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Village Telco: Rural Voice Services Business Model

By Wayan Vota on October 15, 2009

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.

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.

You have a focus on ease of use – will a business owner need to have a skilled IT techncian to operate the system or can it be plug and play? And where would one get the hardware/software? Will this be sold as a finished product or will users need ot download and install code on equipment they buy from multiple vendors?

Steve Song:
I think it depends. In most cases, I expect that there will be a need for someone sophisticated enough to follow a set of installation instructions and debug problems by consulting a mailing list, forum, or by searching the web. We expect there to be a hierarchy of Village Telcos (VTs) ranging in sophistication.

At the top level will be the very sophisticated VTs who operate interconnects with the PSTN, mobile operators, and international VoIP providers. They in turn will be service providers to smaller start-up VTs that will simply have to point their Asterisk server over an IP link to one of the top tier VTs and they will be able to connect to all networks. For this level of VT, I think we can create a fairly packaged, easy-to-install solution.

This breaks down into two components, the Mesh Potato and the Server.

The Mesh Potato
The mesh potatoes will come pre-installed with OpenWRT, BATMAN, Asterisk, and Afrimesh. They will have default unique MAC/IP addresses and even phone numbers. If you plug a bunch of Mesh Potatoes in out of the box, even without a server, they will still give dial tone and allow you to dial any other MP within the wireless mesh that is created. This opens up possibilities for the use of Mesh Potatoes in emergency scenarios. Once an Internet gateway and Asterisk server are added, they will be able to start gatewaying calls outside of the mesh.

The Server
The server will be a combination of Asterisk, A2Billing, and some network monitoring/management software. It is possible that this might be set up as an ISO that you install on a new server. My preference would be to have these as Ubuntu packages. Perhaps we’ll do both. The Asterisk/A2Billing configuration will give you a stock set of Village Telco upstream providers. These could be actual Village Telcos or other VoIP providers. We’ll create a standard set of info for an upstream provider that can go in an ever-expanding upstream provider dropdown box during the installation.

So, an installation might look like this:

  1. Purchase and install a server, a UPS and/or solar unit, 3 Ubiquiti Nanostation 2s, mounting brackets, and an initial quantity of Mesh Potatoes.
  2. Either install the VT ISO or install Ubuntu and install the VT via debian packages. This will set up Asterisk, upstream connectivity, and a billing system. Establish an account with an upstream VoIP/Village Telco provider.
  3. Mount the 3 Ubiquiti Nanostation 2s in a 360 degree configuration around a single pole mounted on the roof or wall of your premises. This should give reasonable WiFi coverage (conservatively a square kilometre) from your premises.
  4. Plug in your Mesh Potatoes and ensure they’re working. We are currently working on a mass configuration tool which will allow the VT operator to set IP ranges, phone number ranges, SSIDs, etc en masse for a group of Mesh Potatoes. Register each Mesh Potato with a phone number on A2billing.
  5. Export a batch of pay-as-you-go codes from A2Billing and import them into a printing program that can make nice-looking pay-as-you-go scratch cards to be sold at local shops.
  6. Start selling Mesh Potatoes to the community. Emphasise the free local calls, cheap long distance, and Internet access.
  7. Install some Mesh Potatoes as payphones and begin offering free voice mail accounts to everyone who is prepared to use the VT network.
  8. Start delivering value-added interactive voice response (IVR) services targeted at local needs and issues.

As to where you will be able to buy the Mesh Potatoes, they are being manufactured in Shenzen, China by a company called Atcom. Atcom will wholesale the Mesh Potatoes to any interested retailer/wholesaler. We expect that entrepreneurs setting up Village Telcos may also begin to distribute them.

Licenses to operate micro telcos are a roadblock that’s stopped previous efforts. How is Village Telco different?

Steve Song:
Well, operating in the unlicensed WiFi spectrum means that no spectrum license is required. That is a critical barrier overcome. Depending on what sort of organisation you are, you may also need an operator’s infrastructure and a service license. In South Africa, these are called Electronic Communication Network Service (ECNS) licenses and Electronic Communication Service (ECS) licenses.

There are a number of ways of dealing with this challenge. The first is obviously to simply apply for the appropriate licenses. This is a lot less difficult than getting a spectrum license. A second option would be to partner with an existing service provider such as an ISP (who have these licenses) and operate under their umbrella.

A third option would be to do something creative like set up a co-operative. Mostly intended for farmers, co-operative legislation could make for a pretty cool model for the Village Telco. Whatever the case, you can probably fly under the radar until you’ve figured out whether you have a viable business or not which would directly influence how much effort you want to put into licenses.

It seems that village telco handsets will look like traditional land line phones, not mobile or wifi-mobile phones. Might this be seen as a step back, a loss of mobility that’s now expected with phone usage?

Steve Song:
Actually, I think this is a strength. Well, actually let me back up. In a perfect world, the Village Telco would operate in the GSM spectrum and use an Open Source base station like OpenBTS. Then everyone could use their own mobile handsets and connect to an alternative Village Telco mobile operator. Sadly, there is no way in hell that the existing mobile operators are giving up any of their GSM spectrum so while we continue to look for exceptions in this area, we’re not holding our breath.

OK, back to Mesh Potatoes with standard phones. I think if we tried to have a handset that looked like a mobile phone we would be critiqued for not doing all the things a mobile phone does. For what its worth, we did experiment with WiFi phones but the transmit power on their antennas is not strong enough to be very useful for a Village Telco, plus WiFi handset are just not nearly as power efficient as mobile handset.

The Mesh Potato is different and that can be a selling point. If we put a Mesh Potato in a school, for instance, there are lots of instances where you might want to call the school without particularly minding who picks up. Same with a household.

If you call someone’s house, sometime you’re happy to speak with anyone there who might know the thing you need to know. Plus, you can leave messages for that household or someone in that household. Just because there are no home phones in much of Africa doesn’t mean there isn’t a market for them, especially if they offer something unique like free local calls in the community and free voicemail.

What’s the current timeline for Village Telco technology.

Steve Song: At this stage we have working prototypes of the Mesh Potatoes and are going to produce 100 beta units to be tested in a dozen different countries. That should happen Oct/Nov. We then expect to go to full production by Feb of 2010.

If you’ve read this far about the Village Telco project, you’ll probably want to check out Steve’s slide deck too:

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Written by
Wayan Vota co-founded ICTworks. He also co-founded Technology Salon, MERL Tech, ICTforAg, ICT4Djobs, ICT4Drinks, JadedAid, Kurante, OLPC News and a few other things. Opinions expressed here are his own and do not reflect the position of his employer, any of its entities, or any ICTWorks sponsor.
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