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Rural ICT Solutions for “Feed the Future”

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”?. Availability. Access.

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Rural ICT Solutions for “Feed the Future”

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

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

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

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

  5. 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%)

  6. How ICT causes growth in rural areas Income = f(productivity, human capital, investment) • 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)

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

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

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

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

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

  12. 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 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.

  13. 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

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

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

  17. 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

  18. 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.

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

  20. 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.

  21. 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

  22. Global Broadband and Innovations (GBI) 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 USFsto achieve universal access. • Altobridge (Ireland) • VNL (India) • iDirect and Ubiquisys (USA)

  23. Summary • ICT causes rural economic growth through better access to information • Rural Economic Growth means more (and more reliable) agricultural output. This is Food Security • 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. • The GBI program provides an avenue within USAID to engage in each of these activities

  24. Points of Contact Joe Duncan GBI Program Manager, USAID jduncan@usaid.gov Eric White Managing Associate, INTEGRA LLC ewhite@integrallc.com

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