Universal access and service (UAS) programme developers can build up a desk-based demand model for unserved areas based on data collected during the ICT sector review which may be refined later through a field demand study. The model uses national data on communication expenditure and projects it to unserved areas. It starts out with the country’s total telecommunications revenue divided by its GDP, resulting in the percentage telecom expenditure of GDP. This can be refined with additional data where available, as follows:
- Percentage of GDP accounting for household income (typically 60-70 percent of total GDP);
- Typical rural or low-income compared to average income;
- Regional variation of income;
- Percentage of telecom revenue from business users (to be subtracted from the total telecom revenue for a closer approximation of household expenditure);
- Data on telecom expenditure by households; and
- Household number and size.
By having data on population or household and income in various identified unserved areas, the total revenue generating potential of each unserved area can be calculated on an annual basis, as follows:
(per capita income) x (population) x (the telecom expenditure percentage)
or
(per household income) x (no. of households) x (the telecom expenditure percentage)
In most countries, the demand for telephone service has been identified at somewhere between 2-5 per cent of a country’s GDP, using ITU’s indicator of telecommunications revenue as percentage of GDP, as can be seen in the Figure below.
Figure: Total telecom revenues as % of GDP – 2007
Source: ITU-infoDev ICT Regulation Toolkit – UAS Module based on ITU World Telecommunication/ICT Indicators.
A recent review of several telecoms demand studies in developing countries found a high variability in spending levels per household, as well as significant rise globally of the percentage in household income spent on communications [1].
Field surveys of rural areas in Africa have indicated household expenditure levels of more than 5 per cent in some countries. This makes sense, considering that rural incomes are often lower than average income, thus the expenditure is a higher percentage of the income and also, living in rural and remote parts of the country, the opportunity costs of travelling to communicate are much higher. This makes the argument for communications services all the more attractive. In a large demand study commissioned in 2005, by the Nigerian Communications Commission (NCC), respondents stated they spent on average USD 20.7 per month on the mobile phone (fixed phones are almost nonexistent outside the main cities), which is 7 per cent of monthly household income. In the developed world, phone cost expenditure is typically less than 2% of Gross National Income (GNI) per head, due to a combination of low telephone costs and higher incomes.
People want and need to communicate and are prepared to pay for it no matter what their economic status is. The benefits they receive from communications expenditures are now well known as they relate to routine family, business and emergency matters, and to time and expense savings (the opportunity cost) of alternative means of communications, such as the necessity to travel.
In NCC’s demand study, over one third of respondents (36 per cent) indicated that they travel to another town to make a telephone call (as shown in the Figure below). 21 per cent of the respondents actually travel to meet in person because they have no access to a phone. A third of respondents send a letter or use a messenger (or a combination of both – i.e., write a letter and then have a messenger deliver it) to communicate. Approximately 8 per cent do none of the above or selected “Other” (methods of communication) in the survey. Less than 1 per cent of respondents stated that they have their own mobile phones and travel to the nearest coverage area.
Figure: Alternative means of communication due to lack of phone.
Source: NCC Demand study 2005
On average, respondents stated they spend one hour and 40 minutes travelling to make a phone call and return home. The average total cost of return travel to make a phone call is USD 2.84. This is based on over 5,000 interviews in all six regions of Nigeria, and a sample that included urban, semi-urban and rural areas (but excluding major cities).
End notes
- See “Telecoms demand: measures for improving affordability in developing countries – A toolkit for action – Main report”, Claire Milne, January 2006, chapter 2 on assessing and measuring affordability