Cashing in on the village phone

Posted on January 9, 2006  /  2 Comments

Dec 23, 2005, By: Robert Clark, Wireless Asia

The UN summit in Tunis last month did not turn out to be the showdown expected between the and the rest of the world.
That particular non-event, and the anti-social behavior of ‘s police, took the headlines, such as they were. By the end, journalists were reduced to counting the number of delegates (19,400), sessions (316) and participating organizations (264).
It is worth recalling that one of the key missions of the grandly-named World Summit on the Information Society (WSIS) was to figure out ways of narrowing the digital divide.
And despite the grandstanding, WSIS did leave behind a few small straws of progress for the three billion citizens on planet earth who don’t have access to modern communications. I’m not talking about the 2,500 unknown tele-development projects claimed by the ITU, or its under-subscribed Digital Solidarity Fund.
ITU secretary-general Yoshio Utsumi sniffed that rich western nations, who elected not to write checks to his fund, suffered from a "limited" understanding of the divide. That’s one way of looking at it. Or it may be that governments these days are wary of throwing public monies at the UN. Or perhaps rather than kick in cash for "solidarity", donors prefer to fund real solutions.
Addressing the divide
One is the expansion of the village phone program pioneered by Grameen Telecom in . The concept has trialed successfully in and the main instigator, the Grameen Foundation , has picked up Nokia as a technology supporter.
There had been skepticism about how well the village phone concept would port to other markets beyond its home in . Supposedly ‘s high population density and homogeneity made it exceptional among developing nations.
Not so. The Ugandan trial has set up village phones in 2,800 villages, each serving 500 to 1,000 people. Another pilot is underway in , and Grameen is also exploring possibilities in the and.
The village phone is another application of the micro-finance concept pioneered by Professor Muhammad Yunus. Grameen Phone, a JV between Telenor and the non-profit Grameen Telecom, has put a phone service into 165,000 Bangladeshi villages, each yielding an ARPU higher than that of the average business user on the network.
The powerful thing about the Grameen approach is it’s not charity. Typically, one person – always a woman – in each village is given funding to buy a phone business, typically with a loan of about $180. She gets a phone, antenna, access to wholesale airtime rates, marketing collateral, and training. In turn she earns income by selling airtime to other villagers.
"Village phone is not selling a phone, it’s selling a business opportunity. We give them the opportunity to create an ICT-based business," said David Keogh, deputy director at the Grameen Foundation ‘s Grameen Technology Center.
While Nokia is backing the village phone, rival Ericsson has hooked up with the United Nations Development Program (UNDP) and the Swedish International Development Cooperation Agency (Sida) to improve rural mobile coverage.
Johan Bergendahl, Ericsson’s head of marketing, says one of the hard things was to get local operators on board. "It was difficult to encourage those operators sitting in cities with pretty good coverage" to take it seriously, he said. But under the model devised, operators can come in on a "pay as you grow" basis, eliminating most of the risk.
Skeptics might believe that the interest of Nokia and Ercisson is less about bridging the divide than setting themselves up for fresh orders of networks and handsets. Well, I should hope so.
It’s surely much healthier to treat the world’s under-privileged as customers or potential business partners than as hapless poor who need our charity and sympathy.
And if multinational vendors can do well while doing good, that is better than throwing taxpayer dollars on dubious charity projects and nebulous feel-good funds.


  1. Grameen Telecom (GT) has certainly succeeded to do what the ITU has pathetically failed despite forming the infamous WorldTel (, lead by Sam Pitroda. Thank God the Digital Solidarity Fund is not flying. It’s a bad news for the crook politicians and civil servants of the digitally divided countries. They are obsessed with procurement but strongly oppose policy reforms. GT has reasonably succeeded to overcome these artificially created crises in Bangladesh.

    Robert has partially explored the power of Grameen approach, “it’s not charity.” The real power of Grameen approach is, however, attributed to be blessed with having uninterrupted access to heavily subsidized (50%) airtime of GrameenPhone, 62% of which is owned by Norwegian Telenor. GT makes money out of this concession and if GrameenPhone (Telenor) pulls this plug, the Village Phone scheme’s business case doesn’t fly anymore. LIRNEasia’s recent research provides the details and hopefully David Keogh will go through it.

    Robert’s has made a somewhat overstatement regarding Nokia’s contribution to the Village Phone project. GT had been the exclusive dealer of Nokia handsets in Bangladesh until the very recent past. It became counterproductive for both the parties. Nokia, the dominant supplier of GSM handsets, didn’t make cheap gadgets when Village Phone was launched in 1997. GT incurred high cost while bundling Nokia’s handset with subscription to the Village Phone operators (The phone ladies). Ultimately GT had to source cheaper handsets from Nokia’s competitors. GT doesn’t have the organizational capacity to promote a global brand like Nokia. Ultimately the Finnish vendor is opening up its own outlet in Bangladesh to recover Nokia from down the line. It’s better to be late than never.

    Nokia’s major contribution to bridge the digital divide will come from its ingeniously designed low-cost micro-base stations for rural areas. This base station is housed at the tower’s top and it doesn’t require air conditioning. That radically slashes capex as well as the opex (power cost) and the operators find the business case in low traffic generating rural areas.

    Ericsson also has similar product called “Expander Solution”. Besides, Ericsson has structured a smart solution called “Managed Service”. Ericsson’s customers outsource the entire operations and maintenance of the network to this Swedish vendor. Actually no engineering team exists in the mobile operators’ organogram if they opt for Managed Service. Indian operator Bharti is even reluctant to pay for the equipment. It buys bulk airtime from Ericsson and resells them in the retail market.

    I don’t want to bombard you with the details of award winning emerging software radio by Vanu, Inc. Why not visit the website ( and dig out the result of its partnership with C-DOT for the Rural Indian mobile market? I hope Robert Clark will tell us this story sometimes in near future.

  2. Idea cellular is trying out a model that is similar to Grameen’s except it does not provide loans for the handset. As we had discussed during colloquium on LIRNEasia’s Grameen project, once the handset costs drops dramatically the need for a loan will not be as compelling. May be this could be a model for extending rural connectivity in other South Asian countries? It removes the risk component in the Grameen model from loan defaulters, since operator only sells minutes.

    Wednesday, 14 June 2006 Telegeography
    Idea to provide Shared Access to rural India

    Indian mobile operator Idea Cellular has launched its Shared Access programme in cooperation with the GSM Association in an attempt to improve communications in rural areas of the country. The scheme aims to create a new breed of local entrepreneur who will lease airtime via their mobile handset to residents in remote municipalities. Idea says tailored software is being developed to provide a printable bill to customers if required, whilst transparency is ensured by the displaying of call charges on the handset itself. After a successful trial in Maharashtra, the service will now be launched across the entire Idea network