There are a handful of countries with co-operative models for telecommunications services – Argentina, Bolivia, Poland and the United States of America.
It is important to note that all these co-operative models began operating before the introduction of cellular technology, when fixed lines were the norm. For example, most of Argentina’s approximately 300 co-operatives have been operational since the 1960’s.
Co-operatives emerged primarily in rural and remote areas where existing national carriers clearly were disinterested in serving those areas because they were considered unprofitable. Many of the Argentinean co-ops are in small, isolated communities in the south (Patagonia) where the two operators at the time, had openly expressed they did not want to serve those communities. Even in the United States, independent telecom providers serve less than 5 per cent of the United States’ phone subscribers; 225 co-operatives are a sub-group of independent telecom providers. However, while representing a very small percentage, in these cases rural co-operatives are important to reach and serve these small communities.
Poland is an exception to the fact that co-operatives typically serve areas no other operator is interested. In Poland, a new telecommunications act (1990) created 44 local licence areas to compete with the government-owned incumbent operator TPSA. Not all of these local areas were rural areas only though, they included urban and semi-urban areas. Some of the local licence holders were co-operatives, set-up with the assistance of the National Telecommunications Cooperative Association (NTCA) and USAID of the United States. Typical subscriber size is around 8,500. Two co-operatives are known to be still operational and profitable and have added additional services such as Internet, broadband, radio and TV.
Looking at the co-operative experience, the following factors allowed co-operatives to be sustainable and in some cases even profitable:
- Providing multiple services – many co-operatives in the United States also own cable TV or cellular subsidiaries, while the Polish co-operatives added Internet service, broadband and in some cases radio and TV. Argentina’s co-operatives often provide other services such as water and power, and in 2007 they have been authorized to provide mobile telephony service;
- Favourable interconnection agreements or subsidies – Poland’s co-operatives have been established with substantial donor funding and managed to negotiate reasonable interconnection agreements with the incumbent fixed network operator. In the United States the rural operators, including co-operatives, receive subsidies for serving high-cost areas – in 2006 alone, this amounted to USD 4.1 billion;
- De-facto monopoly position – historically, most co-operatives started out as the sole telecom provider in their serving area, which meant that they captured all potential demand and did not need to operate under competitive pressure. With the advent of expanding cellular technology, the sole-provider position is often severely eroded;
- Medium-income countries and service to households – countries with co-operatives are low-middle income (Bolivia), upper- middle income (Argentina and Poland) and high income (United States). Co-operatives provide service to households and they would not be sustainable in communities where only a minority can afford private service; and
- Infrastructure and resource sharing – as many co-operatives also provide other services such as power and water, they have invoicing, accounting and collection mechanisms, and human resources already in place, reducing overhead costs. The sustainability of co-operatives is further increased through management often working without any payment.
Whether co-operative models have a role in future universal access and service (UAS) policies depends on various factors and specific circumstances of the country considering these models. Co-operatives are considered by some as potential model for providing broadband services to communities. A recent example in the United States is the Mid-Atlantic Broadband Cooperative (MBC), created in 2003 by a group of regional leaders whose purpose was to revitalize the regional economy of Southside Virginia. In 2004, MBC created a plan to build over 700 miles of new fibre-optic infrastructure and own the facilities and infrastructure. The project started with USD 6 million in grant funding from the US Department of Commerce Economic Development Administration (EDA) along with additional funding of USD 34 million from the Virginia Tobacco Commission (VTC). Today, the 700-mile fibre network is operational. MBC is an established wholesaler of broadband services, providing the infrastructure necessary to attract businesses to rural Virginia. MBC and the VTC are funding last mile pilot projects in five different Virginia towns. Businesses and residents throughout Virginias are benefiting from MBC’s initiative [1
Some factors e.g., the sustainability issues discussed above and other factors are elaborated in regards to community networks and community involvement in Section 3.3.2
. It appears that co-operative models might be preferable for communities or areas not served by commercial providers (who are not enticed by subsidies through a Universal Access and Service Fund [UASF]) or in areas that are served extremely poorly. Co-operatives might not be appropriate if there are viable alternatives within the market and with commercial providers.
- See for details http://mbc-va.com/