ICTworks by Inveneo

Mobile phones seem to be ubiquitous in the developing world, until you leave the main population centers. Then service drops off fast, and rural residents are left to walk miles to get a signal. But it doesn't have to be that way. There should be a strong business model for the right entrepreneur to deploy a local phone system cheaply, and with a good investment return.

Back in April, the Technology salon studied this issue and we found that micro mobile telco business models are essential, yet elusive. That's before I learned about the Village Telco initiative.

This project aims to assemble and develop the cheapest, easiest to setup, manage, and scale, local telephone company toolkit in the world. Even better, the Village Telco focuses creating a sustainable business model for entrepreneurs as much as the technology.

In awe of such a ambitious goal, I interviewed Steve Song about the Village Telco project, with an aim to understand its business models.

ICTworks:
You say that any entrepreneur with modest resources and technical ability should be able to deploy a Village Telco. What might be the business model that you anticipate them using? And in that model, what are the start up costs? Revenue model? Break even projection?

Steve Song:
We've discussed this a lot within the community. Initially we picked the figure of USD $5,000 and asked whether it was possible to start a Village Telco with that sum of money and could you break even in six months.

The answer is yes but it really depends on your priorities. The above assumes that every user will pay for their own Mesh Potato. Any telco really begins to deliver value when it begins to experience the network effects when the network reaches a certain critical size.

Accordingly, you might want to discount the Mesh Potatoes in order to stimulate roll-out, just as the mobile operators do. In this case you would need more upfront money for roll-out on the assumption that a larger network is going to generate significantly more income because it is delivering higher value to customers.

Here's a fairly simple spreadsheet at which you are welcome to play around with. Don't take any of the existing data in there too seriously as it is really intended as a sandbox to play around with different scenarios e.g. discounted Mesh Potatoes, monthly subscriptions, no monthly subscriptions, free local calls, more or less Internet use, etc, etc.

There are a host of variables and it is not clear until we get some more examples in the field which model is going to suit the market best. This is likely to vary from country to country and from urban to rural areas.

One key selling point of the Village Telco is free local calls. In Johannesburg, Dabba who operate a Village Telco-like operation in Hillbrow in Johannesburg, they have found that 70% of the calls are local on the network.