access is

vital for CSPs, enabling them to learnfrom consumer behavior and translate

this knowledge into new and profitable

service offerings that will grow market

share and revenue. Being early also

helps to build brand reputation,

strengthening presence in the

business segment and opening up

opportunities to provide managed

services and other innovations to

enterprises.

Indeed, it is these business users,

as well as higher income consumers,

that traditionally spearhead the roll outof internet access and broadband

connectivity. To make the most of the

opportunity, CSPs may adopt a dual

market strategy. This entails providing

high-speed, high-value access in

urban areas for higher income users,

while at the same time deploying more

affordable access in both urban and

rural areas to permeate access to

lower income users, thus capturing the

high volume market.


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Access to data, from shared

to personal

Most emerging markets follow a

familiar pattern of growth with the first

voice services being used by several

consumers sharing a fixed or mobile

device. As the affordability of services

comes within their buying reach,

individual consumers opt for their own

device and subscription. This switch

from shared to personal access is the

phase of strongest growth and the one

that we are currently experiencing with

mobile voice in many markets.

The same pattern of adoption is likely

with internet access. The first data

experiences are happening on shared

access, such as internet kiosks and

internet cafs. When consumers

become sure of the value of internet

access, feel comfortable using the

technology and find them to be priced

to suit their available spending power,

they will then commit to personal

subscription as illustrated in figure 2.

This intermediate step of shared

access will therefore be necessary to

move the market from personal voice

services to personal internet access,

and it is in this phase of moving from

shared to personal internet access

that the highest rates of growth will be

experienced.

Colombia evolves personal internet

access

The internet subscriber base in Colombia grew

by 13.63 percent in the first quarter of 2009,

reaching 2.47 million users. The government

estimates the total internet user base at over18.23 million from Colombias overall

population of 44.97 million inhabitants.

Source: Colombian Telecommunications

Regulatory Commission10)

By the end of 2008, South Africa had

1.35 million internet subscribers.

794,000 of these were wireless internet

subscribers and 588,000 were ADSL

subscribers. there are more mobile

internet subscribers than fixed.

Source: Balancing Act11)

Figure 2. Rapid growth will be achieved when users switch from shared to personal internet access.

Voice

Voic

e+da

ta

Productivityincrease

Time

1) Building basicvoice connectivitytoday.

2) Adopting internetservices with sharedaccess first before...

3) ...moving topersonal internet.


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Providing internet access at affordable

rates for the mass populations ofemerging markets is the key challenge

for CSPs. Tariffs must be driven down

to within the buying capabilities of

lower income consumers who survive

on just a few US dollars per day and

who can afford less than ten percent

of this income for communications.

Yet the CSP must ensure that these

lower prices are still profitable.

Innovation will provide the answer.

Not just deploying the latest

technology, but creating innovativebusiness models, marketing and

business operations. In this respect,

emerging market CSPs are not

burdened by cumbersome legacy

systems and processes, which can

put them in a better position to adopt

new ideas than some of their mature

market counterparts.

The ultra-rapid spread of voice

services across emerging markets is

almost completely due to the adoption

by CSPs of mobile technologies,as well as mobile markets that are

much more open to competition than

fixed-line markets, as shown in

figure 3. In rural areas, deploying

fixed infrastructure across wide

geographic regions is prohibitively

expensive. It is unlikely that this will

change and we do not foresee any

significant investment in fixed access

for rural areas in emerging markets.

Solving the affordabilityversus profitability conundrum

Figure 3. Percentage of markets open to competition, mobile and fixed, worldwide,

2008. Source: ITU, World Telecommunication Regulatory Database; based on World

Bank classification of economies.

A. Developing countries, mobile

C. Developing countries, fixed,international long distance

B. Developed countries, mobile

D. Developed countries, fixed,international long distance

10%

90%

42%

58%

16%

84%

13%

Monopoly

Competitive

87%


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In urban areas too, although many

fixed lines are in place, it is the easeand cost-effectiveness of mobile

coverage brings that makes it

attractive to CSPs looking to offer

services to more people. Existing fixed

infrastructure can be developed to

provide more advanced data services

to corporate customers and high end

consumers.

Consequently, there exists a fast

growing base of users who are familiar

with mobile devices. CSPs that have

bought into mobile infrastructure overthe years are best placed to re-use

much of their investment by adopting

3G technologies as the means of

offering internet access to their

customers.

Currently, about 100 million 3G

subscribers (21 percent of global 3G

subscriptions) come from emerging

markets. In 2013 Nokia Siemens

Networks expects this to rise tenfold to

about 1 billion emerging market 3G

subscribers (48 percent of the globalnumber). However, in the context of

population levels, with emerging

markets having 70 to 80 percent of the

world population, 3G penetration of

emerging markets will remain far lower

than in mature markets. (Figure 4)

Deploying 3G services using

UMTS900 may create 70 percent

CAPEX and OPEX savings for

mobile operators, says a recent

case study on the experience ofElisa Corporation of Finland,

released by the Global Mobile

Suppliers Association. Widely

used by GSM systems throughout

Asia Pacific, the Middle East,

Africa and Europe, the use of the

900 MHz band lowers the number

of cell sites needed to cover rural

and suburban areas.

Source: LIRNEasia13)

Figure 4. WCDMA subscriptions are predicted to show the fastest growth rates in emerging markets.12)

Figure 5. Significant cost savings can be achieved by using the 900 MHz band compared to using the

2100 MHz band.

Emerging markets

Mature markets

World

2500

0

500

1000

1500

2000

Subscribers in millions

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Cost of rural/suburban coverage(CAPEX & OPEX)

UMTS2100 UMTS900

50% 70%reduction


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Other 6.5%

Supportfunctions 12.7%

Marketing &sales 16.5%

Cost of goodssold 4.8%

Dealercommissions

16.9%

Customerservice 7.5%

Bad debt0.5%

IT 3.0%

Networks 31.6%

In India, the government is keen to

remove the digital divide (rural Indiahas almost 75 percent of the

countrys total population), and to

achieve this end, it is giving high

priority consideration to broadband

penetration in the rural areas to extend

services such as Tele-education,

Tele-medicine, and e-governance.

Deploying and running

mobile infrastructure

Nokia Siemens Networks operationalefficiency benchmarking studies

show that in emerging markets over

30 percent of a CSPs OPEX is

accounted for by the network, with

close to 40 percent coming from

marketing and sales, including the cost

of goods sold (Figure 6). On the other

hand, the main capital costs for a CSP

are in tower, power and backhaul.

Clearly, these three costs tower,

power, backhaul are key to achieving

more affordable access for end users.Lowering these costs will take

innovation at the network level, at the

site level and at the equipment level.

The affordability challenge

in rural regions

Achieving viable affordability in rural

areas takes a combination of low-cost

infrastructure deployment, new

business models, and innovative

marketing strategies.

The move into rural areas by CSPs is

being encouraged by governments

and regulators. In Brazil, for example,

the telecoms regulators licensing

tender for voice telephony and

broadband internet services will favorCSPs that pledge to deliver broadband

internet services in rural areas.

Meanwhile the Indonesian government

is aiming to encourage more of the

private sector to become involved in

the development of ICT in the country.

In addition, licensing obligations for

mobile CSPs in Brazil look at reducing

the cost of new frequency licensing,

but require 2G coverage in all

municipalities and 3G coverage in

60 percent of them within three years.

In another example, an OECD Rural

Policy Review reports that Chinese

public expenditure for rural areas has

been increasing in line with a stronger

focus on territorial imbalances.

Expenditure on rural areas almost

doubled in nominal terms between

2004 and 2007.

Through our ICT Policy, the government

seeks to build an ICT-driven nation revolving

around the idea of a knowledge-based society.

I firmly believe that the ICT Policy will allow

the development of ICT infrastructure hence

improving citizens access to information.

Kemal Stamboel, Vice Chairman, Executive

Team, Indonesian National ICT Council

Figure 6. Overview of operational costs for emerging market CSPs14)

Figure 7. Breakdown of site capital costs in mature markets.

Source: Powerwave

Civil works43%

Base station34%

Antennaequipment 9%

Coaxialcable 8%

Powersupply 6%


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Tower reducing the number

of sites required

In rural areas, base stations need to

cover huge areas and often there is

no existing site development that can

be built on. The difficulties of acquiring

suitable sites can be eased by

accurate network planning and the

latest base station technology that

together can reduce the number of

required sites by 2530 percent. This

can cut the CSPs capital and

operational costs (CAPEX and OPEX)

significantly.

Equipment also needs to be robust to

withstand often harsh environmental

conditions to avoid unnecessary

maintenance costs, particularly

important when a maintenance

engineer needs to travel for days in

difficult terrain just to reach a site.

Power efficiency is the key

With many sites built off-grid, beyondthe reach of the national electricity

grid, it is vital that base station

equipment is as energy efficient as

possible. The GSM Association

estimates that 75,000 new off-grid

sites will be deployed yearly from 2009

to 2012 as CSPs move increasingly

into rural areas. Sub-Saharan Africa

alone is expected to see year-on-year

growth of 17 percent in base stations,

with 70 percent being off-grid.

Innovative equipment designs canreduce base station site energy

consumption by as much as 70 percent.

We estimate that 86 percent of a

CSPs overall energy bill is accounted

for by the network, with 65 percent

being consumed by base station

sites. Extreme energy efficiency at the

site level, coupled with fewer overall

sites, can therefore reduce the CSPs

direct energy costs enormously.

Furthermore, because many sites are

powered by diesel generator sets,

less frequent refueling can reduce sitesupport costs dramatically.

Backhaul the importance of

technology selection

Backhaul is the third significant cost.

Rural areas will not have copper

transmission lines available and rely

on microwave radios for the backhaul.

Creating an effective mobile backhaul

requires a deep understanding of both

the radio and transport layers and

how they interact, particularly with

regard to optimizing the use of IP and

Ethernet technologies across the

backhaul layers. Multilayer optimization

enables services to be transported inthe most efficient layer, helping to

reduce network complexity and cutting

capital and operational costs. Such

optimization requires cross-functional

skills and experience spanning all

technologies, which realistically can

only be achieved by vendors that offer

a full portfolio of access and

aggregation technologies, including

microwave radio, fiber and copper in

the access network; as well as Carrier

Ethernet and IP/MPLS in the

aggregation and core networks.

Table 1. Tower, power, backhaul how innovation reduces the total cost of ownership for CSPs. Source: Nokia Siemens Networks, 2009.

Network impact Site impact

Tower: Cost of

construction

Fewer sites through

intelligent network

planning

Backhaul technology can have a huge impact on the site

construction cost. For example, using point to multipoint

IP based backhauling allows sites to be built on a pole or a

house in a village

Outdoor and self-cooling cabinets help to avoid shelters and

air conditioning

Power: Cost of

electrification

Fewer sites reduces

overall energy costs

Latest generation base station equipment reduces power

consumption substantially

Reducing or eliminating of air conditioning reduces the power

consumption per site

Innovative business models such as Power as a Service

reduce CAPEX and provide fixed monthly OPEX that is

independent of fluctuating energy prices

Backhaul: Cost of

backhaul

Fewer sites reduces the

number of hubs required,

improving backhaul

efficiency

Research shows that most voice traffic is generated within

villages. Most internet traffic is likely to be between the

internet gateway and the village. Therefore, local voice

routing frees up backhaul capacity for data trafficProxy servers can improve the customer experience by

caching functionality

In general, IP backhauling provides the best efficiency for

remote sites.


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Innovating at the base station site

Providing affordable access demands base station sites with low

CAPEX and OPEX. Nokia Siemens Networks Smart Site solution

brings innovation to all aspects of the site, including site planning and

design, active base station and transmission equipment, passive

equipment and the power system.

Flexible and cost-effective site design

Outdoor site design eliminates CAPEX items such as shelters

and air conditioning and reduces site running costs

Tower top sites for maximum RF coverage saving up to 30

percent in network roll-out costs

Optimized passive elements

Three legged tubular tower is up to 45 percent lighter for the

same height than traditional four legged angular tower

30 percent fewer carbon emissions because less steel, concrete

and transportation are needed

Wide coverage with Flexi Base Station

Nokia Siemens Networks Flexi Base Station supports multiple

installation options in outdoor and indoor environment

Lowest power consumption on the market

Suits a broad range of climatic conditions

Integrated transmission and transmission efficiency enhancement

Effective power systems

The latest technology helps to maintain constant optimal

temperature to extend battery life considerably in hot or cold

climates

Significantly lower power consumption can be achieved compared

to air conditioned outdoor power cabinets

Minimal power consumption reduces CO2

footprint

Renewable Energy Solutions Autonomous Sites

A range of renewable energy options with one or more power

sources including solar, wind and generator

All autonomous sites are equipped with an integrated battery bank

to provide power when solar generation is unavailable.


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The emergence of network sharing

Network sharing, in which CSPscome to a commercial agreement to

share physical network resources,

is becoming an increasingly important

way of reducing costs. Sharing can

be passive, in which only the site is

shared, or active, in which base station

and backhaul equipment are also

shared.

Both passive and active sharing are

seen by regulators as a fruitful way of

fostering investment and growth in

the ICT sector by offering incentives,including financial subsidies, for service

providers who share infrastructure.

The potential cost savings are

enormous. There are estimates that

CSPs in the Middle East & Africa

region could save USD 8 billion over

the next five years, by sharing their

towers.15)

Infrastructure sharing is a concept

that is being encouraged by several

authorities around the world. In 2008,

the Indian authorities relaxed their

restrictions on infrastructure sharing,

allowing the sharing of active and

passive infrastructure except spectrum.

The guidelines are aimed to reducing

the input costs on telecom access

providers (and to aid) reduced tariffand increased tele-density in rural

areas, the telecoms ministry said in a

statement.16)

In China, the Ministry of Industry and

Information Technology (MIIT) and the

State-Owned Assets Supervision and

Administration Commission issued a

joint policy statement on infrastructure

sharing, which became effective on

1st October 2008. The regulations

mainly apply to 3G network

construction rather than 2G networksharing. According to one report,

Sharing is key to promoting ICTaccess at affordable prices in rural

areas. Operators will automatically

receive subsidies for the

deployment and management of

towers as long as operators

share the towers with three other

operators or service providers.

Nirpendra Misra, Chairman of the

Telecommunication Regulatory

Authority (TRAI), India

the move could lead to a reduction of

about 15 percent in the 3G CAPEX of

Chinas three operators: China Mobile,

China Unicom and China Telecom.17)

Consequently, sharing deals in

emerging markets are appearing.

For example, in April 2009 Zain Kenya

and Essar Telecom Kenya agreed to

share 300 base stations over 15 yearsin Kenya.18)

In Ghana, CSPs are working jointly to

enable more than one network to

share cell sites. Co-location is very

close to our hearts and we are getting

on very well with the other operators

in reaching co-location deals to enable

us to provide better services to our

teaming customers, said Brett

Goshen, CEO of MTN, Ghana.19)


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Adopting innovative business

models

Innovation needs to extend to

business operations. The challenges

specific to emerging markets are

sometimes best answered by adopting

business models that are unlikely to

be deployed in mature markets.

Take the example of theft from rural

base station sites, a problem that

many CSPs in emerging markets face.

This can be a significant operational

cost for the CSP, with repeatedmaintenance visits to repair base

station equipment or to replenish

stolen fuel supplies.

By involving local subscribers and their

social structures, responsibility for a

base stations security can be taken on

by the local community. For example,

positioning the base station in the

mayors or tribal eldests house, helps

to increase the populations

appreciation of the value of the service

and provides local protection.

Building relationships with local

entrepreneurs also brings down theCSPs total costs by effectively

outsourcing the management of

elements of the business to local

communities. Two prominent initiatives

in recent years that demonstrate the

possibilities are The Grameen

Foundations Village Phone project20)

and the Nokia Siemens Networks

Village Connection solution.

A further option lies in innovative

funding options, which create a new

category of payment model,overhauling conventional CAPEX and

OPEX structures. Nokia Siemens

Networks, for example, has been

exploring a leasing concept for

renewable energy solutions. The aim

is to help CSPs adopt renewable

energy solutions despite their high

upfront cost.

The concept of Power as a Service

entails a vendor financing and

installing a renewable energy solution

at sites and then offering power fora fixed monthly fee from the CSP.

The CSP can enjoy a CAPEX-free

installation and monthly fees (OPEX)

that are lower than the monthly cost of

diesel consumption. The model also

means that the renewable energy

assets do not appear in the CSPs

financial records, enabling it to retain

its financial flexibility to invest in its

core business, which is connectivity.

Internet-style services without

the internet

A key challenge for CSPs in addressing

rural users lies in building their

competence and motivation to use

data services. An innovative and

rapidly-deployable way of delivering

data services into these markets using

SMS technologies has been developed

by Nokia.

Nokia Life Tools is a range ofagriculture and education services

aimed at rural consumers. The services

use an icon-based, graphically-rich

user interface that is supplied with

information via SMS that can be

accessed using standard mobile

phones.

Using SMS makes information services

available and affordable, while meeting

the two other areas crucial for emerging

market success motivation and

competence.


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Different approaches to

innovating operations

In recent years novel business models have

emerged to bring connectivity to remote villages.

Village Phone

building the sharing model

Village Phone was pioneered in Bangladesh by

Grameen Telecom and it has now also been

replicated in Africa.

In rural villages, mobile phones with a coupled

external antenna are provided to low-income

women to operate a business by renting the use

of the mobile phone and selling prepaid airtime

to other villagers, thus providing vital

communications access. Equipped with an

external antenna, the phone is able to receive

GSM signal far outside the CSPs normal

coverage area. This enables Village Phone

ladies to work in areas where commercial GSM

phones with integrated antennas will not work20).

By leapfrogging fixed infrastructure andleveraging existing wireless infrastructure, Village

Phone offers a viable strategy for increasing

communications access and technology

business opportunities in emerging markets.

Village Phone CSPs often use the additional

income to improve their health, food and

childrens education. Many Village Phone CSPs

have used their new resources to develop other

services, such as healthcare and emergency

calls, transport and charging services that benefit

the wider community.

Vandalism cut by local involvement in Nigeria

Engaging with the local population is an important aspect of serving rural communities

and in May 2008 Zain Nigeria launched its innovative Rural Acquisition Initiative (RAI)

to help boost entrepreneurship. The scheme franchises out the basic maintenance

and security of rural BTS sites to local trade partners.

Revenue-sharing with these local entrepreneurs is based on the call records from

each site, so maintaining BTS availability is in their interests. With RAI, we have seen

utilization rise by 200 percent on 25 sites, largely through better security to reduce

vandalism. Community relations are a big part of our activities. We want to put

something back into the local community.

John Earley, Chief Technical Officer, Zain Nigeria.

Village Connection

encouraging local entrepreneurs

The Nokia Siemens Networks Village Connection

solution involves enterprising villagers in the

management and selling of local voice and data

access.

Village Connection combines a network

architecture based on standard off-the-shelf

GSM infrastructure with an innovative franchised

business model in which call management and

service is controlled by a village entrepreneur.

No site construction is needed and a village-

based GSM access point can be installed within

hours to handle local switching. Access points

are connected to regional Access Centers via a

native IP link, using transmission media such as

microwave radios, WiMAX or satellite

connectivity. This eliminates traditional network

hierarchies, allowing a rural network to be built at

a much lower CAPEX, as well as eliminating

considerable operational expenses.

A local entrepreneur runs the village network,either employed by the CSP or as part of a

franchise. Such an arrangement not only creates

income, but also helps to build villagers

competence in using information services.


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Innovation in marketing to

rural customers

The logistics of rural areas, many

lacking basic transport infrastructure,

can be a further barrier to rolling out

access to consumers. Furthermore,

CSPs face unique challenges in the

marketing of services to lower income

rural communities.

Such difficulties are best overcome by

a mix of technology and operational

innovations.

The cost of access must be matched

to the available spending power of

lower income prepaid consumers who

may never have a significant amount

of cash to hand to buy conventional

top ups of around 5 US dollars.

Electronic prepaid recharging

solutions based on SMS replace paper

vouchers with text messages and

reduce the cost of the prepaid process

by up to 70 percent, enabling CSPs to

offer small denomination prepaidrecharges profitably.

Conventional marketing techniques

based on mass media advertising are

not always appropriate for the rural

sector. Instead, adopting very local

marketing and distribution strategies,

underpinned by detailed research on

socio-cultural knowledge systems has

proved to be more effective. Such

local strategies are also considerably

less expensive than nationwide mass

media campaigns which also fail toreach the whole population.

The deployment of a rural distribution

network comprising town-based

distributors supplying village shops orlocal distributors will also help to

overcome physical distribution

challenges. A recent Nokia Siemens

Networks pilot scheme in China

rolled out eCommerce to local

entrepreneurs, enabling them to

expand their businesses, which are

often limited due to their shop size and

storage opportunities. The pilot

scheme showed that during a five-

month period business owners

generated online transactions equal

to the revenue they have raised fromtraditional business.21)

The dual-market urban strategy

More and more people are living in

cities. Its a trend that accelerated

during the 20th century and will

continue to transform the demographics

of most countries. According to the

United Nations, 49 percent of the

worlds population lived in cities in

2005. By 2030 this will have risen to60 percent, with 4.9 billion people

expected to be urban dwellers.

In emerging markets, providing data

access to this huge urban population

will take a different approach than thatfor rural regions.

A dual market strategy is needed,

with investment in higher speed and

higher quality access to cater for the

demand for advanced services from

enterprises and high-end consumers,

accompanied by providing affordable

access for the lower income urban

population.

Shared access is already a well-

proven and popular business withwidespread internet cafs catering for

the needs of millions of users. These

establishments succeed because they

sell access in affordable chunks of

time. The move towards personal

access to the internet via the mobile

phone will be underpinned by this

same charging model.

Instant provisioning solutions will enable

users to buy flat rate internet access

on their phones for short, affordable

periods of 30 minutes or one hour orlonger, with the cost being deducted

from a prepaid account bought from

an entrepreneurial-run distributorship.

The appeal of flat-rate pricing

The runaway success of flat-rate tariffs for mobile internet

access in mature markets provides invaluable experience

for installing instant provisioning solutions that provide

access on-the-fly for lower income segments. Flat-rate

pricing is proven to appeal to subscribers.

Users can be sure that costs will not go up even when

growing from initial low levels of use to higher usage.

Simple pricing increases peoples willingness to pay;

they do not want to be bothered with complex pricing.

Flat rates increase usage. Broadband CSPs have seen

use increase by 50 to 200 percent when users changetheir pricing plan from a metered to a flat rate model.

Source: Nokia Siemens Networks 200922)


16/20


Mobile internet accessprovides ultimate affordability

It has become clear that the sheer

cost and logistical difficulties ofproviding widespread data access with

fixed technologies is simply not viable.

In many countries the number of

mobile internet subscribers outstrips

the number of fixed access users.

According to analysts Informa and

Yankee group, 2009 will see the

number of mobile broadband customers

overtake fixed-line broadband users

globally.

The markets showing high growth for

voice services are clear candidates fortransformation to the internet and

multimedia world.

In these emerging markets the shift

from shared internet access topersonal internet access will be

enabled by a lower total cost of

ownership for the consumer,

underpinned by affordable access.

In Peru, for example, with a GDP per

head of less than USD 4000 a year,

in 2007 12.9 percent of the population

had access to a PC, but only 2.5

percent had internet access the cost

structure of mobile technologies can

rapidly unlock this potential.23)

The cost effectiveness of buildingand maintaining mobile networks for

CSPs is another key factor, and in

terms of the economies of scale it

brings, the front runner in mobile is

undoubtedly 3G. One prediction points

to more than 2.5 billion 3G subscribers

worldwide by 2013, with over one

billion in Asia alone.24) The success of

3G is largely down to its sheer scale,

making affordable access a reality for

lower income segments.

There are many examples of emergingmarket CSPs launching 3G services

and achieving rapid take up. When

TEF, Chiles most successful 3G CSP

deployed 3G technology, traffic

soared from 450 GB to 4 TB a day in

just 60 days, with the majority of this

new data traffic coming from outside

urban areas.

There has been an explosion in the use of

mobile internet access [in Mexico]. Mobility

plus data is what customers want and we

are seeing very good results with 3G.The internet is a necessity in the 21st century,

not a luxury.

Marco Quatorze,

Director of Value Added Services

for Amrica Mvil

The mobile handset is becoming

the most important means of

accessing the internet in Egypt.

Abdul Razzak,

Chief Technology Officer,

Etisalat, Egypt


17/20


Shaping the individual

communications experience

The selection of technology will

depend on an analysis of many

factors, from frequency availability,

to license and regulatory conditions,

and the CSPs existing installed base.

An understanding of customer needs

is equally important as the consumer

market evolves from voice to data,

from urban to rural, and from shared

to personal access.

However, consumers are not concernedwith the technology that their CSPs

deploy. They want a communications

experience that satisfies their

individual needs. The quality of

service, their costs, reliability of

access and the relevance of services

all influence consumer adoption.

Nokia Siemens Networks focuses on

helping CSPs to understand the

context in which their customers find

themselves and then deliver the

services that excite their imaginationsand enrich their lives. The ultimate

vision is to enable a segment of one

whereby the service experience is

defined for each individual. Such an

individual communications

experience is the highest value that

any CSP can deliver to its customers,

whether people or businesses.

The route to this vision lies in providing

the lowest total cost of ownership for

networks and their operation and

enabling CSPs to create the bestexperience for their customers.

The importance of excellent customer

experience

A strong focus on customer experience is characterizing

the transformation of CSPs in mature markets and

already we are seeing evidence of the impact network

quality and service in emerging markets. A Nokia

Siemens Networks study25) has found that in Indonesia,

19% percent of all subscribers who have churned have

decided to change CSP due to bad voice quality.

The study also shows that when markets mature, the

likelihood of mobile subscribers changing CSP increasesvastly. Some 87 percent and 79 percent of mobile

subscribers in Indonesia and Pakistan respectively have

never changed CSP, while the corresponding figure is

55 percent and 48 percent for Germany and the UK.

In times of hyper-growth, emerging market CSPs are

concerned mainly with acquiring market share rapidly.

The race for market share can be to the detriment of

network quality, but need not be.

One Indonesian CSP has confirmed to Nokia Siemens

Networks that network quality is a key acquisition driver

for its customers.


18/20


Conclusion:The internet without restrictions

This must change and it is. Internet

services can help people to buildbetter lives and to support nations as

they create greater economic

prosperity. The key that will unlock

these huge opportunities is affordable

access. Unless people can reach the

internet, the internet cannot help

people.

Innovation in technology, in business

and in policy-making can makeaffordable access a reality for ever

more people, further and further down

the income pyramid.

The communications industry is being

charged with the responsibility to

make the internet a possibility for all.

The joint effort of all players in the

industry is needed to provide the vital

innovation. However, it is certain that

the investments required will be repaid

many times over through the revenue

that will be generated by billions ofnew internet users.

Ultimately, nobody, whatever their

income, need be deprived of the

benefits of the internet, of the ability to

use information to improve their lives.

All the pieces of the affordable access

puzzle are available, we just need to

put them together correctly.

A minority of the worlds population

uses the internet today. Yet thepotential for good that the internet

offers is greatest for the billions of

people who do not yet use this wonder

of the information era.


19/20


References

(1) http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:

22231347~pagePK:34370~piPK:34424~theSitePK:4607,00.html, July 3, 2009(2) Chilean Mobile Telephony association (Atelmo 2008)

(3) South China Morning Post, April 2009

(4) Pyramid Research, April 2009

(5) ITNewsAfrica, October 27th, 2008. http://www.itnewsafrica.com

(6) How the internet can enhance the lives of the next billion consumers,

Nokia Siemens Networks, 2008

(7) Information changes lives making the internet relevant in emerging markets,

Nokia Siemens Networks, 2009

(8) Chinas Ministry of Industry and Information Technology (MIIT), 2008

(9) Telecom Regulatory Authority of India, January 2009

(10) Colombian Telecommunications Regulatory Commission (CRT), 2009

(11) Balancing Act, May 2009, www.balancingact-africa.com

(12) Nokia Siemens Networks 2009, based on multiple analyst resources(13) Reports: 2G frequencies can make big savings on 3G deployment,

LIRNEasia, Sept 25, 2008

(14) Nokia Siemens Networks operational efficiency reference benchmark 2009,

1st update, i.e. not based on published reports

(15) Tower Sharing in the Middle East and Africa: Collaborating in competition,

Delta Partners, April 2009

(16) LIRNEasia, April 2008

(17) Informa Intelligence Centre, 16/10/2008

(18) Telecoms.com, http://www.telecoms.com Zain-essar-network-sharing-deal-is-

a-paradigm-shift-for-emerging-market-players, April 16, 2009

(19) Balancing Act Africa, issue 447, March 2009

(20) Grameenphone, http://www.grameenphone.com/index.php?id=79

(21) Nokia Siemens Networks Corporate Responsibility Report 2008(22) Opening Doors to the Next Billion People the Markets and Economics of

Connectivity White Paper, Nokia Siemens Networks 2009

(23) 3G for all. How 3G is set to transform communications across emerging

markets, Nokia Siemens Networks, 2009

(24) Parks Associates, http://newsroom.parksassociates.com/article_display.

cfm?article_id=5128, January 20, 2009

(25) Acquisition and Retention Study, Nokia Siemens Networks, 2009


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