12 steps towards the establishment of Meaningful Broadband Investment Policies in emerging-market nations.

1. INTRODUCTION: THE SECOND COMING OF MOBILE BROADBAND

According to Goldman Sachs, the major source of investments in emerging markets has been for cell phones. Now that half of humanity has them, industry coalitions have converged to achieve ubiquitous penetration in every nation as well as to encourage cell phone users to upgrade to smart mobile devices. But not the first time those commercial forces have embraced such as trend. A cautionary tale comes from Europe, less then a decade ago, when a “telecoms bust” offers lessons for today.  In 2001, the European corporations and government officials conspired to elicit a big push in the embrace of mobile broadband applications by the public.

 This effort produced the bust: a sharp drop in stock valuations by the big telecommunications companies, more than 100,000 lost jobs lost, and a slump in expected government tax revenues. The problem wasn’t with the quality of the technology itself but the inspiring nature of content.

Mobile phone users were not willing to pay for the menu of services -- mobile banking, mobile TV, mobile GPS systems produced at high cost by the R&D divisions of participating companies.  All these services duplicated non-digital services that the consumers were already paying for. So why should they pay more for having them delivered via their cell phones?

Now a second big push in mobile broadband is occurring and the stakes are even higher. This time, dozens of emerging markets are the target of marketers. Clusters of ICT-related industries have joined together to aggressively push an embrace of mobile broadband products and services to users who earn as little as $3 per day. But if cost per subscriber is low, the potential for economies of scale is high. Another benefit is that supply chains could benefit from subsidies provided by governments or other donors who see the social benefit of this trend. In fact, supply chains are lowering their risks by getting help from governments to pay for infrastructure costs needed to bringing a second and third billion category of users into broadband internet. This time the companies are not making the mistake of ignoring end users. Dozens of companies have even hired anthropologists to study their behavior. Not content merely with formulating new products and services at new price points, they are hunting for new “killer aps” such as VOIP phone calls that would generate returns on investment. Though the obstacles are great, mobile executives are buoyed by evidence of insatiable third for mobile technologies at the low end of each emerging market. Having been shut out of markets till now, these low-income users have pent up demand for services never before offered to them. They could find ways of increasing income as well as lowering costs in an “economic multiplier effect” that would bring them into a new global middle class, a development that could have a big impact on world markets. Thus, mobile supply chains see themselves as part of an historic nation-building process designed to bring wealth and power  among those currently making as little as $1,000 a year ($3 per day) and who are currently stuck in “poverty traps.

2. ESTABLISHING NATIONAL BROADBAND ECOSYSTEMS:

To bring mobile broadband to these users, “national broadband ecosystems” need to be created that begin with backbone (fibre optics and/or satellite) and then extend to “last mile” (e.g. via WIMAX) and that are linked to low-cost devices, and software, including efforts to mobilize developers to formulate open source applications that fit the realities of local economies. These broadband ecosystems are particularly compelling in countries with large relatively literate populations that create large economies of scale. These ecosystems are funded through public private partnerships and can dramatically lower the costs of telecommunications operations to extend their reach to users in rural enclaves far from large cities. To further reinforce the beneficial social impacts of these broadband ecosystems, ICT stakeholders are advocating that governments, commercial industries and academic institutions alter their policies and practices.  Doing so could achieve “economic multiplier effects” and could also establish a pattern of environmentally benign sustainable development.

3. INDIA AS THE SOURCE OF BEST PRACTICES:

India is the pre-eminent source of technological and management innovations needed to establish broadband ecosystems. It has the expertise, market size, political environment and commercial and academic laboratories necessary to develop and test prototypes that fill niches in these broadband ecosystems. However, the size and complexity of India has prevented it, so far, from serving as a source of a national broadband ecosystem that might be adaptable to other countries.

4. INDONESIA COULD BE A NATIONAL MODEL:

Indonesia could serve as a promising source of such a national model because of the inclination of its relatively high literacy, growing appeal to investors, the capacity of its stakeholders to work at a national level and also because of the presence of IGADD as a “big tent” to aggregate and integrate the activity of its national ICT stakeholders. As the largest Islamic country, Indonesia also has appeal to foreign aid donors that wish to encourage economic prosperity within the Islamic world. As the world’s third largest democracy, Indonesia also has appeal for those who wish to demonstrate the link between open-source based economic models and open societies in a democratic context.
 

5. THE CRUCIAL ROLE OF BROADBAND INVESTMENT POLICIES:

Unlike South Korea and other countries with budget surpluses, Indonesia is not able to fund national broadband infrastructures through tax dollars and must develop investment policies that attract foreign investment into its telecom sector without lessening the benefits to its citizens that result from its transformation into a broadband enabled society. Such countries risk forfeiting control over the future of their own communications. The Republic of Indonesia is the first nation to formally request an independent nonprofit policy research organization, Investor Group Against Digital Divide, to develop to develop such a policy.

6. OPERATIONALIZING “MEANINGFULNESS”:

Ethical considerations should be defined at the outset as stakeholders seek to establish broadband ecosystems that meet local needs. “Meaningful” means that the broadband ecosystem is likely to produce impacts that are perceived as meaningful to users, to communities and to societies. “Meaning” can be defined in a very practical way, eg a device is meaningful if it is affordable and usable. But meaning can also describe behavior furthered by technology. For example, addiction to video games would not be considered meaningful behavior.
 

7. WHERE THE MONEY WILL COME FROM:

In light of the liquidity crisis affecting large commercial finance institutions the perception exists that there is a lack of money to fund national broadband ecosystems. Thus it is important to look beyond conventional sources such as investment banks as potential sources of commercial investment, subsidy and technical assistance that could establish broadband ecosystems

MBR suggests five sources of finance:

• Middle of Market Finance: This refers to the spending power of those who earn between $1,000 and $3,000 per capita GDP who represent as much as 50% of total populations and 80% of total spending. New data indicates that much of the total value in emerging markets is pent up in this category, and partly hidden within informal economies. Furthermore, introduction of cell phones (especially smart phones) could conceivably produce multiplier effects compounding the value within the sector.
• Mobile Finance: This refers to the combined spending by telecommunications and mobile industries to accelerate the penetration of mobile phones into the hinterlands. The world bank estimates that $1 trillion has been spent in this form of finance, often obscured by cross-subsidies within multinational corporations to develop new products and services and pricing to reach low income users in emerging markets.
• Foreign Aid: A portion of “official development assistance” by OECD donor countries (working through multilateral or bilateral channels) is spent on infrastructure, education and public-private partnerships that affect commercial investments in developing countries.  These aid agencies are well represented in Indonesia, their primary base of operations in Southeast Asia Man predict that the post-Bush era in foreign aid will bring an increase in “soft power” in which donor countries will use aid to stimulate economic growth in strategically important countries.
• Sharia Finance: The fastest rising form of finance in the developing world, Islamic finance is now worth $1 trillion and may rise to 2.4 billion in five years, according to Standard & Poors.   A form of ethical investment, Sharia is associated with microcredit and infrastructure spending and could serve an important role in broadband ecosystems in the future.
• Social venture finance: Dot-com billionaires such as Pierre Omidyar (of eBay) and Bill Gates are considered examples of “philanthrocapitalism” in which donors seek to use their business expertise to effect industry dynamics in emerging markets to the benefit of low-income users. Some such investors are involved with extending web 2.0 social networking activity into emerging markets.

8. SCENARIO CONSTRUCTION.

Shell Oil is among the enterprises that have pioneered the use of scenario planning to formulate investment strategy. Based on an assessment of these funding sources, together from those that may emerge from domestic governments and commercial ventures, the stakeholders of any given ICT corporations are able to generate answers to the following questions:

• How much money can be expected from normal market forces (under existing public policy conditions) to build broadband ecosystems.
• How much additional commercial money is needed?
• Which instruments of finance are most likely to provide the needed funding?
• How could new funding emerge under by altering certain variables, such as the introduction of new regulations or subsidy by local or foreign governments?

Once these questions are answered, stakeholders are in a position to use a technique called “reverse-engineering” to arrive at a strategy for what should be done to achieve the optimal future desired by stakeholders.

9. MEANINGFUL BROADBAND INVESTMENT POLICY:  

After having established their investment policy, stakeholders can then propose new policies and practices that would accelerate meaningful broadband ecosystems. These recommendations may extend, not only to national governments but other public agencies at a sub-national or super-national level, as well as academic and commercial institutions.

10. POLICY MARKETING AND POLICY IMPLEMENTATION:

Stakeholders may then choose to “socialize” their commendations through:

• Creating media campaign,
• incorporating social networking options via the internet itself, as well
• building a “brain trust”  of experts to lend credence to the policy formulations.

Stakeholder may also offer their services to help governments implement Meaningful Broadband Policies.

11. OUTPUTS:

Having completed its involvement in policy-generation, stakeholders may build upon the collaborations established by moving directly into entrepreneurial action, e.g.

• by establishing social venture funds,
• mobilizing commercial investments or
• building new business alliances that accelerate or enhance the social benefit of meaningful broadband ecosystems.

12. CONTINUAL TRANSFER OF BEST PRACTICES:

Since technological and management innovations in the establishment of meaningful broadband ecosystems are ongoing,  stakeholders may wish to establish web based systems to facilitate the transfer best practices into their countries, as well as to disseminate their own best practices that may be useful to foreign countries.