One approach to universal access (UA), which springs from the user side of the network—even though the first international case and several current initiatives involve leading mobile operators—is the village phone concept. This has emerged in several forms around the world, sometimes organized by a Micro-Finance Institution (MFI), sometimes by a private enterprise, or sometimes by the operator with financial partners.
The village phone concept began with the launch of the village phone programme in rural Bangladesh in 1997 as an initiative of the Grameen Bank. The Grameen Bank provides impoverished village women with financial support to develop sustainable income generating activities. In 2006, Muhammad Yunus, the founder of the bank, and the Grameen Bank itself, were jointly awarded the Nobel Peace Prize "for their efforts to create economic and social development from below."
Women clients of the Grameen Bank who show the initiative to become local Village Phone Operators (VPOs), receive training and are loaned funds to purchase a mobile phone set-up (phone with special in-built pricing software) suitable for rural areas, as well as airtime credits. Through the network of VPOs, vending affordable airtime denominations and facilitating individual calls, residents enjoy better access to communication services.
The success of the programme at generating sustainable business and social empowerment opportunities for women, and high performance in the recovery of loan disbursements, led to the replication (with variations) of Grameen’s initial Bangladesh model, in the African countries of Nigeria, Uganda and Rwanda.
Essential features
At the core of a generic village phone programme is a viable business model for local entrepreneurs (women and increasingly men) to provide telecommunications services to their community. The entrepreneurs are offered a telephone operator business kit consisting of a mobile phone, external antenna (in the African cases), business management materials, a marketing poster, and usually some introductory training via the telecommunications service provider alone or in partnership with supporting organizations, which include microfinance entities, banks and non-government organizations (NGOs).
The entrepreneurs then buy discounted pre-paid airtime credits for resale at a profit and thereby offer an affordable public mobile phone service to their communities. They can typically also sell airtime top-ups for other mobile network private subscribers. Earnings from the business are then used to pay off the initial investment (typically in less than a year) and provide long term income for the entrepreneur.
For local residents, VPOs provide affordable access to the mobile communication services, where the cost of mobile handsets, hardware and account subscriptions have otherwise limited people’s ability to use the existing telecommunications services. By establishing widespread communication access in impoverished areas, the village phone approach has been shown to empower the poor by enabling them to improve their livelihoods and generate income through reducing the opportunity cost of communication. The participants experience enhanced networking opportunities and access to knowledge, which is increasingly available through the text transmission services.
Various benefits of the village phone model
As pointed out by the World Resources Institute in their NextBillion initiative to support widespread social entrepreneur opportunities to the poor, “Low-income populations have clearly benefited from access to mobile phones, which ease access to jobs, to medical care, to market prices, to family members working away from home and the remittances they can send, and, increasingly, to financial services.” [1].
The village phone model facilitates delivery of core services and market expansion of the organizations involved, and this benefiting also governments, regulators, telecommunications companies, micro-finance institutions (MFIs) and development organizations. A village phone approach allows telecommunications providers to increase sales of airtime to a greater number of new users, as well as widely extending their service infrastructure to all clients (e.g., VPOs selling airtime, facilitating calls, product information, etc.) without the prohibitive costs of formal staffed facilities.
Operators active in village phone-type programmes also find that further market share can be leveraged through branding of the service via an expanded presence of dispersed VPOs [3]. MFIs can also expand the reach of their services and empower clients with increased access to important communication resources and information that can be used to improve productivity and opportunities. For national governments with responsibilities for telecommunication infrastructure and regulation, a village phone approach can assist in meeting national universal access (UA) goals for optimal community coverage.
Key roles and alternative models
Key organizational roles and responsibilities of this model include the following:
- Finance/Development Organization – Responsible for providing and managing financing, capacity development for potential client operators and expanding reach of VPO model as viable livelihood strategy. Traditionally, microfinance organizations such as Grameen Bank, are involved in this role;
- Telecommunications Provider – In charge of mobile network infrastructure, responsible for being compliant with regulatory and licensing issues, and supply of airtime credits for programme use. In Bangladesh, this role is carried out by Grameen Phone Company;
- VP Company – A distinct company usually created by the telecommunications provider to manage the village phone program, finances, partner liaison and expansion of the program. An example of a VP company is Grameen Telecom; and
- VP Operator (VPO) – An individual who participates in a village phone program and is established as a communication services business for the community where he/she lives. In Bangladesh, this refers to women clients of the Grameen Bank who are established in a business selling mobile phone services – call by call.
As demonstrated in the case of the village phone implementation in Uganda spearheaded by the mobile operator MTN, an alternative operational model has resulted in implementation successes beyond planned expectations; significant expansion and adoption of VPO businesses are occurring without formal intervention and loans from microfinance organizations. Details regarding the village phone implementation approach utilized in Uganda and implications for alternative village phone models are included in the Reference document Review of Replicating Village Phone from Uganda and Bangladesh.
Regulatory response to Village Phone
The integration of a village phone approach in efforts to realize national universal access and service (UAS) goals requires complementary regulatory and operational structures to facilitate integration of policy with the dynamics of the competitive telecommunications market and required standards for quality of services.
For example, appropriate village phone tariff regimes should price services within reach of the intended beneficiaries while not undermining other telecommunications service providers’ market. In general, regulators can be confident that the players involved can make use of existing competitive tariffs without intervention beyond that which may be required to monitor competition and ensure a level playing field and minimal dominance by the strongest operator(s).
These are the tangible actions that policy and regulatory bodies can facilitate for village phone programs to thrive within, and complement, UAS programmes:
- Policy and regulatory bodies can establish specific funding mechanisms or categories for village phone initiatives (for example in collaboration with financial institutions or under the universal access and service fund (UASF) programme) that supports any one or more of the following:
- assessment of village phone activities;
- training and capacity development;
- programme evaluation;
- start up financing options for VPOs; and
- working capital for village phone operators; and
- Regulatory bodies should streamline tariff and regulatory requirements appropriate to the scale of VPO service provision. Typically, VPOs make use of bulk discount tariffs available from the telecommunications operator, which enable them to retail their service at a profit while offering the end users an attractive price for calls compared to the price of calls under private subscription.
The future of Village Phone programmes
The village phone program in Bangladesh is experiencing a decline in profitability due to a combination of two factors:
- Increased numbers of VPOs: starting with 32 VPOs in 1997, the number reached almost 280,000 in 2006; this increased competition among VPOs is squeezing the profit margins to a minimum; and
- Increased affordability of mobile phones for individuals, leading to a decline of demand for public access village phones.
Bangladesh’s village programme might become a victim of its own success and the success of the market. It and other programmes will only remain relevant for the future if they are able to integrate value added services into their offering, which could include, for example, mobile banking, mobile data, Internet and broadband services.
END NOTES
- Allen Hammond et al. The Next 4 Billion in Innovations - Spring/Summer 2007, World Resources Institute.
- Numerous rural demand studies and cost-benefit analyses have demonstrated that rural residents either already spend or are willing to spend and see the need to spend between 5-10 per cent of their household income on the phone. These include studies recently carried out for the regulators in Nigeria, Burkina Faso, Mozambique and Mongolia as part of UA policy and programme development activities. See for example the NCC Demand study, on their web-page
- The VP programmes in Nigeria, Uganda and Rwanda are clearly being used to promote the brand name of MTN in all villages where a VP operator is established and was part of the feasibility justification for those local MTN operators.