Rural ICT Solutions for “Feed the Future”

Eric WhiteINTEGRA LLC

15 December 2010

What is “Feed the Future”?

“The US Global Hunger and Food Security

Initiative”

So…

“ICT for Feed the Future” becomes…

“ICT for Food Security”

What do we mean by “Food Security”?

Availability

Access

Utilization

Stability

RURAL ECONOMIC GROWTH

Food Security

Agricultural Development

RuralEconomicGrowth

The importance of ICT infrastructure to Economic Growth

Controlling for all else, access to voice and broadband is associated with big increase in GDP (10% to 1%)

How ICT causes growth in rural areas

• Lowers search costs and transaction costs, making labor more productive.

• Increases the rate of social learning (better workers = increased human capital)

• Reduces risk (increasing investment)

Income = f(productivity, human capital, investment)

How ICT increases rural productivity

1. Voice, the killer app2. Market information

systems

Lowers Search Costs

How ICT increases rural productivity

1. Voice, the killer app2. Market information

systems

1. Warehouse receipt systems

2. Commodity Exchange

Lowers Search Costs

Lowers Transaction Costs

How ICT improves rural human capital

Farm Extension Services• Disease Identification

(Grameen AppLab “Community Knowledge Worker” Program)

• Google SMS: Farmer’s Friend

Increases Social Learning

How ICT increases investment in rural areas

ICT can reduce the risk faced by farm households, thereby increasing their ability to make investments.

Reduces Risk

Risk levels move inversely with incomeSecure Money Transfers/Savings-

Safaricom M-PESA

Knowledge instead of guessing

Weather- Reuters Market Light

Busting myths about ICT Infrastructure

Myth #1Telecoms are more than poor people need.

Priority should be put on irrigation, electricity, roads, sanitation, etc.

In the 21st century, ICT is just as important as

any other piece of infrastructure.

And, for Rural Economic Growth, perhaps more so!

Busting myths about ICT Infrastructure

Myth #2Poor people can’t afford ICTs,

don’t want them, and don’t think that they need them.

The fastest growth rate in mobile adoption

is in the developing world.

BOP has shown a huge willingness to pay for ICT as a share of total income

Willingness of Poor to Pay for ICT

“In richer economies, households spend on average 1.5-2% of their income on communications. In emerging markets, it’s not unusual for this number to reach as high as 8-10%”

-Pyramid Research

To the astonishment of the industry, people living on a few dollars a day have proven avid mobile phone users”

-Business Week, Sep. 2007

• Lowest capital cost of any infrastructure, coupled with highest customer willingness-to-pay, means that the private sector is willing to play.

14

ICT – The best way to leverage private sector funds for infrastructure

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

3

6

9

12

15 Investment Commitments to Private Sector Infra Projects in SSA by Sector

Energy Telecoms Transport Water and sewerage

Source: World Bank Private Participation in Infrastructure Database, in billions of 2008 US$

15

Investment commitments to telecom projects with private participation in Sub-Saharan Africa, by segment, 1990–2008

Source: World Bank and PPIAF, PPI Project Database.

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

2

4

6

8

10

12

Mobile access Multiservice providers Fixed access and long distance Fixed access Long distance

2008 US$ billions

Private ICT investment is overwhelmingly in Mobile Infrastructure

The “Gap” Model of Telecoms Access

Current network reach & access

Market efficiency gap

Smart Subsidy Zone

True Access Gap

Geographical ReachHig

h in

com

e ho

useh

olds

L

ow in

com

e ho

useh

olds

ARPU*Users > (OPEX+CAPEX)

ARPU*Users > OPEXARPU*Users < (OPEX+CAPEX)

OPEX*Users > ARPU

Covering the “Smart Subsidy” zone

Most countries already have a mechanism in place to institute a state-managed subsidy.

In most countries, these Universal Service and Access Funds (USAFs) do not function well

On average only disperse 13% of the amount they take in.Multiple reasons for this, not just corruption

Getting to Universal Service

• To reach households beyond the Sustainability Frontier we must FUNDAMENTALY ALTER the economics of the situation.

• Since we can’t instantaneously raise ability to pay, our only choice is to lower costs. How?

• The private sector is in the early stages of experimenting with a new technology and a new architecture that has the potential to reach everyone.

Low Cost Base Stations

Sat. Receiver/

RouterSatellite Service Provider Uplink

Sub. Management

Internet

Backbone

Sat. Receiver/

Router

Sat. Receiver/

Router

Sub. Management

Sub. Management

Femtocell

Femtocell

Femtocell

Base Station Specifications

• Low-cost base stations require a capital expenditure of <$20,000 as opposed to $100,000 for standard cell sites

• They are solar powered and completely stand-alone

• Operational costs approach 0. Standard cell sites cost $2000/month in generators alone

• Profitable at an ARPU of around $3, which is within the “willingness-to-pay” of many rural poor.

• Signal range of up to 10 miles = >1 base station per village.

Issues and scope for USAID Technical Assistance

• Reaching the Market Efficiency Gap – standard legal/regulatory/competitiveness issues. Room for Technical Assistance in these areas.

• Reaching the Sustainability Frontier with Smart Subsidies– USFs, on average only distribute 13% of money taken in

• Achieving universal service– Working with technology companies to help demonstrate the

business model and to link them to Universal Service Funds

USAID contracting vehicles ready for this work

• Meets the market efficiency gap– Provides Legal/Regulatory/Competitiveness TA

• Runs a Program on Universal Service Fund Administration, with a specific focus on Africa– Partnering with Intel

• Connectivity on the Rural Edge (CORE) program– Works with Micro-Femto companies, network

operators, and USFs to achieve universal access.• Altobridge (Ireland)• VNL (India)• iDirect and Ubiquisys (USA)

Global Broadband and Innovations (GBI)

Summary

1. ICT causes rural economic growth through better access to information

2. Rural Economic Growth means more (and more reliable) agricultural output. This is Food Security

3. To expand rural connectivity we need to engage in legal/regulatory/competitiveness work, provide Technical Assistance to Universal Service Funds, and push for the adoption of new, low-cost technologies.

4. The GBI program provides an avenue within USAID to engage in each of these activities

Points of Contact

Joe DuncanGBI Program Manager, USAID

jduncan@usaid.gov

Eric WhiteManaging Associate, INTEGRA LLC

ewhite@integrallc.com