Strategies for the Next Billion Operator Strategies.pdf
Transcript of Strategies for the Next Billion Operator Strategies.pdf
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
1/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 1
This report is a licensed product and is not to be photocopied
Strategies for the Next Billion:
Operator Strategies
Decreasing the speed of network expansion
Reference Code: OT00034-005
Publication Date: December 2011
Authors: Angel Dobardziev and Shiv Putcha
SUMMARY
In a nutshell
Most of the next billion mobile connections will come from remote rural areas in emerging markets.
This will pose significant technological and business challenges for vendors and operators alike.
This report examines the strategies that operators should adopt for successful network rollouts and
marketing to these users. It also looks beyond simple voice and SMS services, outlining
possibilities in utility, health, education, government, and mobile money services.
Ovum view
Most of the next billion mobile connections will come from the rural and remote areas of Africa,
Asia, and to a lesser extent Eastern Europe and Latin America. These prospective subscribers not
only have low incomes; they also live at the periphery of physical and social infrastructure,
especially for utility and communications services. The further that operators go into these sparsely
populated areas, the higher the cost of network coverage per customer. In addition, average
incomes in rural and remote areas are substantially lower than in urban centers, which leads to
ARPU that can be as low as $12 per month. As a result, the business case for network
investment in these areas is highly pressured in terms of both revenues and costs.
Emerging market service providers are moving cautiously to expand their network coverage into
rural and remote areas, with many operators decreasing the speed of their network rollouts. Many
service providers consider the return on investment (ROI) on the next billion connections as
insufficient for a large-scale investment. Instead, emerging market operators have shifted their
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
2/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 2
This report is a licensed product and is not to be photocopied
focus to upgrading their existing networks to 3G in urban and suburban areas, which has yielded
strong mobile data revenue growth rates of 3040%. In addition, policy frameworks in many
emerging markets are unhelpful, and in some cases actually hinder service providers from
expanding into rural areas.
Ovum believes that the current mix of technology, business models, policy tools, and
improvements make it possible for service providers to make attractive returns on rural network
expansion. We expect services among the next billion to evolve from shared services and devices
to personal ones, meaning that operators need to include shared access voice and data services
in their marketing strategies for rural users. While voice and SMS will be the primary services
among the next billion users, we expect a number of other services to also be popular. Agricultural
utility services will be extremely important, as will education, health, government, and mobile
money services.
Recommendations for mobile operators
Be the first to launch or look to share rural networks
Service providers must regain their focus on rural network expansion as there are many areas that
make good economic sense to cover with the latest low-cost solutions. It is easy to neglect rural
expansion amid the current rush towards 3G and mobile broadband. However, operators need tobe aware that many rural areas will not support more than one or two physical networks, meaning
that they have to launch first, or be willing to share network infrastructure with other operators.
Pick coverage areas carefully
As some areas are more attractive than others, it is critical to deploy services in these areas first in
order to maintain the financial and organizational momentum behind rural expansion. Whether
operators take helicopter rides to seek out tin roofs or rely on the insights of local agricultural
cooperatives, they need to choose carefully and focus on areas that will provide immediate
returns. Operators must also be prepared to adapt and move away from areas that turn out to be
unsustainable.
Adapt marketing
Operators must adapt their existing marketing and service offerings, placing a greater emphasis on
shared services, recalibrating dealer commissions, and engaging with local entrepreneurs for
marketing and promotions.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
3/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 3
This report is a licensed product and is not to be photocopied
Adopt dynamic pricing for network capacity
Ovum believes that rural areas are excellent candidates for dynamically adjusted pricing models
based on network capacity. This involves offering discounts to subscribers when a cell is under-
utilized in an effort to drive traffic and avoid the wasting of network capacity.
Channel local entrepreneurial energy
Local entrepreneurs are essential to the success of operators rural strategies. They can play a
variety of roles such as basic airtime distributors, shared service operators, mobile money agents,
or be responsible for network maintenance and security.
Localize data services mix
All services that go beyond basic voice and SMS must be localized and calibrated to ensure that
they are suitable for the language, cultural, and literacy requirements of local populations. There
are already some excellent examples of agricultural, health, and educational services that
operators can learn from.
Lobby policymakers for policy improvements
Operators must let local policymakers know what needs to be done to improve the policy
framework for rural investment. Operators should not only lobby for passive infrastructure sharing
in rural areas; they should also push for active network sharing. Providers also need to inform
policy agencies of the sites that are economically unviable so that they can be made more
attractive through policy tools such as universal service obligation funding, tax incentives, and/or
subsidies.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
4/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 4
This report is a licensed product and is not to be photocopied
TABLE OF CONTENTS
SUMMARY 1
In a nutshell 1
Ovum view 1
Recommendations for mobile operators 2
IDENTIFYING THE NEXT BILLION 7
Who are the next billion? 7
Ovums definition of the next billion 7
A harsh revenue and cost equation 8
SERVICE PROVIDER STRATEGIES FOR THE NEXT BILLION 10
Service providers are decreasing the speed of rural expansion 10
Strategies for effective network coverage 11
Prioritize coverage in areas with the greatest potential 12
Deploy lean, shared, and managed network equipment 13
Adopting lean and local marketing and distribution strategies 14
Local engagement: from distribution to network management 15
Track, learn, and adapt to improve performance 16
Policy imperatives for increasing rural network coverage 17
SERVICES FOR THE NEXT BILLION 19
From shared to personal voice and data 19
Beyond voice and SMS: service mix must be localized 21
Productivity-enhancing services will be crucial 22
Educational services 23
Health and wellness services 24
Government services 25
Mobile money services 26
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
5/29
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
6/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 6
This report is a licensed product and is not to be photocopied
TABLE OF FIGURES
Figure 1: The next billion in the global socioeconomic pyramid 8
Figure 2: The next bill ion ROI challenge 9
Figure 3: The two opposing forces pressurizing operator capex 11
Figure 4: Six key success factors 12
Figure 5: Local engagement levels 16
Figure 6: From shared to personal services 20
Figure 7: Mobile money feature design for the next billion 27
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
7/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 7
This report is a licensed product and is not to be photocopied
IDENTIFYING THE NEXT BILLION
Who are the next billion?
The next billion is a powerful metaphor that conjures up images of users in emerging markets,
usually based in remote and rural areas, that are un-served or under-served by telecoms services
(as well as often by basic utilities such as water and electricity). The promise of the vast number of
underprivileged people around the world being able to meet their aspirations through the power of
mobile communications is a topic that makes for impassioned debate, innovative zeal, and
sometimes cliches and platitudes.
However, the next billion means different things depending on ones perspective. Governments
present a vision of rural and remote communities that are in need of infrastructure and connectivity
to improve their economic positions. Mobile operators refer to the next billion in terms of the next
billion mobile connections, which doesnt align exactly with the number of active users due to multi-
SIM usage. Equipment vendors view the next billion as an opportunity for an incremental revenue
stream from a new wave of strategic investments. Device vendors speak of the next billion in terms
of mobile phone shipments, either to entirely new user segments or through replacement sales to
existing users. Software, services, and platform providers define the next billion as the next wave
of users that they connect to the Internet.
Ovums definition of the next billion
As shown in Figure 1, Ovum defines the next billion as the one billion people currently without
access to telecoms services, most of which are near or at the bottom of the global socioeconomic
pyramid. In simple terms, there are currently 6 billion mobile connections globally and 7 billion
people on Earth. Taking into account that many people have multiple connections, a rough
estimate would be that there are 4 billion connected people. Therefore, the next billion will be the
additional billion people that mobile operators, vendors, and governments manage to expand
network coverage to and connect to mobile services. Considering the growth of multi-SIM and
multi-device ownership around the world, these people will form part of the additional 23 billion
connections that service providers add to their networks around the world.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
8/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 8
This report is a licensed product and is not to be photocopied
Figure 1: The next billion in the global socioeconomic pyramid
1 billionMore than $60 a day
Mostly urban
2 billion$1060 a dayFairly urban
3 billion$210 a dayMostly rural
1 billionLess than $2 a day
Rural/remote
Networkcoverage
Source: World Resource Institute, Ovum O V U M
A harsh revenue and cost equation
Most of the next billion will live in rural and remote areas in Africa, Asia, and to a lesser extent
Eastern Europe and Latin America. These prospective users not only have incomes of less than
$5 a day; they also live at the periphery of physical and social infrastructure, particularly for utilityand communications services. This combination of low-income users living in sparsely populated
remote regions poses a significant challenge for operators that are looking to connect and serve
these customers profitably.
The further operators go into sparsely populated areas, the higher the cost of network coverage
per customer. In addition, average incomes in rural and remote areas are substantially lower than
in urban centers, leading to ARPU that can be as low as $12 per month. As a result, the business
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
9/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 9
This report is a licensed product and is not to be photocopied
case for network investment in these areas is highly pressured in terms of both revenues and
costs.
Figure 2: The next billion ROI challenge
Low to
mediumdensity area
Sub-urbanarea
Rural/remotecommunity
High LowAverage revenue per subscriber
Average cost per subscriber HighLow
Urban
Low tomedium
density area
Suburbanarea
Rural/remotecommunity
Urban
Source: Ovum O V U M
The standard mobile equipment, backhaul, power, and distribution approaches taken by operators
are often over-provisioned, too expensive, and unsuitable relative to the revenues on offer in
remote communities. This study looks at the challenges facing operators, network equipment
vendors, and device manufacturers. The study is presented in the following three reports:
Strategies for the Next Billion: Operator Strategies (this report)
Strategies for the Next Billion: Technology Solutions
Strategies for the Next Billion: Devices.
This report looks at the business models and services that operators are deploying or will need to
deploy to address the next billion users. To deliver services to the next billion, operators will need
to make the economics of delivering communications services to remote and rural areas work.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
10/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 10
This report is a licensed product and is not to be photocopied
SERVICE PROVIDER STRATEGIES FOR THE NEXT BILLION
Service providers are decreasing the speed of rural expansion
Service providers are moving very cautiously to expand their network coverage into rural and
remote areas, with many operators decreasing the speed of their network rollouts to these areas.
Fewer operators are willing to outline their strategy for the next billion, and those that are willing
have suggested that the pace of network expansion into rural and remote areas has slowed over
the last year, with most expansions occurring on a small scale or as part of pilot programs. The
lack of a large and sustained investment in the expansion of rural networks is underlined by
network equipment vendors, which have not seen much interest in their rural network solutions.
Ovum believes that there are three key factors for the reluctance to rapidly expand networks into
rural and remote areas. Firstly, operators consider the ROI on the next billion insufficient for a
large-scale investment. Operators clearly believe that the incomes of the next billion users will not
provide adequate revenues to justify the considerable investment that will need to be made.
However, there has been significant progress made in reducing the cost of deploying networks to
the next billion, with a number of vendors launching solutions that enable network coverage for
significantly lower capex and opex (for more information see Strategies for the Next Billion:
Technology Solutions).
Secondly, in the past year, many emerging market operators have invested in 3G spectrum and
embarked on 3G upgrades of their existing networks in urban and suburban areas. While this has
put significant pressure on their capex growth, it has yielded mobile data revenue growth rates of
3040% for many operators. As a result, it has been an easy choice for operators to slow or stop
expanding their networks in rural areas to focus on the more attractive ROI from 3G expansion, as
outlined in Figure 3.
Finally, policy frameworks in many emerging markets are unhelpful, and in some cases actually
hinder service providers from expanding into rural areas. For example, mobile devices and airtime
purchases are still subject to substantial luxury taxes in many markets in Africa and Asia, which
adds to operators costs and hinders affordability. In addition, active network sharing which we
think will be essential in rural areas is still banned in many markets, while subsidies and
incentives for rural coverage (e.g. use of government land) are rare.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
11/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 11
This report is a licensed product and is not to be photocopied
Figure 3: The two opposing forces pressurizing operator capex
Urban Low density/
rural areas
Suburban Remote rural
areas
2G/2.5G
3G/3.5G
Capacity/
networkupgrades
Expandedcoverage
Urban
2G/2.5G
3G/3.5G
Capacity/
upgrades
Source: Ovum O V U M
Strategies for effective network coverage
Ovum believes that the technological, business model, and policy improvements that have taken
place over the last few years have made it possible for service providers to make attractive returns
from rural network expansion. Nevertheless, the difficult economic factors mean that service
providers will still need to focus on effective execution in six key areas (as shown in Figure 4).
Carefully select coverage areas. Some remote areas are more attractive than others,
and operators must focus on picking the best ones first to maintain continued
momentum and support within the organization.
Adopt network technology that offers the lowest total cost of ownership per potential
customer.
Align marketing and distribution strategies with network expansion.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
12/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 12
This report is a licensed product and is not to be photocopied
Engage with local entrepreneurs at both a network and service-delivery level.
Ensure there is a favorable policy framework that contributes to, rather than hinders,
positive ROI on rural strategies.
Adopt processes that closely track, refine, and adapt rural expansion strategies.
Figure 4: Six key success factors
Coverage:
user insight
and priority
Services and
marketing: loaded
and local
Perform:
track, learn,
and adapt
Technology:
lean andshared
Local
entrepreneurial
engagement
Favorable policy framework
Source: Ovum O V U M
Prioritize coverage in areas with the greatest potential
Prioritizing coverage in areas that have the greatest potential is easier said than done, and gettingit wrong can rapidly drain support for further rural expansion as the losses flow back to
headquarters. But, how do operators choose which areas to prioritize out of thousands of villages
and communities that are currently without mobile coverage?
There are no definite answers as to which areas operators should prioritize as there are
considerable differences between local markets. Service providers must use every local tool at
their disposal to determine local population density, incomes, and the potential ARPU of their
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
13/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 13
This report is a licensed product and is not to be photocopied
target areas. One African operator stated that its method is to fly a helicopter over rural
communities and seek out tin roofs. When they are present in a village, this operator has found
that there is usually enough disposable income for mobile services. Another operator in Asia
stated that it studies rural clusters of communities to determine the villages that are at the centers
of those clusters, and then targets those villages first. Others suggested using data and insights
from agricultural cooperatives to determine income and wealth in given communities as agriculture
is often the only source of income for people in remote or rural areas.
Deploy lean, shared, and managed network equipment
As outlined in our report Strategies for the Next Billion: Technology Solutions, there are some
excellent rural mobile solutions available from a number of equipment vendors. Ovum believes that
the rural mobile solutions currently available present significant reductions in operator capex and
opex compared to the alternatives that were on the market a few years ago. The current solutions
are usually micro base stations that address the challenges of power, backhaul, site and radio
equipment cost, and performance very well. Most of these solutions run on solar power, and have
built-in compression and local switching capabilities that reduce backhaul costs. In addition, most
of these solutions no longer require a tall tower with extensive concrete foundations as the
equipment can be mounted on a single pole that does not require much space or deep
foundations.
A recent development is the option to have fully managed services in rural areas. For example,
Ericssons Managed Rural Connectivity product is a managed services offering where Ericsson
operates cell sites, and then sells capacity (typically bundles of minutes and SMSs) to operators.
Under this model, Ericsson manages the site installation, operation, management, and
maintenance for a monthly fee per site.
We believe that most rural areas will only be able to support one or two physical networks. As a
result, operators will need to focus on two key issues.
They need to be the first to deploy networks in the most attractive areas.
Where a competitor is already in an attractive area, they need to consider active
network sharing rather than rolling out their own network. As this option is not always
available within a given regulatory framework, operators need to work with regulators
to facilitate active network sharing.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
14/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 14
This report is a licensed product and is not to be photocopied
Adopting lean and local marketing and distribution strategies
Marketing for rural users needs to be centered on a carefully focused, value-led strategy in order
to fit the income constraints of the target market and ensure service provider profitability. There are
four key elements that we believe are central to this strategy.
Local high-impact promotion. The core focus of promotional campaigns must be to
demonstrate the value of the service to users and stimulate usage. Ovum believes
that the best approach to this is through a combination of local demonstrations and
shared access phones. Encouraging village heads or religious leaders to take up
services is another tactic that falls in the low-cost, high-impact category. Dynamic pricing. Services such as MTN Zone price mobile services (typically voice)
according to available network capacity. Solutions such as these are well suited to
rural areas, where there is likely to be substantial network capacity. Rather than waste
capacity, network operators should dynamically discount their services during low
traffic periods to stimulate usage among rural users. For more information on dynamic
pricing, see our report Dynamic Pricing: Yield Management Solutions and Strategies.
Tightly managed customer acquisition costs. Service providers need to make sure
that they optimize subscriber acquisition and retention costs in order to ensure that
low ARPU customers remain profitable. The key factor in keeping acquisition costs
low is managing the level of dealer commissions. Some operators in Asia and Africa
have managed to reduce dealer commissions to $1, and have agreements that
commissions will not be paid if a subscriber leaves the network within a certain period.
This is the approach that operators need to carefully consider for the next wave of low
ARPU users, particularly those based in remote and rural areas.
Local distribution network. An effective local distribution network is one of the most
important parts of operators marketing strategies for low ARPU users. As these users
typically earn small sums of money frequently (often daily), they regularly top up their
phones with small amounts. For low-income users, purchasing a phone is a smaller
challenge than regularly topping it up locally and in small, affordable increments. Ifthere isnt a local agent to serve rural users, operators will miss out on considerable
revenues. Service providers must expand their distribution networks in conjunction
with their network expansion. As a result, optimizing, incentivizing, and providing
promotional support to the network of agents and airtime resellers are crucial
elements of operators marketing strategies.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
15/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 15
This report is a licensed product and is not to be photocopied
Local engagement: from distribution to network management
Engaging the local community in the operation of rural solutions is critical to the success of rural
expansion initiatives. In our report Low ARPU Users: Best Practice Strategies, we envisaged four
progressively greater steps of local engagement in rural solutions, as outlined in Figure 5.
Airtime distributor. This is the easiest role to perform as it requires very little skill or
investment on the part of the local community.
Shared service enabler. They provide a shared service to members of the local
community that dont yet have access to a personal service.
Local network management and maintenance. Operators can employ local people to
provide security and maintenance for some of their infrastructure.
Local service provider. This occurs when a local entrepreneur effectively leases the
cell site to provide services to the local community. Nokia Siemens Networks (NSN)
Village Connection solution envisaged this type of local engagement, which requires
substantial entrepreneurial and technical skill to execute effectively.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
16/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 16
This report is a licensed product and is not to be photocopied
Figure 5: Local engagement levels
Local engagement
Local skill andinvestment requirements
Airtimedistributor
Shared serviceenabler
Local network
manager
Local serviceprovider
Local engagement
Local skill andinvestment requirements
Local engagement
Local skill andinvestment requirements
Source: Ovum O V U M
The failure of NSNs Village Connection solution to gain significant traction highlights the fact that
the local service provider model will be extremely difficult to execute. If an investment in rural
coverage is a challenge for operators with substantial financial and technical resources, it will be
an even greater challenge for people in a local community. As a result, it appears that the only
form of local engagement that vendors and service providers can rely on will be local network
management and security.
Track, learn, and adapt to improve performance
Service providers must carefully track the progress of each stage of their rural expansion in order
to learn from best and worst practices, address underperforming areas, and refine their strategies.
We believe that metrics such as users, traffic, revenues, costs, and profitability per base station or
site can provide enhanced insight into the success of a service providers rural strategy. These
indicators will enable operators to identify poorly performing areas, address them with a
concentrated marketing push, and provide lessons for further refinements of their rural strategies.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
17/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 17
This report is a licensed product and is not to be photocopied
Bharti Airtel tracks profitability per base station in its rural areas. When it identifies a poorly
performing base station it concentrates marketing efforts through mobile promotional teams that
demonstrate its services to local villages.
Operators must be prepared to adapt to the inevitable mistakes they will make along the way. With
the smaller size of rural base stations, it is now much easier to decommission a site in an
unprofitable area and move it to a site with better prospects
Policy imperatives for increasing rural network coverage
Governments across the world are keenly aware of the role that ICT can play in improving theireconomic growth and governance. In emerging markets, one of the key policy imperatives is the
expansion of rural networks, with a particular focus on reducing the digital divide and boosting rural
incomes. There are several policy tools available to governments for furthering this objective.
Universal service obligation (USO) funding
USO directives and funds are common across the world, although they have different provisions in
mature and emerging markets. In emerging markets, they tend to focus on extending basic
coverage and access to rural and remote areas. While USO funds are collected and made
available in many countries, the implementation of USO funding policies has been patchy. In many
emerging markets, and particularly those with intense competition, mobile operators target the
most lucrative segments in the early phases of deployment in an effort to build sufficient market
share to ensure their survival. Operators will then typically build out the basic level of coverage
required to qualify them for USO funds.
Spectrum refarming
In many emerging markets, operators have spectrum in higher bands. While this is sufficient for
the coverage of urban areas and ensures a decent quality of service, using the same frequencies
for rural coverage doesnt usually make for a sound business case. The better propagation
characteristics of lower frequencies such as those in the 900MHz, 800MHZ, and 700MHz bandsmake them attractive for the purpose of extending network coverage to rural areas, not to mention
significantly more cost effective. However, these bands are often used for other services such as
terrestrial TV, meaning that policymakers will need to refarm it to make it available for mobile
services.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
18/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 18
This report is a licensed product and is not to be photocopied
Network sharing
Policymakers are beginning to come around to the prospect of network sharing, although most of
them have only allowed passive network sharing (the sharing of sites, towers, and in some cases
power infrastructure) to date. We believe that active network sharing, including the sharing of
spectrum, will be very important for rural coverage. As many remote and rural areas will only be
able to support one or two physical networks, network sharing will become a necessity for
operators.
Taxes, subsidies, and incentives
In addition to USO funding, operators should lobby for tax breaks, subsidies, and incentives to
support rural expansion. Operators in a number of African and Asian markets are subject to
punitive luxury taxes on airtime and devices, which operators should lobby to get reduced or
removed in rural areas. In addition, policymakers could offer incentives such as lower cost
spectrum and access to government land for network sites. They could also provide easier access
to international cable stations as an incentive for rural network expansion.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
19/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 19
This report is a licensed product and is not to be photocopied
SERVICES FOR THE NEXT BILLION
From shared to personal voice and data
The service mix for populations in rural and remote areas is a completely different proposition to
the traditional approach taken by mobile operators. Besides the primary demand for voice and
SMS communications, persuading these users to adopt other value-added services (VASs) and
content is not straightforward. Unfortunately for operators, it is not as simple as extending existing
VASs and content from urban areas.
We expect mobile services among the next billion to evolve from shared services and devices to
personal ones. As shown in Figure 6, this will initially occur for basic voice and data services, and
then be repeated for more complex mobile data, content, and Internet services.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
20/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 20
This report is a licensed product and is not to be photocopied
Figure 6: From shared to personal services
Time
Service utility/productivity
Shared voice
experience
(e.g. family/village
phone)
Personal mobile
data, content and
Internet access
Personal voice
and SMS
service and
device
Shared
Internet access
experience
(e.g. Internet kiosk,
shared smartphone)
Service utility/productivity
Service utility/productivity
Source: Ovum O V U M
Service providers need to include shared access voice and data services in their marketing
strategies for rural users. These services already exist in some markets, including Grameen
Telecoms Village Phone service in Bangladesh that has also been adopted by MTN in Africa,
Bharti Airtels public call offices, and Grameenphones Community Information Centers. All of
these solutions bridge the gap between non-consumption and personal connectivity.
Besides the fact that they are very attractive to low-income rural users, shared services providethree key advantages to operators in rural environments.
Aggregate demand. Shared access solutions aggregate demand from users that are
unable to afford a personal connection.
Act as an introduction to personal services. Shared services allow users to get a first-
hand view of the value of mobile services, which can work as an extremely effective
promotional tool.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
21/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 21
This report is a licensed product and is not to be photocopied
Provide local employment opportunities. Shared access services promote
employment opportunities for local entrepreneurs in rural communities. This
strengthens local economies and increases purchasing power for communications
services.
Beyond voice and SMS: service mix must be localized
Basic network coverage of elementary services such as voice and SMS will continue to be the top
priority for operators. Once these basic needs are met, operators can consider moving up the
value chain by offering data and content services. The most important issue facing operators is
that content and services for the next billion must be customized for the local population and their
specific needs. Beyond basic communication functions, services deployed for the next billion must
be designed to solve practical issues. This approach will attract users looking to purchase
solutions that increase their productivity and earning power or their knowledge and awareness of
local issues.
Local language support is essential for any service deployment
Literacy is one of the key challenges in reaching the next billion with services beyond voice and
SMS. The lack of access to quality education is a significant issue in rural and remote
communities. This means that even if they are able to afford a mobile phone, many remote and
rural users do not have the ability to use the device for anything other than basic voice calls. The
reluctance to use mobile devices among these users is related to both their lack of education and
the fear of something going wrong. However, this is a challenge that can be overcome. With the
increasing prevalence of group ownership and shared usage models among emerging market
users, more people are becoming familiar with mobile phone usage through their family and
friends.
Content and application developers are increasingly looking to add local language capabilities to
target the next billion users. For example, a farmer may be interested in subscribing to a farming
productivity or agricultural service and be able to afford it. However, he may not be able to read or
write, and so would be dependent on voice recorded messages or would need to speak to a live
person. The majority of the next billion users will reside in rural areas, and will only be able to
speak their local languages. This makes it critical for operators to offer local language support,
either in text or speech form.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
22/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 22
This report is a licensed product and is not to be photocopied
VASs, content, and apps must be multi-platform
With so many of the next billion users in remote and rural areas, there can be no guarantee of
basic cellular coverage, let alone data capabilities. As such, any VASs, content, or applications
must be designed to work on multiple platforms. In addition, they must be able to work effectively
with basic SMS, unstructured supplementary service data, and even voice so that they can be
offered to the widest possible audience.
In areas with a low level of literacy, voice services assume even greater importance. For example,
voice recording and authentication technologies are being introduced to help connect emerging
market users to essential services. Studies in India have shown that many users in remote villagesare reluctant to send a basic SMS to access their bank account balances. A pilot program initiated
and run by the Indian Institute of Technology in Chennai is focused on a use case for voice-only
mobile banking. There are only two levels of authentication required: a mobile number and the
users voice. Once the users voice is recorded and authenticated, they can listen to their bank
balances and use other options. These are the kind of initiatives that can help the next billion users
overcome their lack of literacy and reluctance to use more advanced services.
Productivity-enhancing services will be crucial
One of the major areas of innovation for remote and rural users is to use ICT devices,technologies, and tools to improve productivity. Most of these users are employed in agriculture,
and their yields are often erratic and unreliable, especially for those with small land holdings.
Increased productivity will have a direct impact on the amount of income that these users can
generate. While there are several examples of productivity enhancements targeted at remote and
rural users, we have highlighted one specific example of a product, and several other information
services that are designed to improve agricultural productivity.
Nano Ganesh: remote irrigation service
Nano Ganesh is a product developed and promoted by the Ossian Group, an Indian company
based in Pune. Ossian developed Nano Ganesh to tackle the issue of farmers in rural India having
to manually operate the water pumps across their agricultural holdings. Without automation,
farmers suffer losses from excess water seepage that can ruin crops, insufficient irrigation from
delayed pump operation, erratic electricity supply, and the risk of personal injury.
Nano Ganesh has been designed to eliminate these issues by enabling remote operation of water
pumps using a mobile or fixed-line phone. The product includes an instrument that connects to the
electrical starter on a water pump. Each instrument has a unique number that the farmer can dial
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
23/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 23
This report is a licensed product and is not to be photocopied
using a standard mobile or fixed-line phone. Once the number is dialed, the farmer has to enter an
on/off code to operate the water pump remotely. The Nano Ganesh instrument also alerts farmers
about the availability of a power supply or if there is an attempt of theft, either of cables, panel
instruments, or the pump itself.
IFFCO Kisan Sanchar Limiteds (IKSL) farmer information service
IKSL is one of many initiatives that seek to empower farmers and improve their productivity by
providing them with agricultural information through their mobile phones. Other initiatives in India
include Reuters Market Light and Fisher Friend, while Manobi and Esoko are examples of similar
services in West Africa.
IKSL is a joint venture between Indian Farmers Fertiliser Cooperative Limited (IFFCO), Bharti
Airtel, and Star Global. IFFCO is an Indian cooperative organization that consists of over 40,000
cooperative societies, and has a user base of approximately 60 million farmers. IFFCO has
partnered with Bharti Airtel and Star Global (a financial institution) to offer Airtels telecoms
services to its large base of members. By providing farmers with an Airtel SIM card, IFFCO can
send valuable information directly to its members in a cost-effective manner. After a series of pilot
projects, IKSL now covers IFFCO members in 18 Indian states across 60 designated zones. The
zones are marked so that IFFCO can provide relevant local content to its members. The basic
service portfolio includes five free voice messages sent to farmers mobile phones every day ontopics such as soil management and disease prevention. Farmers have a call-back facility that
allows them to listen to their messages when convenient. Farmers also have access to a
dedicated support line that gives them access to a panel of experts that can answer their questions
in local languages. IKSL experts also conduct regular phone in programs to clarify and redress
issues.
Educational services
A lack of education is a considerable issue for people living in rural and remote areas. Despite the
significant advances made by governments in increasing the reach and effectiveness of primary
education, users in remote and rural areas are at a significant disadvantage when it comes to
accessing quality education. This makes it far more difficult for these people to learn skills that can
be used to gain employment. While there are many initiatives and programs focused on
developing education around the world, we have highlighted one specific educational area, the
learning of English. English is widely accepted and viewed to be upwardly mobile. People with
English language skills are more likely to be employed, and this fact has caught the attention of
people in emerging markets, particularly those in lower income segments or rural and remote
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
24/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 24
This report is a licensed product and is not to be photocopied
areas. The following are examples of innovative services that offer English language lessons to the
next billion users.
BBC Janalas English lessons
BBC Janala is an education service that was launched in Bangladesh in November 2009. With
over 50 million mobile subscribers in Bangladesh, the opportunity for educational services
delivered through mobile phones is considerable. BBC Janala offers English lessons across
multiple platforms including mobile, TV, and the Internet. The service was created through a
partnership between the BBC World Service Trust, BBC Learning English, and mobile operators in
Bangladesh. Calls to the service are subsidized by mobile operators to make them affordable forlow-income users. This approach has been successful, with over 15 million calls logged as of
September 2011. The service has been used at least once by 26.3 million people, while the
number of regular active users is approximately 7.5 million.
To access English lessons and quizzes, users only have to dial 3000. The English lessons follow
a curriculum set by English in Action, a project sponsored by the Bangladesh Government with
grants from the UK. Each English lesson is three-minutes long and costs BDT3 (approximately
$0.04). There are hundreds of lessons available in a tiered curriculum that is designed to help
users gradually improve their English language skills. There is also the option for users to register
their profiles on BBC Janalas website, which gives them access to additional resources andcommunity forums for interactive learning.
English Seekho
English Seekho was developed by the education division of Indian company Infrastructure Leasing
& Financial Services Limited. The service has been rolled out by Tata Teleservices, Airtel, and a
number of other Indian mobile operators. It is similar to BBC Janala, with the major difference
being that subscribers are charged a monthly subscription fee in addition to the prevailing call
rates. For example, users pay INR2030 per month as well as the prevailing per second or per
minute tariff, which is typically INR0.01 per second. Once a user calls the service, they are
directed through an interactive voice response system to their lesson of choice. Each lesson runs
for approximately five minutes. The service is also designed to allow users to practice the English
words and work on their pronunciation.
Health and wellness services
The lack of access to basic healthcare facilities is well documented in emerging markets, and is
particularly acute in rural and remote regions. In most cases, the lack of healthcare infrastructure
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
25/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 25
This report is a licensed product and is not to be photocopied
in remote areas mirrors the lack of other physical infrastructure such as roads, electricity, and
water. Significant advances have been made in improving healthcare in emerging markets, despite
the significant challenges of rapidly increasing populations, dire poverty, a lack of finance, and the
remoteness of many areas. Governments have managed to launch successful drives aimed at
vaccinating against diseases such as polio and smallpox.
In recent times, there has been a noticeable shift towards prevention-based techniques for
healthcare. As access to a mobile phone is often far easier than access to quality healthcare,
mobile healthcare solutions are particularly well suited to awareness programs aimed at prevention
and wellness. Mobile phones are also very economical and efficient for the input and relay of
health-related field data for non-governmental organizations (NGOs) and government agencies.
The following examples are some of the more prominent recent developments in the provision of
healthcare services using mobile technology.
Arogya Worlds health information service
Arogya World is a US-based NGO that focuses on reducing the impact of chronic non-
communicable diseases. It has partnered with Nokia Life Tools (NLT) to provide information on
diabetes via SMS. The content is offered as part of NLTs heath category. Arogya and NLT plan to
distribute diabetes awareness and prevention messages using this service to approximately 1
million Indian users in rural and remote areas over the next two years. Given the literacychallenges involved with delivering services to these users, a basic text-only service is likely to be
the only way to ensure that the information is delivered effectively to these users.
Phones for Health
Phones for Health is a public-private partnership between the GSMA Development Fund,
Accenture, Motorola, Voxiva, and MTN. The program allows health workers in remote and rural
areas to enter health-related field data using a downloadable app on a mobile phone. The system
by Voxiva is called TRACNet, and is a software application that is used to analyze field data for
HIV/AIDS. Based on a pilot program in Rwanda launched by MTN, Phones for Health aims to
expand to 10 African countries in its first phase.
Government services
Many governments around the world have invested in e-governance initiatives in an effort to
provide efficient and cost-effective services to their citizens. However, most of these services are
based on fixed broadband and narrowband Internet connections. This framework doesnt work well
in emerging markets, where the penetration of broadband is much lower than mobile penetration.
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
26/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 26
This report is a licensed product and is not to be photocopied
As a result, many emerging market governments are looking at ways to offer their services on
mobile phones to enable wider and more cost-effective reach. The following are examples of
mobile governance solutions rolled out by governments in emerging markets.
Indias National e-Governance Plan
The Department of Information and Technology (DIT) in India plans to extend its existing e-
governance framework to a mobile platform in order to reach citizens in remote and rural areas.
The DIT is keenly aware of the low broadband penetration in India, and the inability of users in
remote and rural areas to afford Internet connectivity and computing devices. The DITs proposed
plan is to build a mobile service delivery gateway (MSDG) that will integrate seamlessly with theexisting e-governance infrastructure already built out across the country. The services provided
over the MSDG will include information- and transaction-based services covering a wide range of
areas such as agriculture, health, education, banking, status tracking, and alerts. Examples
include m-health awareness campaigns, passport application tracking, and mobile banking and
transfer services.
MFoods
MFoods is a program developed by the Indian state government of Andhra Pradesh (AP). The AP
state government has long been at the forefront of using ICT to improve service availability,
delivery, and efficiency for its citizens. MFoods was initiated in 2000 by Andhra Pradesh Foods, a
state government enterprise. It is designed to enhance the efficiency of the supplementary nutrition
program (SNP) for children under six years of age and pregnant women in lower income
segments. The SNP provides nutrition through its network of anganwadis (day-care centers), but
the program has faced issues with implementation and delays in the procurement of supplies.
MFoods allows workers at the day-care centers to place orders through SMS, and these orders
are then processed through a centralized server. Deliveries are then coordinated through the state
governments network of warehouses and transportation. Workers can also track the status of their
orders via SMS, and the supply chain is integrated with Google Maps so that orders can be
tracked in spatial views. The MFoods program has been developed in conjunction with the
National Informatics Center of the Indian government.
Mobile money services
Mobile money is a critical service for users in rural and remote areas. As outlined in our studies
Making Money from Mobile Moneyin Emerging Markets and Mobile Money in Emerging Markets:
201015 Outlook, mobile money is already a strategic priority for many emerging market service
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
27/29
-
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
28/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 28
This report is a licensed product and is not to be photocopied
APPENDIX
Methodology
This report was written using extensive briefings with all of the equipment vendors included in this
report. Ovum also conducted briefings with a number of vendors and service providers operating in
emerging markets. The report also utilizes secondary research, and Ovums ongoing analysis of
telecoms services in emerging markets.
Further reading
Dynamic Pricing: Yield Management Solutions and Strategies. OT00031-001 (March 2011)
GCash: Mobile Money Case Study. OVUM052313 (May 2010)
Low ARPU Users: Best Practice Strategies. OVUM050381 (February 2009)
Making Money from Mobile Moneyin Emerging Markets. OT00030-011 (August 2011)
Mobile Money in Emerging Markets: 201015 Outlook. OVUM052840 (December 2010)
M-Pesa and Vodafone: Mobile Payments Case Study. OVUM050150 (December 2008)
MTN MobileMoney Uganda: Mobile Payments Case Study. OVUM052573 (August 2010)
Rural Mobile Strategies: Five Key Success Factors. OVUM050553 (March 2009)
Strategies for the Next Billion: Devices. OT00034-006 (December 2011)
Strategies for the Next Billion: Technology Solutions. OT00034-005 (December 2011)
Author
Angel Dobardziev, Practice Leader, Emerging Markets
Shiv Putcha, Principal Analyst, Emerging Markets
mailto:[email protected]:[email protected] -
7/27/2019 Strategies for the Next Billion Operator Strategies.pdf
29/29
Strategies for the Next Billion: Operator Strategies (OT00034-005)
Ovum (Published 12/2011) Page 29
This report is a licensed product and is not to be photocopied
Ovum Consulting
We hope that the analysis in this report will help you make informed and imaginative business
decisions. If you have further requirements, Ovums consulting team may be able to help you. For
more information about Ovums consulting capabilities, please contact us directly at
Disclaimer
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form by any means, electronic, mechanical, photocopying, recording, or otherwise, without the
prior permission of the publisher, Ovum (an Informa business).
The facts of this report are believed to be correct at the time of publication but cannot be
guaranteed. Please note that the findings, conclusions, and recommendations that Ovum delivers
will be based on information gathered in good faith from both primary and secondary sources,
whose accuracy we are not always in a position to guarantee. As such Ovum can accept no
liability whatever for actions taken based on any information that may subsequently prove to be
incorrect.
mailto:[email protected]