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IGF 2018 - Day 2 - Salle VIII - WS426 Hybrid Business Models: A Connectivity & Approach

The following are the outputs of the real-time captioning taken during the Thirteenth Annual Meeting of the Internet Governance Forum (IGF) in Paris, France, from 12 to 14 November 2018. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record. 

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>> CHRISTOPHER YOO:  If everyone would please take their seats so that we can begin.  Excuse me.  We have to start our next session.  Thank you.  It is my pleasure to welcome you to the next session on hybrid business models.  We have a busy schedule and only 40 minutes.  So we need to get started as promptly as possible.  So .... thank you.

  (laughing).

You are doing very important work as well.  I'm running the next session.  Thank you for coming.  Our goal is to create a interactive session where we take advantage of the knowledge of the speakers we have invited, but as well as the knowledge of the people in the room, to start to analyze the kinds of ways we can try to find new solutions to the challenges we all face, which is connecting more people, my name is Christopher Yoo, I teach at the University of Pennsylvania, where I lead the one world connected project.  We are delighted to have four outstanding speakers with us today.  One of whom I was going to ‑‑

  (voice off microphone).

One of whom could not make it because of some visa issues and travel issues, but she has prepared a presentation to talk about a rural Indian projects they are doing under a organization called Gram Marg.  Why don't we start with Sarbani's presentation.  If we can play that now, that would be perfect.

  (video played:)

>> SARBANI BANERJEE BELUR:  It is a working model currently.  This model came about with our villages, 25 villages that we looked into, we wanted to experiment, the feasibility of 5.8 gigahertz for connectivity, and also in the same time, address the sustainability of connectivity by understanding the different stakeholders who can take connectivity to remote areas of India, or remote villages of India.  How connectivity can be sustained and how the connectivity can ensure, along with user utilization by the people.  We connected 24 villages, a area of approximately 350 square kilometers, and that is where we develop the model.

What is the model, we tried to identify who are the important players who can take connectivity to the villages of India.  We found out that one is a private, it can be a funding agency also.  The public is the Government who sometimes can have infrastructure in the form of buildings, powers that are already present in many villages, and policies.  The Government has different policies like health policies, insurance policies, housing policies, school building policies, schooling policies, so different types of policies, already present with the Government.  And the village administration, they are in dire need of connectivity.

These are sometimes villages that are, don't have any voice connectivity as well, so leave aside data, they don't even have voice connectivity.

What we wanted to do and what we did actually is that we brought these three entities, the public, private and Government in partnership mode but in any place, these three were together in a partnership, then the best out of each can come out, and the connectivity can be ensured in the remote villages of India.  It can also be accessible connectivity.

We identified that when connectivity is between a private, public partnership, what happens is that the connectivity is usually a top‑down approach.  But in order that for what happens is that the village administration is actually not villages whom we are connecting but actually not taken into account at all for the connectivity.

The Punjab of the village administration playing a role in the connectivity is important because that can ensure that the local, regional needs are given priority over the other needs, so it becomes a bottom up approach.

The main qualities or main features of this 4P model that we have developed is that it is a multistakeholder partnership model as I have told you earlier.  There is a involvement of a local entrepreneur in the community.  We found that with interaction from the interaction with the village administration and the villagers that in order to make it accessible in the villages, that there needs to be involvement of the local entrepreneur and the community.  Otherwise it can never be sustained.

We have taken that into account in the model.  We have also, because this was funding, this was a project that was funded to us, so we invested on the cap ex, we directed the towers, we provided devices, all infrastructure we provided.  It is communities, a sharing community model, from Gram Marg, one is a private entity, but some operators, it can be a funding ...

  (no audio).

Until and unless we have a new generation sharing more than this model, it cannot be sustained.  It is a localized model, in two regions.  It is developed in these villages, but we can use it for different villages in India.  We are working on that now currently.  It can be used in various other locations in various parts of the world as well.

It is already modular and scalable model, because currently it takes into account 25 villages but it can take into account 50, a hundred and so on.  That is modular and scalability of this model.

Validation, what we did is after the model has been developed, we have validated it on field in two different scenarios, one is 15 village scenario and the other is a ten village scenario.  These 15 villages, it has a local ISP model that local ISP takes bandwidth to the villages, and village administration purchases that bandwidth per month, for roughly 13 U.S. dollars.

Then the local ISP makes it a renew not only by selling the bandwidth to the village office, but also selling it to the villagers inside the village.  That is the model of this.  These are current user scenario.  The bandwidth required actually is increasing.  It's a two year graph, it's 24 months graph that we have.  The bandwidth you can see that how the bandwidth requirement increases.  We have taken the village administration's office, only in March actually so we have not taken into account how many access points does the local ISP put into the village.  So we have not done that.

We have just taken bandwidth and it's investment, so initially first two months, it is a negative.  But then slowly it catches up.  Then you can see by the end of one year, the local ISP starts making a profit, and then entering into the bandwidth and gets more bandwidth for the villages, and that is how the internal investment infuses.

We did a plan model to see how the bandwidth requirement will increase over time, and what will be bandwidth available and whether the local ISP will have a steady return on investment.  We see that from year one, towards the end of year one, onwards, there is a steady return on investment for the local ISP, because if the local ISP does not get steady return on investment, it becomes futile for the local ISP to pay more bandwidth to the villagers and provide connectivity to villages over there.

The next set of the same model has been taken to ten villages, where we revalidated the different scenario, where we did it on a local or village entrepreneur.  The entrepreneur, this is also ten villages where we have the community network, that is the community is owning the network in these villages.  We have identified the village with a entrepreneur who invests an initial amount, and buys the bandwidth from the local ISP, and tries to get that delivered from the villages by selling bandwidth in the village.  Often, he makes a profit, in the initial amount that he invested on.  He invests much more, and then the model keeps growing in itself.

This is the validation in the ten villages of the community led effort that Gram Marg has set up in the ten village also.  The current user scenario, we see that the bandwidth, the village with a entrepreneur makes a steady return on investment.  This is a similar as the local ISP where he gets, he or she gets a steady return on investment, only of the cap ex, by selling bandwidth in the villages.

It actually stabilizes, it slowly infuses from year one towards end of year one and it keeps increasing year after year.

The five years predictive model for this, we see that the bandwidth requirement, required bandwidth and available bandwidth goes hand in hand with each other.  The return on investment is actually negative, towards for the first two years, after which it makes a steady growth.  This is our model and the model has been validated on ground as I have told you earlier.  I will be happy to take questions and queries and discuss further on this.  Thank you.

>> Good morning, everyone, this is Sarbani Banerjee Belur.

>> CHRISTOPHER YOO: That is a interesting deployment that uses innovative technologies, and not just connectivity but back hall as well.  That is one fascinating example.  I'll turn to Natalie, deploying networks in Namibia in a innovative way.  Thanks for joining us.

>> Good afternoon, everyone.  My name is Natalie.  I don't have a presentation.  I made some notes.  I'll read from my notes.  I work for a NGO, we use the Internet to send information to mothers in rural areas, expectant mothers and mothers of newborns, to create awareness and guidance for the mothers to prevent child mortality in Namibia.  There are over 50 unemployed youth in my country and the rate of underemployed is even higher, the digital revolution in Namibia has not yet reached Namibia.  Why I say Namibia is digitally excluded is first, the Internet is not accessible, and worst of all, it is not affordable.  Secondly, the Internet is mainly afforded to the previously advantaged, so struggling mother cannot easily access Internet.  Internet is a basic human right.

The majority of our youth did not have training in technical field, and Namibia deployed a project test phase, and still Namibians cannot have access to the Internet network.  The digital economy would enable our youth participant in digital economy, and it would help as a game changer, and youth employment and empowerment.  To engage in digital economy it is almost impossible to secure funding.  It is easier for a farmer or cattle herder to obtain funding an average Namibian.  There is high risk tech start‑ups and rarely funded projects.  The digital infrastructure does not exist, forcing people to migrate to cities outside Namibia for Internet.

>> To add to what Natalie says, there is a lot of challenges in Africa, and we need the networks and we need the business models that enable those networks for SMEs to thrive.  We have a massive migration from the rural areas to urban areas.  The digital economy will enable the Namibian youth and the rural youth in particular to engage, and basically to become digital citizens.

>> CHRISTOPHER YOO: Thank you, Natalie and Paul.  If I understand, engaging SMEs is a critical hybrid model for making the connectivity work in Namibia.  Is that ‑‑

>>   Yes, it is about creating the driver, so when you are moving, you want to get the last mile, you have to generate demand.  Right now that demand is moving to urban areas because there isn't access in rural areas, which means if you are a SME and you want to engage, Africa has one of the largest young population in the world, and it is growing.  If we don't create the opportunities and there is no opportunities in the formal business, it has to be the informal sector.  The digital economy can help transform that informal sector and enable the youth to gain employment.  But we don't want that at the cost of migration just to the urban centers.

So getting the SMEs engaged and giving them access to connectivity at the rural area and the digital skills, it is not just access, it is creating digital skills to enable SMEs to engage on that platform, will transform Africa.  It will help on rural youth employment and will solve a lot of problems that we face right now.

>> CHRISTOPHER YOO: Have you found any strategies for getting the digital training, other engagement needed to get SMEs trained in place without having to move to the cities, or are there other challenges that you face that you can't overcome?

>> There is a growing understanding of digital literacy, and it's often driven by the NGO or the Civil Society sectors, ISOC in particular is part of the core.  We are getting there.  But in Namibia, it is a complex country, massive country, small population, large areas, and you have got a lot of cultural differences, language is a different challenge.  The majority of the population, they don't speak English although English is the official language.  Even having the right content and Internet that the SMEs can interact with in a language that they understand, and they are going to sell goods and services in their language.  We have to take what is in the real world and put it into the digital world for it to succeed in the rural areas.

We are a long way off.  There is a lot of problems and challenges that need to be resolved.

>> CHRISTOPHER YOO: Thank you, Paul.  I'll turn the floor over to Allen Bailochan Tuladhar, Picosoft P Limited, doing deployments in Nepal to connect more people to the Internet.

>> ALLEN BAILOCHAN TULADHAR: In terms of connecting in one of the most difficult terrains in the world, where reaching the top of the world, difficult terrains, geography of people being sporadic and pretty widespread, I think for us fiber was not an option that could be affordable.  We had to look at technologies other than fiber, and white space was better.

In terms of every time we talk to the policymakers, whenever we talked about TV white space they thought we were providing television and because of that, their minds in terms of taxing was difficult.  Talking about taxes in Nepal we pay over 35 percent taxes on Internet, 13 percent Telecom server charge, 4 percent universal service fund, so when it gets aggregated, that is equal to some of the industries like gambling or alcohol or some of the heavily taxed industries, Internet is also in the same category in terms of being taxed.

So we looked at, and back home, majority of the infrastructure is also being funded with development funds.  One possibility of investing into the infrastructure was being able to use development funds, but most of our deployments are much smaller in terms of requirements of funds that it really does not attract the World Banks and IMF or other development bank or other of the private sector funding wings of these larger funds that is available for deployment of heavy infrastructure, heavy cap ex involved projects.

On the other hand, is the possibilities of using, if I may, for lack of a better word, kind of grant money or free money, that does not need to be repaid back and it is not a investment or it's not a debt, and comes easier, is also with the NonGovernmental sector.

Again, lots of players in that area, so in terms of looking at hybrid models of investment, development sector, nonGovernment sector, the Government also is normally with a lot of fast changing in terms of the Government and also what is potentially issues with kickbacks and corruption, we tend to stay away from Government funding as much as possible, because it comes with a lot of other strings attached to it.

The other hybrid model definitely is trying to have the community pay for it.  But the community that we are addressing is, has affordability and being able to, when they are looking at their budgets, they have to decide on what is their priority, and Internet is not in the highest of their priority.

So having, and I think one of the ways that was talked earlier was to see if the ways that how Facebook and Google and some of the other Internet players have been able to fund their business.  To the consumer it's free of cost, but there is a cost to the whole effort, whole business.  It has to be funded by other sources.

In this hybrid model, we are kind of still struggling to find which would be the best model for us to look at.  We are looking at now, saying do we go on to aggressive pricing model, where we sell our services into the city, and subsidize onto the rural areas to be able to have a long term sustainability.

With a donor funding, the difficult part is that it's a spurt funding and then after that, it kind of, because Internet is not the spurt funding, because there is a major cost of the back hall Internet and the service and support cost, that needs to be sustained for a longer time.  The spurt funding could become that sense of a project that NGOs run, where after the funding of the project, the whole project dies down.  And it doesn't have a long term sustainable model.  We want it to be a sustainable business so that it should be able to continue even if there is no external funding available.

We are still struggling with what will be the best model, and maybe from the room itself, learn a bit in terms of how do we look at financing, the growth and scale to a much larger extent, out of the 77 districts in Nepal.  We are just active in 2.  Less than150,000 population we have been able to affect and there is still 30 million people that we need to make sure that Internet is accessible within the country.  The next big challenge is saying, we have started, we have extended, how do we scale to become a major player within the country.

I think the model of hybrid financing is still something that we are still struggling with.

>> CHRISTOPHER YOO: Thank you, Allen, very inspirational.  I'll turn the floor over to Philip Zululeta, who is working on the wireless interactive network or WIN, in the Philippines.  From what little I know about my friends who have worked in the Philippines, with the difficult island architecture and the uncertain property rights, getting access to rights of way can be a incredible challenge.  I'm delighted to hear your story about your efforts in the Philippines.

>> PHILIP ZULULETA: Sure, thanks, Chris.  I'm Philip from the Philippines, easy to remember, founder and CEO of wi‑fi interactive network.  I have notes that I can read off and then we can maybe go into Q and A later.

In the three years that we have been tackling this issue, we have gone through three iterations of our business model.  All three models have one thing in common.  It's a recognition that the audience and the user base we are addressing have very limited spending capacity.

In the Philippines, 96 percent of the users are on a prepaid, pay as you go model.  The average spent per month is roughly two U.S. dollars for phone services.  So it tells you a lot.  Right?

The first model that we launched back in 2015, was with what we called a sponsored wi‑fi model.  The way we did that is asked consumer goods giants to fund the cost of providing Internet access at community mom and pop stores.  In exchange, whatever the consumers purchased, their specific brand, the consumer gets 30 minutes of free Internet access for purchasing the sponsor's brand.

So we soon encountered issues with that model, because the community stores don't have POS systems to track if the brand was actually sold.  Because we couldn't attribute the sale to the reward, the brand couldn't continue investing in the particular model.

So we moved on to the second model, which was a paid version.  So the idea was to have the consumer pay 2 U.S. cents per hour, for paid access.  So that is really affordable by many standards, right?  The thing is, we learned that if people were going to pay as little as 2 U.S. cents per hour, they didn't want to hang around the store.  They wanted the service to actually be delivered to their homes, and that is really a tough market to serve, right?

So, now we are in version 3.0 of our business model, and this is where it gets interesting.  So, on the first two models, we were approaching the market with, if you build it, they will come approach.  Right?  We have completely reversed that, because of the operational issues.  We are now building it where they actually congregate.  We are now focused on a high traffic public areas like bus terminals, front line Government offices, train stations, where there is a lot of crowd users that we can easily address at any given time.

So, we are launching this in Q1 next year.  What we are really doing is we are setting up the wi‑fi hot spots this time, not necessarily as points of connectivity, but really as a venue to provide value added services through our digital marketplace.  What we did this time is we developed an Android app, so that when you connect to free wi‑fi, you are offered a digital marketplace complete with a digital wallet, so that people can transact new financial transactions.  The value added services include as an example, number one, you can pop up your digital wallet and purchase prepaid air time load, which is very popular in the Philippines, and we can actually deliver this product at a discount versus bricks and mortars.

Second, right now we are partnering with e‑commerce based companies, that are actually dependent on Internet connectivity to sell their own products and services.  So as an example of this, this would be online discounted shopping sites.  We are also having microlending, so peer to peer lending online can be facilitated through our free wi‑fi hot spots.

The big one is actually online remittance, the ability to move funds, cashing in into our digital wallet with free connectivity, and then cashing out those funds with our partner sites from brick and mortar locations.

So there are many more value added services that we can include in this marketplace, games, travel, music, healing, these are value added services that can pay for the cost of Internet service.

In closing, I want to say that in the three years we have been working on this very challenging issue, we have come to the conclusion that this is not really a technology problem.  The tech exists in different flavors, and there are many more to come.  Our specific audience expects wi‑fi to be free.  As a private enterprise, our continuing work is to develop a win/win economic model, where the consumers or the users get what they want, and at the same time our commercial partners are able to justify their continued participation and investment in this approach.

I think that is the key to sustainability, and we are hoping to report possible outcomes next year.  Thank you.

>> CHRISTOPHER YOO: Thank you, to Philip and thank you to all the speakers.  I had hoped this would be a interactive session, to get your input.  But they only scheduled it for 30 minutes.  I'm afraid at this point, unless there is a very pressing thing that someone would like to share or ask, I'm inclined to adjourn.  Please.

>> Hi, everybody.  My name is Aqua Walters, I'm from Jamaica, which shares a lot of the similar characteristics of a lot of markets that you guys operate.  For instance, in your market, would Jamaica, Jamaica has a duopoly of telecommunication chance but for that last mile rural service, what end up happening was there is a company that basically pays homeowners to set up a wi‑fi hot spot at the back of their homes, and that really helped to solve the last mile issue for them, because there was already connectivity in those areas.

The issue was running the cables, or running the connection from the main roads or wherever those points of connectivity were, to the actual home.  What they ended up doing was just basically broadcasting signals from those points into those communities, as a point.

Another one, another way to look at your problem is that of supply of services which you have already started down that road, looking at ways to support small SMEs, or digitizing those services.  A lot of those popular services that already exist in the market, that a lot of the unbanked already use, you already have the wallet.  What needs to, or one suggestion would be, one, look at a way to not train those business owners to code anything.  Figure out how to connect them with digital service providers, people who can build those applications for them, and then basically have a per transaction, if you will, look at how they can, how you can monetize those networks.  Because remember treat wi‑fi like a road, and just basically collect on the traffic, collect on the transactions that are done there.

For Namibia, what is interesting ‑‑

>> CHRISTOPHER YOO: We need to wrap this up.  If you could keep it very short.

>> We can talk off line.  Thank you.

>> CHRISTOPHER YOO: I don't mean to be rude but I don't want to keep them waiting as well.

>> Of course.

>> CHRISTOPHER YOO: That is interesting in Jamaica, fascinating.  Share your thoughts with Natalie about what is going on in Namibia.  We reached the end of our session.  I hope this is the start of a conversation, we have a shared commitment to the same goals.  I hope we will continue to meet today, tomorrow and in the future IGFs and other places in the future.  Thank you very much for coming.

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