Do marginal communities make good markets for telecommunications services?

Historically, companies have regarded marginal areas as unprofitable for telecommunications services. As a result, these areas have been excluded from most services. However, decisions regarding service provision are based on rather vague information and prejudices. Regulators have only limited resources and expertise to generate information about how new services are likely to be used by consumers. As new, cheaper methods of providing such services continue to be developed, service providers should be encouraged to extend access to areas that otherwise would not be considered.

Gamos Ltd and the Commonwealth Telecommunications Organisation co-ordinated a DFID-funded research project to explore patterns of the use of telecommunications services in marginal markets in Africa. The researchers drew information from case studies in Botswana, Ghana and Uganda.

Telecommunications networks are increasingly believed to have substantial value in promoting social development and economic prosperity. Phones offer a quick, cheap and convenient form of communication that avoids the costs and risks associated with travel.

In the 1990s Botswana, Ghana and Uganda opened their telecommunications markets to more competition. These markets are now overseen by independent regulatory bodies and have experienced dynamic growth as a consequence. All three countries are increasingly relying on commercial practices to provide the infrastructure needed for access to telephones or the Internet. However, relevant stakeholders lack understanding of demand, particularly in rural areas and low-income communities where services remain limited to public phone booths or commercial providers.

Seventy to seventy-five per cent of respondents in areas that are not served by telecommunications companies use telephony on a regular basis (at least once in three months). In contrast to previous projections the researchers highlight the following key findings concerning telecommunications usage:

• There is substantial demand in currently unserved areas. People are willing to travel significant distances on a regular basis to make phone calls. Local access would allow substantial savings concerning travel costs and time.
• The intention to use private (mobile) phones is twenty to forty per cent higher than current use. However, frequent power cuts and poor network quality undermine the reliability of the system.
• In contrast to the widespread use of telephones, email and Internet usage is low, even in areas of high service coverage. High costs and unreliability of Internet services is a major obstacle.
• Attended services (teleshops) lack privacy and require long queuing. On the other hand, they provide useful services by assisting their clients with the technology, taking messages and facilitating incoming calls.
• The majority of respondents use telephones to call friends and family to keep in touch and arrange the transfer of money between family members.

The findings indicate that the substantial majority of adults in most African countries wish to make significant use of telephony. There is great potential for increase in use of services and network expansion into rural areas may generate more revenue than previously anticipated. The researchers recommend the following measures to improve the telecommunications service provision in marginal areas:

• More realistic projections of potential users should be made as current ones underestimate demand. Policy makers should be more aware of and promote the potential of demand for telephony in areas currently under-served.
• Companies should take account of consumer concerns to determine the type of facilities, which most effectively meets the consumers’ needs. Public access facilities should be improved to make them more user-friendly.
• Donor agencies should support co-ordinated infrastructure approaches to bring power and telecommunications together. Power cuts need to be addressed and network quality should be improved.

The study has shown that there is much more demand for telecommunications services in marginal areas than previously anticipated. Network expansion must be accompanied by technical improvements to guarantee a high standard of reliability.

Source(s):
‘Innovative demand models for telecommunications services’, final technical paper, CTO & Gamos 2003 Full document.
'The Use of Telephones in Rural and Low-Income Communities in Africa' Edited by N. Scott and K. McKemey, November 2002
'Africa's New Communications Users - what do they use and why?' Balancing Act Issue No. 147

Funded by: DFID (IUDD) R8069

id21 Research Highlight: 8 October 2004

Further Information:
Nigel Scott
Gamos Ltd.
231 Kings Road
Reading
RG1 4LS
UK

Tel: +44 (0) 118 926 7030
Fax: +44 (0) 118 929 9514
Contact the contributor: nigel@gamos.demon.co.uk

Gamos Ltd, UK

Commonwealth Telecommunications Organisation

DFID Infrastructure Connect

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