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Grameen Phone: Empowering the Poor through Connectivity By any measure, Grameen Bank is a success story. What worked?
Jean Camp is an Assistant Professor at the Kennedy School of Government, with a background in electrical engineering, computer science and public policy. Her research focuses on the intersection between computer science and public policy; governance and technology. Brian Anderson is employed at UUNET, the Internet branch of MCI WorldCom. His current research interests concern the nexus of various social issues (such as universal rights, poverty, and educational inequality) and information technology, with special attention on technological and social affordances of the Internet.
Grameen Phone uses investments in expanding its own Global System for Mobile (GSM) network and also functions as a bulk reseller of time. Currently, Grameen Phone is a commercial operator with 25,000 customers, providing cellular services in both urban and rural areas. The goal is to expand this an order of magnitude in the next year, with at least 300,000 subscribers signed up nation wide by 2001. Grameen Phone was established to provide GSM cellular service at affordable prices to all people irrespective of their locations in Bangladesh. Grameen Phone is focusing on rural villages where there is rarely wireline competition. The services of Grameen Phone are targeted to help Bangladesh reduce its existing disparity in telecommunication services in urban and rural areas. Grameen Phone strategic goals are to earn healthy returns for its shareholders and, at the same time, contribute to genuine development of the country. This expansion of infrastructure and access has led to an expansion of information, which has improved the status of the connected villages as whole. All Grameen Phone products come with GSM features and optional Voice Mail Service facility. The standard Grameen Phone product (GP Regular) connects to the local fixed network maintained by BTTB as well as to all GP mobiles. Grameen Phone has two elements: credit and technology. The first has been difficult to replicate but is certainly worth consideration. The second is applicable at any location. By any measure, Grameen Bank is a success story. More people, particularly more poor women in a country that is the poorest of the poor, have more access to more information than ever before. It is one of the classic rationales for expanding global Internet connectivity. What happened? What worked? What can be successfully transferred to other developing nations? The story has two parts: infrastructure and service access. The options for service access are a function of the installed infrastructure. In the developed world, the issue of infrastructure is an issue of broadband accessibility. In contrast, in the developing world, the expansion of infrastructure is an expansion of low bandwidth, voice quality (64kbps) service. Regulatory changes in the telecommunications realm have allowed private wireless carriers into previously closed telecommunications markets. This offers the opportunity to expand infrastructure access. Conversely, decreased regulations can undermine universal service and limit access through the decrease in universal service funds resulting from cherry-picking of profitable areas by recent entrants. In Bangladesh, the increase in competition has increased both access and service. Although the Grameen Phone model offers a potential guide to other nations, it may be even more effective where the poor may ride at low marginal cost on the infrastructure built to serve the affluent, mobile elite. We begin with a brief description of the state of telecommunications in Bangladesh. We then discuss the Grameen Phone model and the weaknesses and strengths of this model based on the chosen technologies. We argue that such a model could be used to harness the infrastructure of the roving rich to serve the poor. The Program: A Combination of Credit and Connectivity The Grameen Bank is an organization of micro-enterprises and a human development organization with integrated financial, social, and communication services. The goal of the bank is to empower poor people to improve their socioeconomic conditions in an environmentally sound and sustainable manner. Toward this end, Grameen organizes the poor, landless (a Grameen borrower cannot own more than one-half an acre of land.), and mostly illiterate people of rural Bangladesh. Grameen's target is the bottom 25 percent of the population, who are primarily women. Grameen Phone's aim is to connect a wider range of the rural population and promote general economic development within Bangladesh. Grameen Phone emphasizes rural coverage, as these areas have traditionally been underserved. Service to the villages helps them develop economically, and allows Grameen Phone to develop a rural market for its services in regions with minimal landline and wireless competition. From a development perspective, this strategy also provides self-employment opportunities for the rural poor. Thus, the Grameen Phone Village Program offers an approach to development that may be sustainable. Grameen Phone's Village Program was started to use telecommunications as a weapon against poverty. The village program provides the credit necessary to purchase a phone and begin selling calls. Grameen Phone is also a reseller, and sells air-time at cost to its village merchants. The initial loan is approximately $500, usually borrowed by a poor woman in a village. This covers the purchase of a Grameen Phone GSM phone, and she can immediately begin to sell communication services to fellow villagers. A pilot program involving 150 villages has shown that the village phone concept is economically viable. Each of the village operators made an average of $2 a day, or $700 a year, after covering all her costs, which is more than twice the country's annual per-capita income. The initial expectation was that there was little or no demand for communications in the villages -- after all, whom would the potential customers call? In fact, there turned out to be substantial demand for personal communications between villages, and between villages and cities as well as for information about prices in the centers of commerce. There are currently more than 200 village phones in operation. The existence of the phones has had economic effects on the entire village market structure. The prices paid by traders for both raw materials and hand-crafted goods has increased in villages with phones, since the sellers have more pricing information. In addition, exchange rates for currency from expatriates have improved for those villages with phone access. Grameen Telecom selection depends on three factors: the applicant's history, location, and facility in English. Grameen Phone selects women for this program based on their past borrowing records with Grameen Bank. Residence location is important in considering loan requests because for many villages the Village Phone will be the only link to the telecommunications infrastructure and therefore a central location will prove beneficial, both to business and to the community. Grameen Telecom also ensures that at least one member of the family knows the English letters and numbers. According to Grameen Phone, women choosing to retail telephone services need only a one day training session from Grameen Phone. Their success in rapid training and in their business has partly been attributed to their general entrepreneurial skills and the confidence they have built through their past income generating businesses with the help of the Grameen Bank. The Technology: Wireless The technological base used is the ITU-approved GSM. The competing standard is CMDA. Both of these are second-generation wireless. (Third-generation wireless offers broadband connectivity.) The critical observation is that wireless covers area. Wireless systems when installed to enable roving cover large areas in which anyone with a cellular phone has access. Compare this to a wireline phone. In that case, the wire must pass directly by for there to be access, in addition to the necessity of connecting the subscriber to the system. This means that the infrastructure demands (see next section) are reduced. GSM is a connection-based service in that bandwidth is guaranteed. Notice that despite the wide discussions of quality of service guarantees, these are mythical in packet-based connectionless networks: bandwidth is reserved or it is not. In contrast, CDMA is (by definition) multiple access. It is based conceptually on the packetized shared medium model for transmission. As a result, GSM is popular for higher voice quality and better certainty of connection. Like many shared access protocols, CDMA fails catastrophically (many calls dropped) when overloaded while GSM refuses additional connections. As the higher tier users demand broadband datarates across the planet, the two standards diverge further. GSM requires replacing all hardware but the tower, while CDMA enables upgrading particular connections. Backwards compatibility is easier, implicit, in fact, in CDMA. Upgrades to the network will not require upgrades of all phones on the network. In contrast, the requirement that the entire network be upgraded at once suggests that older -- including affordable or paid for phones -- could not function with a 3G GSM network. Thus, as the datarates move upward for the top tier, the bottom tier could conversely see less opportunity to use low-cost voice services that are the network coattails of the global upscale nomad. In designing and selecting next generation system, there are two features that can enable the second tier -- that is, the local stationary poor -- to use the phone services built for the first tier -- the corporate and tourist consumers.
In contrast, systems which offer a single quality of premium service can result in an unintended consequence of network upgrade: removing from the stationary poor the opportunity to be connected. Thus, while the strategy of connecting the poor using the creditworthiness of the poor is functional, the choice of GSM perhaps should be reconsidered, especially in those places where the bulk of the tourist traffic consists primarily of (CDMA using) Americans. The Infrastructure Teledensity, the number of telephones per unit of population, is the most recognized measure of expansion in the telecommunications industry. Total access to the telecommunication infrastructure in the isolated homogeneous population is equated with a teledensity of 100. The teledensity in Bangladesh is 0.26 phones per 100 residents, which exceeds only teledensities in sub-Sahara Africa. Although Bangladesh has seen wireline subscribers increase by 50% over the past decade, the number of subscribers is only twice that of the number that remain waiting. In 1996, there were 155,000 people wait-listed for telephone service. The wait-list duration averaged 6.6 years. Thus, assuming complete recovery from the floods and steady connection in the intervening three years 77,500 of those people have been connected. Given the population 131 million, this is not a significant change in teledensity. During the same period there were only 3,410 public telephones in the country. Thus, Grameen Phone has little to no competition -- the demand is far greater than the supply. An overwhelming majority of the country's telephone lines (91 percent) were concentrated in urban areas (36.6 percent are in Dhaka alone) constituting an urban teledensity of 1.09 telephones per 100 inhabitants. In stark contrast, only 9 percent of the total main lines existed in rural areas, a teledensity of 0.02. Yet Bangladesh is a predominantly rural country. The (lack of) reliability of the infrastructure is illustrated through an annual main line fault rate of approximately 600 faults per one hundred mainlines. In these statistics Bangladesh reflects the patterns of lagging nations across the globe: many faults, long waits, unconnected rural populations, and expensive service. Bangladesh has a heterogeneous population distribution with the rural population more accurately considered a distribution of villages. Under such conditions, with the sharing of phones, total access to the telecommunication infrastructure can exist with a teledensity considerably less than 100. Thus, while low teledensity measures are not necessarily in direct proportion to telecommunications accessibility, the teledensity measures listed above concerning Bangladesh do indicate the relatively limited scope of the state-supported wireline infrastructure. As in many developing nations, the PTT infrastructure is old, in disrepair, and predominantly urban. Rural Bangladesh is either not served well or not served at all. The low number of cellular subscriptions reflects less a non-viable technology and more entry and artificial cost barriers. The bottom line for Grameen, though, was a rural market waiting to be served. The Market This market mechanism is currently viable for several compelling reasons. Given the population and poverty of rural Bangladesh, it is clear the rural shared cellular market is far from saturated. Let me emphasize two attributes of this model: telephone service is cellular (or wireless) and shared. Given the maturity of the cellular technology, prices in cellular equipment are affordable, reducing one of the traditional barriers. The successful pilot project demonstrates the existence of demand, which was questioned. Thus, the hitherto neglected Bangladeshi rural market, which commands 80% of the population, and purportedly 50% of the economy, in fact, has considerable potential. Moore's law predicts a doubling of processing power per chip area every eighteen months. An implicit corollary is that the cost of processing power should be decreasing. The long-term trend is that end-point computing equipment will be ever decreasing in cost. In developed nations, expected subscriber revenue, from attention span alone, is adequate to pay for both connectivity and end-point equipment. Consumers in the developing world will not have the purchasing power to support such business plans, but universal drop in hardware costs will surely become a contributor to expansion. The combination of these potentials, technology affordances, and a nascent long-distance market illustrate the economic feasibility of the Grameen Phone development project. This means that the continuing driving costs will be the loan management. The dominant costs of the wireline, however, are from the costs of buying physical plant. These costs are dominated by labor rather than technological costs. Thus there is no expectation of subsequent subscriber costs. Furthermore, there is additional cost for connecting a subscriber: connecting the wireline and the phone. It has been widely documented that wireless networks are currently less expensive than wired plant models in terms of area coverage. In addition, the personal costs of Grameen Phone, (services, subscriber management and loan management), are exactly those services that are expected to drop in price with automation. In contrast, there are no expectations in reduction of cost of line burial. Conclusions Looking ahead to data communications, the ability of a wireless model to enable widespread wireless voice depends, in the near term, on the deployment of protocols which can offer low cost service and premium service simultaneously so that the Next Generation Information Infrastructure does not lock out those who have not connected to the voice infrastructure. With careful selection of protocols providing backwards compatibility the data network of the twenty-first century may enable everyone on the planet to take part in the twentieth century voice communications revolution, at last. Bangladesh is not a tourist destination so the cost of network must be borne by Grameen Phone subscribers. In areas which are tourist destinations (e.g. the Caribbean) or where there are distributed corporate facilities (e.g. the Niger delta), the high end consumer may pay for much of the network. Bangladesh has suffered from environmental devastation, which increases the harm from natural disasters. Thus, infrastructure that is easy to protect or easy to replace is an advantage. Unless aggression is targeted specifically at mobile communications, such devices may also prove valuable in other kinds of emergencies and refugee crises. GSM systems require protections at the base station, base-station controllers, and hand units. Hand units stay with individuals. The end unit themselves travel with refugees (including environmental refugees), and therefore have potential to maintain communication, whereas landline phones are inherently linked to the home or location The Grameen Phone model is well suited for geographical conditions of Bangladesh. This approach is based on the costs of management of accounts and the costs of hardware, which are both likely to decline, and will have long-term success if the base station and base-station controllers are protected against floods. As such, it offers a relatively inexpensive model for connectivity and with it, access to the world's information resources for populations that were hitherto isolated and information poor. It reminds us, too, that empowered by only voice connectivity people can and will take advantage of information to better their lives and improve their economic situations. Thus, as the infrastructure of the twentieth century, it should reflect the reality that connectivity will be as important in the next century as textual literacy was in the past hundred years.
© Copyright 1999. L. Jean Camp and Brian L. Anderson. All rights reserved. SOURCE: http://www.cisp.org/imp/december_99/12_99camp.htm Return to Grameen Telecom's Village Phone Programme: A Multi-Media Case Study |