Rural ICT Solutions for “Feed the Future” Eric White INTEGRA LLC 15 December 2010

What is “Feed the Future”? “The US Global Hunger and Food Security Initiative” So… “ICT for Feed the Future” becomes… “ICT for Food Security”

What do we mean by “Food Security”? Source: Feed the Future Guide, May 2010, feedthefuture.gov Availability Access Utilization Stability

Food Security = Agricultural Development = Rural Economic Growth RURAL ECONOMIC GROWTH Food Security Food Security Agricultural Development Agricultural Development Rural Economic Growth Rural Economic Growth

The importance of ICT infrastructure to Economic Growth Controlling for all else, access to voice and broadband is associated with big increase in GDP (10% to 1%)

How ICT causes growth in rural areas Lowers search costs and transaction costs, making labor more productive. Increases the rate of social learning (better workers = increased human capital) Reduces risk (increasing investment) Income = f(productivity, human capital, investment)

How ICT increases rural productivity 1.Voice, the killer app 2.Market information systems Lowers Search Costs – costs associated with obtaining, analyzing, and storing necessary information Lowers Search Costs

How ICT increases rural productivity 1.Voice, the killer app 2.Market information systems Lowers Search Costs – costs associated with obtaining, analyzing, and storing necessary information 1.Warehouse receipt systems 2.Commodity Exchange Lowers Search Costs Lowers Transaction Costs

How ICT improves rural human capital Farm Extension Services Disease Identification (Grameen AppLab “Community Knowledge Worker” Program) Google SMS: Farmer’s Friend Increases Social Learning

How ICT increases investment in rural areas ICT can reduce the risk faced by farm households, thereby increasing their ability to make investments. Reduces Risk Risk levels move inversely with income Secure Money Transfers/Savings- Safaricom M-PESA Knowledge instead of guessing Weather- Reuters Market Light

Busting myths about ICT Infrastructure Myth #1 Telecoms are more than poor people need. Priority should be put on irrigation, electricity, roads, sanitation, etc. In the 21 st century, ICT is just as important as any other piece of infrastructure. And, for Rural Economic Growth, perhaps more so!

Busting myths about ICT Infrastructure Myth #2 Poor people can’t afford ICTs, don’t want them, and don’t think that they need them. The fastest growth rate in mobile adoption is in the developing world. BOP has shown a huge willingness to pay for ICT as a share of total income

Willingness of Poor to Pay for ICT “In richer economies, households spend on average 1.5-2% of their income on communications. In emerging markets, it’s not unusual for this number to reach as high as 8-10%” -Pyramid Research To the astonishment of the industry, people living on a few dollars a day have proven avid mobile phone users” -Business Week, Sep. 2007

Lowest capital cost of any infrastructure, coupled with highest customer willingness-to-pay, means that the private sector is willing to play. 14 ICT – The best way to leverage private sector funds for infrastructure Source: World Bank Private Participation in Infrastructure Database, in billions of 2008 US$

15 Investment commitments to telecom projects with private participation in Sub-Saharan Africa, by segment, 1990–2008 Source: World Bank and PPIAF, PPI Project Database US$ billions Private ICT investment is overwhelmingly in Mobile Infrastructure

The “Gap” Model of Telecoms Access Current network reach & access Market efficiency gap Smart Subsidy Zone True Access Gap Geographical Reach ARPU*Users > (OPEX+CAPEX) ARPU*Users > OPEX ARPU*Users < (OPEX+CAPEX) OPEX*Users > ARPU

Covering the “Smart Subsidy” zone Most countries already have a mechanism in place to institute a state-managed subsidy. In most countries, these Universal Service and Access Funds (USAFs) do not function well On average only disperse 13% of the amount they take in. Multiple reasons for this, not just corruption

Getting to Universal Service To reach households beyond the Sustainability Frontier we must FUNDAMENTALY ALTER the economics of the situation. Since we can’t instantaneously raise ability to pay, our only choice is to lower costs. How? The private sector is in the early stages of experimenting with a new technology and a new architecture that has the potential to reach everyone.

Low Cost Base Stations Sat. Receiver/ Router Satellite Service Provider Uplink Sub. Management Internet Backbone Sat. Receiver/ Router Sub. Management Femtocell

Base Station Specifications Low-cost base stations require a capital expenditure of <$20,000 as opposed to $100,000 for standard cell sites They are solar powered and completely stand-alone Operational costs approach 0. Standard cell sites cost $2000/month in generators alone Profitable at an ARPU of around $3, which is within the “willingness-to-pay” of many rural poor. Signal range of up to 10 miles = >1 base station per village.

Issues and scope for USAID Technical Assistance Reaching the Market Efficiency Gap – standard legal/regulatory/competitiveness issues. Room for Technical Assistance in these areas. Reaching the Sustainability Frontier with Smart Subsidies –USFs, on average only distribute 13% of money taken in Achieving universal service –Working with technology companies to help demonstrate the business model and to link them to Universal Service Funds

USAID contracting vehicles ready for this work Meets the market efficiency gap –Provides Legal/Regulatory/Competitiveness TA Runs a Program on Universal Service Fund Administration, with a specific focus on Africa –Partnering with Intel Connectivity on the Rural Edge (CORE) program –Works with Micro-Femto companies, network operators, and USFs to achieve universal access. Altobridge (Ireland) VNL (India) iDirect and Ubiquisys (USA) Global Broadband and Innovations (GBI)

Summary 1.ICT causes rural economic growth through better access to information 2.Rural Economic Growth means more (and more reliable) agricultural output. This is Food Security 3.To expand rural connectivity we need to engage in legal/regulatory/competitiveness work, provide Technical Assistance to Universal Service Funds, and push for the adoption of new, low-cost technologies. 4.The GBI program provides an avenue within USAID to engage in each of these activities

Points of Contact Joe Duncan GBI Program Manager, USAID Eric White Managing Associate, INTEGRA LLC