Bridging India’s Digital Divide: Some Policy and
Technological Options∗
By
Anand Chopra†
© 2005 by Author
∗
I am indebted to Prof. Dr. Harald Hagemann, Prof. Dr. Michael Trautwein, Prof. Dr. Peter Spahn and Dr. Stephan
Seiter for extensive support, advice and comments during the project design, fieldwork and analysis stages. I would like
to thank Evangelisches Studienwerk. e.V. Villigst for their financial support through doctoral fellowship as well as
incurring fieldwork expenses in India. I would finally like to thank Mr. Vikram Srivats, Dr. Mrs. Shefali Dash, Mr. Manoj
Thareja, Mr. Virendra Hajela, Mr. Amitabh Singhal, Mr. Hemant Coomar, Mr. Anand Kulsy, Ms.Geetha Dharmarajan,
Mr. Satyan Mishra, Mr. Kumar Tiku, Mr. Satish Jha, Mr. Rakesh Khanna, Mrs. Madhura Chatrapathi, Mr. Senthil Kumar,
Mr. J. Shankar, Mr. Aditya Dev Sood, Mrs Surbhi Sharma, Mr. Abraham George, Mr. Ashish Sen, and Mr. Vishal Salvi
for their time and insightful answers to my questions during personal interviews in India and also arrangements made
by a few of them to visit their project sites. Views and errors in the paper are of the author only.
†
Department of Economics (520H), University of Hohenheim, Schloß Mittelhof-Ost, 70593 Stuttgart, Germany. Email:
[email protected]
1
Abstract:
This paper outlines a new approach of dealing with the digital divide problem facing India across
the borders and within its own borders. Firstly, it assesses the technological catching up by India
with respect to other countries. Secondly, it examines the underdevelopment of information and
communication technology (ICT) infrastructure that is lacking in most of rural India. The paper
tests and explains two hypotheses, one stating that by removing government monopoly,
liberalizing and delicensing the telecom sector would help the brisk dissemination of ICT in rural
areas and the other stating that by the coordination of stakeholders like government, industry, civil
society and community in establishing Internet kiosks to villages would help the brisk
dissemination of ICT in rural areas. A total of nineteen personal interviews were conducted in
India with officials from government, industry, NGOs and academia. These officials are advisers,
board members and Founders of NGOs and companies who influence the country’s ICT policy. I
found that both the hypotheses are strongly supported as a result of the analysis of these
interviews. Later in this paper, I further examine some low cost technological options for
infrastructure accessibility as well as for hardware and software applications in rural India. In the
end the paper deals with some of the most innovative business models in India and globally so
that developing countries can learn from each other’s experiences.
Key Words: digital divide, technology dualism, liberalization, coordination, Internet kiosk.
2
“Globalization, as defined by rich people like us, is a very nice thing... you are
talking about the Internet, you are talking about cell phones, you are talking
about computers. This doesn't affect two-thirds of the people of the world.”
Jimmy Carter.
1.1. What is Digital Divide?
UNITES suggests that the term ‘digital divide’ has become widely used to denote the
inequity in the opportunities presented by ICT and the digital revolution, whether for
economical, social, cultural or political uses. The expanding digital divide is making a new
dimension of poverty – information poverty – highly significant and visible. The potential
levels of impact (present and future) derived from this technology-related gap are
sufficiently serious to have placed the digital divide atop the international development
agenda in the last few years.1 According to another definition, digital divide refers to this
gap between those who can effectively use new information and communication tools,
such as the Internet, and those who cannot.2
Kofi Annan, Secretary-General of the United Nations, has said: “The new information
and communications technologies are among the driving forces of globalization. They are
bringing people together, and bringing decision makers unprecedented new tools for
development. At the same time, however, the gap between information 'haves' and 'havenots' is widening, and there is a real danger that the world's poor will be excluded from
the emerging knowledge-based global economy.” (Annan, 2002)
Unsurprisingly, the digital divide mirrors divides in other resources that have a more
insidious effect, for example, access to education, health care, capital, shelter,
employment, clean water and food. In the sense that the digital divide can be seen more
as an absence of access to information than as an absence of access to technology,
these other divides can arguably be seen as more of the result of an imbalance in access
to information than as its cause. Information is critical to the social and economic activities
that comprise the development process. If information is critical to development, then
ICTs, as a means of sharing information, are a link in the chain of the development
process itself (ILO, 2001).
However, eliminating the problems that the digital divide represents requires more
than the provision of access to technologies. According to the ILO, ICTs can contribute
significantly to socio-economic development, but investments in them alone are not
sufficient for development to occur (ILO, 2001). Put simply, telecommunications is a
necessary but not sufficient condition for economic development (Schmandt et. al, 1990).
Martin and McKeown (1993) suggest that the application of ICTs is not sufficient to
address problems of rural areas without adherence to principles of integrated rural
development. Unless there is minimal infrastructure development in transport, education,
health, and social and cultural facilities, it is unlikely that investments from ICTs alone will
enable rural areas to cross the threshold from decline to growth. The respondents
overwhelmingly supported this statement during the interviews that further manifests its
importance (Figure 1.1). 89% of the respondents supported the statement, 5.5% did not
support and another 5.5% remained neutral. Some of the respondents suggested that the
following:
• ICT is a tool and the process of decline to growth is a multiple process;
• Parallel action is required and not step-by-step approach;
• Delivery of basic services should be more ICT based;
1
2
UNITES, visit http://www.unites.org/html/unites/ictdev.htm
Digital Divide Network, visit http://www.digitaldividenetwork.org/content/sections/index.cfm?key=2
3
•
•
•
•
•
Too much is expected from new technologies;
Working on the field incorporates multiple factors into action;
Opening doors to ICT also open doors for other things to develop;
ICT is a cost effective methodology;
Computers to individual villagers doesn't make sense but computers with
proper applications within institutions in villages providing services like health,
education, business would help in a better way;
If services are always provided free of cost then only government will be
working alone, therefore, commercial interests are important.
•
Q21. Unless there is minimal infrastructure
development in transport, education, health, and
social and cultural facilities, it is unlikely that
investments from ICTs alone will enable rural
areas to cross the threshold from decline to
growth.
18
No. of respondents
16
14
12
10
8
Yes
No
No Comment
6
4
2
0
Figure 1.1, Self-created
Harris (2002) argues that digital divide consists of a variety of dimensions that go
beyond mere access to technology. If societies wish to share the benefits of access to
technology, then further provisions have to be implemented in order to address all the
dimensions of the digital divide. Table 1.1 summarizes some of these dimensions.
4
Table 1.1, Source: Harris (2002)
1.2.
The Gap between Nations
In 1960, per capita GDP in the richest 20 countries was 14 times that in the poorest 20
countries. By 1998, the gap had widened to 34 times.3 The gap in employment
opportunities between the industrialized and developing countries also continued to
remain wide over the past five years. Of the world’s 137 million unemployed in 1995, 29
million were to be found in the industrialized countries (Mehran, 1999). The gap between
the North and the South is also widening in respect of global resource flows, which
provide the investments vital for reducing disparities in income and job creation between
capital-rich industrialized countries and labor-abundant developing countries. During the
period 1993-97, 38% of the world’s total foreign direct investment went to developing
countries. In 1999, this share dropped to 24%.4 Given the huge and growing gap in
incomes, employment opportunities and investments, it is hardly surprising that the huge
3
4
ILO (2001), ‘Reducing the Decent Work Deficit: A Global Challenge’
ILO (2001), ibid
5
digital divide between industrialized and developing countries has continued to widen
over recent years.5
Hans Singer was one of the first ones who introduced the concept of ‘international
technology dualism’, which means essentially unequal developments in the area of
science and technology, between rich and poor countries. Singer identified a “process of
scientific and techno-logical advance” that “in all stages – basic research applied research
and blueprinting – has been heavily concentrated in the richer countries”.6 He further
asserts “the best we can make at the present time is that measuring the distribution of
advance by the distribution of inputs in the form of research and development
expenditures, we find that 70% of world expenditure is in the U.S., 25% in Europe, and
2% in the less developed countries”. The 98% of research and development expenditures
in the richer countries are spent on solving the problems, which concern the richer
countries, according to their own priorities, and on solving these problems by the methods
and approaches appropriate to the factor endowment of the richer countries. In both
respects – selection of problems and methods of solving them – the interests of the
poorer countries would be bound to point in completely different directions. Yet the twothirds of mankind with its different problem accounts for only 2% of all expenditures – a
discrepancy per capita ratio of no less than 100:1.7
In figure 1.2, point A represents a certain level of output on an arbitrarily chosen isocost line ED. Technical change in the figure is represented by changes in the amounts in
capital and labor that are required to produce the given level of output associated with
point A. In the case of point R, for example, because less of both inputs are required to
produce the same level of output as at A, the former combination dominates the latter in
the sense that it is a more efficient technique at all factor price ratios. Conversely, A
dominates all factor combinations within the area PAM, where more of both inputs are
needed to produce the said level of output.
P
E
Capital
A
M
B
R
O
C
D
Labor
Figure 1.2, Factor endowments and the direction of technical change from James, J.
(2003)
5
International Labor Review (2001), ‘The Digital Divide: Employment and Development Implications’
Singer (1970), p.62
7
Singer, ibid
6
6
In Singer’s analysis, the actual direction of technical change is dictated by the
concentration of R&D expenditures in the developed countries where, in general, labor is
scarce relative to capital and innovations will consequently tend to take place in the area
above AB and left of PA. Such innovations can be described as biased in the Hicksian
sense that they lead to an increase in the ratio of capital to labor. Very few innovations, by
contrast, would occur in the (capital saving) area below AM and to the right of PC, given
the paucity of R&D expenditures undertaken by the developing countries themselves, as
noted above.8
Even what little R&D does take place in the third world, moreover, is not necessarily of
the kind that would be dedicated by the factor endowments and other conditions
prevailing in those countries. The fact that the richer countries have such a virtual
monopoly of research and development expenditures, as concretely expressed in terms
of institutions, equipment, number of trained scientists and technologists, as well as a
virtual monopoly of deciding where the existing frontiers of knowledge are, has the further
consequence that the activity of small number of institutions and people, represented by
the 2% of research and development expenditures in the poorer countries, is also itself
largely devoted to the problems and methods determined by the richer countries. Much of
the present expenditures of the poorer countries represent a hopeless attempt to compete
for an inferior position in solving the same kinds of problems by the same methods
(Singer, 1970, pp.62-3).
To some extent, this process may take the passive form of a virtually unexamined and
unquestioned introduction of alien and inappropriate guidelines, preferences and
paradigms into the relevant institutions in the developing countries (Reddy, 1979, p.95). In
part, however, the process described by Singer may also reflect a more active emulation
of developed country science and technology institutions, which reflects the recognition
by developing country scientists that international (and to a large degree national)
rewards accrue to those working at the research frontiers. Indeed, because these awards
are usually more easily won by working in the developed countries themselves, an
international ‘brain-drain’ emerges, and constitutes the third dimension of Singer’s
concept of international technological dualism. The existence of the richer countries, with
their immensely superior facilities, and the glamour associated with work on their selfdefined ‘frontiers of knowledge’ assert a powerful attraction resulting in the well-known
brain-drain (Singer, 1970, pp.63). Some economists like Bhagwati were proposing to tax
professional migrant in order to raise revenue for the developing countries that suffered
from the consequent loss of scarce human capital (Bhagwati and Partington, 1976).
The problem is not that the volume of accumulated knowledge has failed to increase
over time. It has rather to do with the differential relevance of that body of knowledge to
be developed as opposed to developing nations. In particular, the latter have increasingly
found themselves exposed to the type of technological advances that bear little of no
relevance to their own particular problems.9
This in turn is due to international dualism, the fact that knowledge is accumulated by
the richer countries, and in respect of the problems of the richer countries. These are not
the problems of methods of primary concern to the developing countries. The richer
countries are mainly interested in sophisticated products, large markets, sophisticated
8
James, J. (2003), pp.16-8
Such technology is thus aptly described as ‘inappropriate’ by Stewart (1977), as opposed to innovations
that would be ‘appropriate’ to the needs of poor countries. See also Stewart et al. (1990).
9
7
production methods requiring large inputs of capital and high levels of skill and
management while saving labor and raw materials. The poor countries by contrast are
much more interested in simple products, simple designs, saving of capital and
particularly land, reduction in skill requirements, and production for smaller markets. The
potential impact of the increasing stock of knowledge – no doubt still very important and
on balance useful to developing countries – has been largely offset by a tendency for
each unit of this knowledge to become less and less useful to developing countries.10
But on the other hand, according to Abramovitz, the catch-up hypothesis asserts that
being backward in level of productivity carries a potential for rapid advance. The larger
the technological and, therefore, the productivity gap between leader and follower, the
stronger the follower’s potential for growth in productivity; and other things being equal,
the faster one expects the follower’s growth rate to be. Followers tend to catch up faster if
they are initially more backward. The technological backwardness is not usually a mere
accident. Tenacious societal characteristics normally account for a substantial portion of a
country’s past failure to achieve as high a level of productivity as economically more
advanced countries. The same deficiencies, perhaps in attenuated form, normally remain
to keep a backward country from making the full technological leap envisaged by a single
hypothesis. Countries that are technologically backward have a potentiality for generating
growth more rapid than that of more advanced countries, provided their societal
capabilities are sufficiently developed to permit successful exploitation of technologies
already employed by the technological leaders.11
Steinmueller (2001) suggests that ICTs are unique in a number of ways compared
with the leading industries of the past that were responsible for industrial growth and
development, such as steel, chemicals, and machinery. In many applications, and in
some types of production, the conditions of entry for using and, in some cases, for
promoting ICTs do not require massive investment in fixed plant capacity or infrastructure
or in the accumulation of experience. Moreover, ICT applications often appear to be
complimentary to efforts to improve the quality, speed and flexibility of production, offering
a compensating advantage against existing shortcomings in production capacities (Lal,
2000). Because virtually all of the components and many of the systems embodying these
technologies are internationally available from highly competitive markets and are easily
transportable, they appear to be readily transferable to whichever country can make
productive use of them.
All these features suggests that ICTs have the potential to support the development
strategy of ‘leapfrogging,’ i.e. bypassing some of the processes of accumulation of human
capabilities and fixed investment in order to narrow the gaps in productivity and output
that separate industrialized and developing countries. Looking to the future, the potential
of leapfrogging seems even brighter owing to the emergence of Internet technologies,
which are supporting the global flow of information and the emergence of a ‘virtual’
cyberspace domain, in which many of the constraints of time and distance are erased.
Internet technologies are particularly important because they provide an unprecedented
variety of new and ‘open’ formats for the distribution of information and the establishment
of interorganizational linkages.
Are the claims made for the leapfrogging potential of these technologies realistic?
Should developing countries divert scarce resources from other projects in an attempt to
10
11
Singer (1970), p.64
Abromovitz (1989)
8
tap their potential? And, if they do, what are the scale and timing of the returns that might
be expected? These questions are becoming even more central as claims are made in
the industrialized world that businesses failing to develop effective e-commerce or
information system strategies are doomed, and as major efforts are undertaken to close
domestic digital divides separating regions or small and large businesses.12 Against this
background let us now examine how India has done in terms of catching-up with the
developed countries.
1.3.
India: Closing the International Gap
As in most countries’, computers and IT have been around for a long time in India. But,
considered as an industry gaining global recognition and as having an internationally
competitive future, IT’s much-publicized growth in India has been a much more recent
phenomenon. Software exports, the earliest harbinger of a more widespread IT
expansion, began only in 1985, when Texas Instruments established its subsidiary in
Bangalore.13 This move was followed not only by other foreign software companies
setting up operations in that city and elsewhere but also by a number of domesticallyestablished software companies (Tata Consultants, Wipro, Infosys, HCL Technologies
and others). In more recent years, as the Internet has expanded globally, these earlier
investments have been followed by an explosion of start-up Internet companies and by
early efforts of a few well-established manufacturing companies at using the Internet and
other forms of communication to improve efficiency in their operations.
IT manufacturing also has occurred in India for many years and has included
investment by multinational companies, as IBM’s early involvement in India suggests.
Today, many foreign producers of computers and peripherals (HP, IBM, Compaq, Canon,
etc.) have manufacturing operations in the country, often in joint ventures with Indian
companies. There are in addition a number of wholly Indian companies, exemplified by
HCL, a company that formerly had a joint venture with HP but has now taken over the
enterprise. A variety of other manufacturers exist, including producers of peripherals,
electronic supplies and fiber optic equipment, among others, including Modi Xerox, Tata
Liebert and Wipro as examples.14
The key driving force for globalization of R&D in the 1990s has been the increased
demand for skilled scientists. According to this view, an international market for science
and technology personnel has arisen which extends beyond the OECD countries, to
include uncommon countries for international corporate R&D such as Israel, Brazil and
India. Reddy’s study of multinational firms in India contains the most comprehensive
information about the direction of R&D activities in India and what is especially useful
about his results is a comparison of ‘new technologies’ firms with firms in ‘conventional’
industries. In particular, whereas the latter conventionally perform some degree of
adaptive R&D (that is adaptations of products and processes to the local environment),
the former conduct considerably less of this type of R&D behaviour. Specifically, all the
efforts to develop new products and processes for major world markets and to generate
12
Steinmueller, (2001), pp.193-94
Among other possible locations in India, Bangalore was selected as an attractive city with agreeable
weather, a place likely to appeal to both Texas Instruments expatriates and Indian software engineers.
More on Bangalore is discussed earlier in Chapter 3, section 3.5.3
14
Miller, R. Robert (2001), p.21
13
9
“basic technology of a long term of exploratory nature for the use by the corporate parent”
took place in the new technologies firms, only 25% of which undertake any adaptive type
of R&D. This suggests that in new technologies there is less need for product or process
adaptation to the local markets and an overwhelming majority of new technologies firms
are involved in developing products for the global markets, e.g., computers,
communications equipment, etc.15
There is encouraging evidence from countries such as Brazil and India that local
scientific personnel have developed innovations designed specifically for the income
levels and other conditions prevailing in those countries. Indian scientists have come up
with a low cost form of wireless local loop (WLL) technology.16
Miller (2001) suggests that India’s major comparative advantage in the IT sector is
software development. Software had its modest beginnings, at least as an internationally
competitive sector, with the Texas Instruments (TI) investment in Bangalore noted earlier.
Today, the business is both large and expanding rapidly, directed almost entirely towards
overseas clients, and involves both domestic and foreign firms. Most companies,
multinationals and domestic firms alike, today use dedicated satellite links in their
contacts with either their home offices or customers. Eventually, however, the speed and
cheapness of Internet connections may substitute for dedicated means, as international
Internet connections become better established and security issues are overcome. Two of
the best examples are TI and Infosys.
Texas Instruments (TI), the first of several multinationals to establish operations in
India, began as a wholly-owned operation intended to enable the company to continue
software development 24 hours a day and to do so with decreased costs. At the time,
engineering salaries in India were only 10% of those prevailing in the United States,
which translated into software development costs of fifty percent less than in the US.
Today, owing to its early positive experiences, TI assigns not only much more
sophisticated applications of software but also has expanded to include the design of
integrated circuits. Although still dedicated entirely to TI’s internal needs, the much
expanded facility in Bangalore now employs 350 people in a world-class computing and
communications environment equal to any in the company's global operations.
Infosys Technologies began in 1981 as essentially a two-man applications software
shop for large companies. By 1985, sales had already reached US$18.1 million. In the
1990s the company added satellite transmission capabilities to ensure reliable and fast
connections with clients in the industrialized world. Rapid growth has continued, with
fiscal year 2000 sales at US$203.4 million, over 90% North America and Europe. Today
the company employs around 5,000 software professionals in seventeen development
centers located throughout the world, up from just 585 professionals in 1985. Infosys is
not the largest of India’s dedicated software firms, as both Tata Consultancy and Wipro
have greater sales, but in terms of its growth rate, employment expansion and customer
base, it is a prototypical Indian applied software company.17
Growing numbers of call center within Indian cities serving mostly American
customers has been another development recently taking place within the IT sector. Call
center have largely sprung up mostly in metropolitan cities where it is relatively easier for
companies to recruit recent graduates from colleges and after some training and brushing
15
Reddy (1997), pp.1823-28
James, J. (2001, 2002)
17
Miller, R. Robert (2001), p.24
16
10
up their American English accents, they are ready for the task at much cheaper wages as
compared to the US workers. The average income for an Indian worker is around US$
200 per month, which is somewhat 10 times less than their US counterparts. This whole
scenario has turned on a new trend and in order to be competitive, most of the US
companies have shifted their call center to India in order to cut costs. This has resulted in
a number of white collar job losses in the US and has thus sparked several debates within
the US. It also became a very important presidential issue for the US elections in
November 2004. While the democrats are against the tax incentives provided to
companies engaged in outsourcing of jobs and now that the republicans are back in the
White House for another four years after winning the elections, the Indian IT industry is
looking forward to a more booming business in the coming years.
IT offshoring sector is a small part of the Indian economy in terms of the number of
people it employs, even as the sector itself has contributed significantly to incredible
growth for India’s economy—a growth of 10.4% in the first quarter of 200418.
So far our discussion was dealing with India’s technological leapfrogging regarding
R&D for developing products and services for local and global markets. Because the
international digital divide i.e. the digital divide between countries is not the main focus of
this research but is essential for an overview to attain a better understanding of the
phenomenon of digital divide. Therefore, we shall limit this discussion here and focus on
the digital divide within India and examine India’s leapfrogging when it comes to rural
areas, which is the core of this research. Let us now examine the technology gap
between India’s rural and urban areas
1.4.
India: The Gap Within
Ashok Jhunjhunwala asserts that urban areas in India have become synonymous with
development, advancement and opportunity. With superior infrastructure (compared to
that in rural areas), including Educational Institutions, Universities, Industry and Science
and Technology, it is taken for granted that all knowledge, wealth and power is
concentrated in urban areas. Comparatively, the rural areas are just carrying on with
agriculture and small-scale cottage industries, waiting for the fruits of modernization to
trickle down, where modern infrastructure is largely missing. Though schools and colleges
are there, they fail to generate aspirations, let alone confidence, amongst rural
youngsters. The only dream of these youngsters is that some day they can migrate to the
cities, get some menial jobs, and save and send home part of their income, essentially
contributing significantly to their homes. More than the levels of infrastructure and the
industry, it is the degree of self-confidence that today divides the urban and semiurban/rural areas. Urban youngsters have the confidence of becoming part of the world
and to make good careers for themselves. Of course they have to pursue knowledge and
have to be fortunate, and grab the very first opening that comes their way. In contrast,
youngsters in small towns and rural areas rarely exhibit this confidence. Knowledge and
learning is to be pursued for its own sake, not because it helps them to reach a goal.
With the concentration of Universities and schools of higher learning in urban areas
over the last couple of centuries, most Science and Technology (S&T) innovations have
also taken place in urban areas. Further, with some rare exceptions, these S&T
18
Waldman (2004), p.A3
11
innovations have primarily benefited the urban areas and increased the urban-rural
divide. The recent innovations in Telecommunications and IT are no exception. These
developments are fast changing urban lifestyles. While Computers and
Telecommunications are changing ways of doing things and increasing the overall
efficiency of human activity, the Internet is enabling one to have access to almost any
kind of information on one’s fingertips. Even within urban areas, those with Internet
Access are in an advantageous position vis-à-vis those who do not have such access. In
this competitive world, access to Internet gives just that required edge. It widens the
difference between the haves and have-nots.19
Keniston (nd) quotes Bhatnagar (2000) as to “how can we justify the expense of IT in
a nation where so many basic needs are unmet and so many basic rights are violated?”
Kenniston further asserts that Bhatnagar's question is profound. To visit a village where
70% of all men, women and children are below the poverty line, where children's hair is
gray and red from malnutrition, where there is no work, no school, no medical care – to
say nothing of no infrastructure needed for modern IT – is necessarily to wonder whether,
when, and how IT can help. Surely other priorities: food, education, water, medical care,
basic rights, social justice, freedom from corruption – meeting these priorities must be the
core criteria for any use of modern IT. That said, the question is not how to use IT, or
even whether to use them, but under which circumstances, if any, IT can be a means –
the most cost-effective means – of helping ordinary Indians, especially those in the
weaker sectors of the society, meet their fundamental needs and achieve their basic
rights. Put this way, the question is not only a philosophical but an empirical one: it
requires examining on-going efforts in India to achieve just those purposes, to see if and
how they work.
In chapters 2 and 3, we witnessed that there are huge gaps within India when it comes
to ICT infrastructure and equipment that eventually leads to gaps in provision of basic
services such as health, education and opportunities for sustainable development. We
shall further discuss these gaps later within this chapter. Let us now test and explain the
hypotheses that are at the centre of this research.
1.5.
Hypothesis Formation and Analyses
The research takes into consideration two hypotheses namely delicensing & liberalization
of the telecom sector; and infrastructure development & coordination among the
stakeholders namely the government, industry, civil society and the community. I now
explain the factors that led to the formation of these hypotheses and later examine them
as a result of personal interviews conducted by the author involving experts from the
related field.
1.5.1.
Liberalization and Delicensing
The Department of Telecommunications and others have put efforts over the last fifteen
years, but still the info-infrastructure in India is considered by many to be inadequate.
Many, especially in the Indian corporate sector, consider the hold that the incumbent has
over this sector to be a serious bottleneck. The task force initiated by the former Prime
19
Jhunjhunwala, A. (nd), ‘Can Telecom and IT be for the Disadvantaged?’
12
Minister of India, Mr. Atal Behari Vaypayee in May 1998, recommends on infoinfrastructure aims for liberalization, especially in the area of data communications. It calls
for removal of restrictions, declaring that Internet Service Providers (ISPs) be allowed to
operate with zero license fee, long-distance backbone monopoly be removed allowing
Railways, Defense, State Electricity Boards and others to host fiber-optic backbones and
radio frequency band in the range of 2.4 GHz to 2.483 GHz be opened for public
wireless. The report also calls for removal of restrictions on electronic commerce.
Hypothesis #1: Removing the monopoly of the incumbent operator over the telecom
sector; liberalizing and delicensing the complete telecom sector is likely to facilitate the
brisk dissemination of ICT in the rural areas.
1.5.2.
Infrastructure Development & Coordination of Stakeholders
As already mentioned earlier, total teledensity in India touched 7.2 per 100 people as on
March 31, 2004. While overall teledensity in urban areas reached 20.79 per 100 people,
in rural areas it was only 1.55 per 100 people. The department of telecommunication
claims to have covered some five hundred thousand villages by VPTs so far, yet some
one hundred thousand villages are left without a single telephone. Coverage of these
villages is being targeted in the plans for the coming year. It is unlikely that this planned
commitment would be met. The reasons being that the existing operators believe that the
rural areas don’t generate enough revenues and therefore, it is not a priority to build the
infrastructure. Looking at this state of affairs, some NGO’s and Academicians have tried
to establish Internet kiosks in villages, which are cost effective and are run by the young
entrepreneurial villagers for providing essential services to the villagers.
Despite the efforts needed to attract new investment in ICT infrastructure and to
encourage ICT usage in ways appropriate in the developing country contexts, real
opportunities exist for promoting ICT diffusion through the involvement of public and
private sector organizations, NGOs and other stakeholders (Mansell 1999).
Hypothesis #2: Coordination of Government, Industry, Civil Society and Community in
taking the Internet kiosks to the villages is likely to facilitate the brisk dissemination of
ICT in the rural areas.
Deregulation of the government policies regarding liberalization & licenses;
coordination of Government, Industry, Civil Society and Community through various small
pilot projects have proved to be very effective in disseminating the ICT in small parts of
the country. Thus, examining these brisk dissemination hypotheses would provide some
answers to bridging India’s digital divide.
1.5.3.
Brief History of Telecommunications in India
Since, the first experimental telegraph line was laid in India in 1838 between Diamond
Harbour and the anchorage of East India Company and Calcutta the then capital of
Imperial India, for a distance of 33 kms when Samuel Morse was laying the first telegraph
lines in America. The ‘British Rule’ did not do this with any socio-economic objective, but
for the purposes of administration, law and order, Defense, and of course for revenue
13
collection. The Indian Telegraph Act was formulated in 1885, and since the Indian
telecom sector has been operating under its guidelines.20
Even after independence the telecommunications continued to take a back seat as far
as Indian Planning was concerned. The sector could merely attract on an average 2.5%
of the total plan outlays till the sixth five-year plan. It was only in the seventh plan that the
actual percentage of the total outlay was 3.9% for the telecom sector and since then it
has been picking up in the subsequent plans. It is further manifested by the statement,
“The persistent low level of investment and low priority given to telecommunications
adversely affected the sector in terms of quantity, quality and range of services” (India
Development Report, 1999-2000).
In 1981, the government appointed a high-powered committee (Sarin Committee) to
look into organizational issues at the Ministry of Posts and Telegraph. This was in
response to increasing public outcry and Parliamentary questions about the inadequacy
of the level of service, the high prices and the unavailability of telephones.21
Even as late as 1996, the Indian telephony density was 1.3% as compared to the
world average of 11%. It was in 1986, when the then Prime Minister Mr. Rajiv Gandhi said
that “India had missed the telecom revolution bus”, that the mission ‘Better
Communications’ was taken up at his behest. Also the ‘Perspective Plan’ 1990-2000 was
formulated for development of this sector. The main objectives of both were towards
improving quantity and quality of telecom sector.22
As Das (2002, p. 208) puts it, “Indians, and Gandhians in particular, believed that
telephones were a luxury and that it was wrong to supply state-of-the-art technology to
villages; they needed ‘appropriate technology’ (the buzz word of the 1980s). A poor
farmer did not need a telephone but water, literacy, and basic health care. As a result,
India had only 2.5 million telephones in 1980 and most of them were in big cities. It had
only 12,000 public telephones for 700 million people. Managing this system was a rigid
bureaucracy of a quarter million employees. Millions of people were waiting in line to get a
telephone. Those who had one needed to know someone in the telephone department to
get any service. The telephones that existed were not dependable. The employees of the
telephone department were arrogant and corrupt. If the line went down, it could take
months to fix unless one bribed the linesman. When a Member of Parliament complained
in Parliament of these breakdowns, Chief Minister Stephens, Mrs. Indira Gandhi’s
communications minister, replied that telephones were a luxury, not a right, and that
anyone who was dissatisfied could return the telephone, because there was an eight-year
waiting list for this broken down product.”
Sam Pitroda built the foundation of the revolution in telephony usage in India in the
last two decades of the 20th century. His vision, and his technology, helped connect the
people of India—in its far-flung regions and remotest corners, to each other and to the
world. When the developed world saw a resource-strained country heading toward a
billion people separated by large distances, it saw a tele-density gap nearly impossible to
bridge. Looking at the same mammoth problem, Pitroda saw access, not tele-density, as
the solution. He visualized a countrywide network of thousands of phone booths to
provide this access. He battled conventional wisdom and lobbies that questioned why
20
Nigam, Angali and Nigam, Ajit (2000), p.1
McDowell, S.D (1997), p. 128
22
Nigam, ibid
21
14
impoverished people needed telecom. The smattering of bright yellow STD-PCO boxes23
in India today is a manifestation of his efforts. Pitroda’s tenacity helped create the concept
and technology behind the network of ‘STD-PCO’ phone booths across the country, in
every village. The 600,000 booths, providing employment for a million people, today
throughout the remotest regions of India. This model is unique in the world, unparalleled
to this day. The basic technology behind this network was simple and cheap. Pitroda
successfully embarked upon the creation and launch of Rural automatic telephone
exchanges (RAX) designed and produced by his team of Indian engineers at the Center
for Development of Telematics (C-DoT), which he founded in 1984. It was a device that
displayed the phone call cost and generated an instant bill at the user’s end, instead of at
the telephone exchange. This changed Indian telephony. In revolutionizing the state of
telecom in India, he also created a model for other developing nations. Along the way, he
also notched up over 50 patents, for digital switching, synchronization, tone generation,
tone receiving, conferencing, and 10 of them for m-commerce. In 1987, he was appointed
advisor to the Prime Minister of India, with the rank of minister on national technology
missions. In 1989, he became the first chairman of India’s Telecom Commission,
responsible for all aspects of telecom legislation and development for the country. This
was against all the rivalries and the intense fight against him conducted by various
Ministries of Telecom and Bureaucrats in the public Telecom sector and the Multinational
players like Siemens, Alcatel, Ericsson in the private sector. He was even accused of
being a CIA agent by the Indian press. Back in the US, in 1995, Pitroda founded
WorldTel—a global organization backed by the ITU—to help develop telecom
infrastructure in less developed countries.24
1.5.4.
Telecommunications Sector Reforms
Various studies suggest that Government monopoly over the telecom sector is
considered to be a massive obstacle towards the development of Telecom sector. This
monopoly had considerably been a stumbling block to the entrance of private players and
hence restricted effective competition, which resulted in continuation of old technologies;
restriction of services; restriction of coverage and building modern infrastructure; increase
in bureaucracy; long waiting lists for installation; and the consumers paying higher costs
as compared to other countries. Some of the prominent studies include Jain (1993, 1997,
2000), McDowell (1997), Bhatnagar (2000), Bagchi (2000), Morris (2000), Singh et al
(2000), Das (2002), Hudson (2002), Nigam and Nigam (2002) among others.
McDowell (1997, p.149) argues, though reforms had been underway for five years by
1990, and terms like privatization and liberalization were used in public debates during
the 1980s, the meanings of those terms were different than those which applied to
Northern market oriented telecommunications analysts. “In India, privatization did not
refer to selling government enterprises then, but rather denoted the licensing of private
manufacturers to produce telecommunications equipment. Liberalization, similarly, was
used to describe the policies since the mid-80’s which both expanded the number of
manufacturing licenses available and eased rules for importing electronic equipment.”
23
STD-PCO stands for Standard Trunk Dialing – Public Calling Office.
For more on this technology see heading ‘Small-Scale Digital Exchanges’ under section 4.7.3 and also
visit http://www.the-south-asian.com/Dec2001/telecom%20&%20software%204.htm and; http://ww
w.dqindia.com/content/top_stories/102122703.asp
24
15
In the wake of liberalization in 1991, and the subsequent integration of the Indian
economy with the world economy, the need for extensive and efficient telecom services
was felt, and hence the basic and value-added telecom service were opened to private
participation. Till now the entire telecom services were monopolized by the sole service
provider Department of Telecommunications (DoT). Apart from the metros of Delhi and
Mumbai, where the services were provided by Mahanagar Telecommunications Limited
(MTNL) and the international telecom needs were catered by Videsh Sanchar Nigam
Limited (VSNL), both being government of India corporations which came into existence
in 1986. The emerging demand for extensive and efficient telecom services could not be
totally met by the DoT due to paucity of resources and hence, the need for private
participation was felt.25
DoT having monopoly for so many years, only 2.1% of India’s population compared to
the world average of 12.7% has a telephone. In spite of DoT’s professed commitment to
rural telephony only 0.3% of the population outside the 12 largest cities has a phone and
292,000 (as of 1997) villages still do not even have a single telephone.26 Many such
commitments listed in the objectives of the National Telecom Policy (NTP) 1999 remain
unmet even today. For a complete list of NTP 1999 objectives see Appendix IV.
The monopoly organizations DoT, MTNL, VSNL lacked ample investment capabilities
for expansion of telecom network, but still unwillingness on their part to allow the
competition in the sector. The private sector participation was not invited for encouraging
competition in the sector but for sole purpose of inviting investments. This has far
reaching implications, especially when the large investments made by the private
investors are for sole purpose of getting high rate of returns. Therefore, the areas lacking
in giving ample returns on investors’ investments would be looked over, as in the case of
India’s rural and remote areas.27
DoT began the process of liberalization tentatively by opening up the cellular services
in the four metropolitan cities in July 1992. However, the entire process raised various
questions including the manner in which DoT short-listed bidders and the very subjective
criteria it used to do so.28
The conditions imposed were onerous and the selection criteria were not announced
before the bids were made. This led to a lengthy delay because of litigation from private
operators because of subjective changes in the manner in which licenses were awarded.
The Indian Metro cellular auction lacked transparency because the selection criteria were
not announced publicly, unlike in the later case of the basic (wire line) services, before the
bids were made.29
Almost three years after the tentative steps to liberalization were taken in legal
disputes among the participants of the auction and the Department of
Telecommunications, the eight licenses were finally awarded in November 1994. As per
the terms of the license, the winners had to pay a fixed sum as license fees in the first
three years before they switched to paying on a per-line basis.30
25
Nigam, ibid, pp. 1-2
ibid, pp. 4-5
27
ibid, p. 2
28
McDonald, H. (1992)
29
Chowdary (1995); See also Govind and O’Neill: ‘Indian Telecoms Lures Foreign Investment’,
Telecommunications International 28(9) 11-12, 1994 September
30
For a critique of Indian auctions, see ‘Spectrum allocation models for India’; G. Anandlingam, Pradipta
Bagchi and Roy Kwon, (unpublished)
26
16
Many foreign telecommunications companies participated in the bidding for the right to
offer basic (wire line) telephony in India. The main attraction was the then widely used
number of 250 million ‘middle class’ potential customers, and the waiting list of more than
3 million. Companies that bid included multinational like AT&T, US West, Bell Atlantic,
Nynex (at that time a separate company), NTT, and Bell Canada, and small ones like
Bezeq of Israel, and Shinawatra of Thailand. Their Indian partners included the Tatas, the
Birlas, RPG, Reliance, BPL, Essar, Shyam Telecom and Himachal Futurisatic
Communications Limited (HFCL). However, disillusioned by the government’s terrible
handling of the telecom services deregulation, several international telecom giants had by
1999, pulled out of India. While Bell Canada and Swisscom have withdrawn from India for
good, US companies like AT&T and US West have frozen fresh investments blaming
‘unfriendly telecom policies’, particularly high license fee outflows and the lack of a
powerful regulator (Achar, A. 1999).
Bagchi (2000) assert that in most other countries, like the European Union or the US,
regulation was separated from operations and licensing before the process of
demonopolization and introducing competition started. In India, it was only in 1997, that
an independent regulator, the Telecom Regulatory Authority of India (TRAI) was
established. Both Parliamentary politics and bureaucratic reluctance stalled the setting up
of TRAI with the result that the DoT retained both policy making and regulatory authority
in the process of induction of its competitors (Dokeniya, A. (1999), p. 123). TRAI was
finally created by the passing of the TRAI Act in February 1997, but from the outset there
were various discrepancies between the TRAI Act 1997 and the Indian Telegraph Act of
1885, creating jurisdictional conflicts between DoT and TRAI.
The problems with TRAI Act 1997 were manifold. The TRAI Act also excluded issues
covered by the Monopolies and Restrictive Trade Practices Commission (MRTPC) from
its jurisdiction. It means that the anti-competitive behavior by the DoT cannot be referred
to TRAI as such, because monopolistic, restrictive and unfair trade practices fall under the
jurisdiction of the MRTPC. While the TRAI Act gives the regulator powers to resolve
disputes between service providers, TRAI was not given jurisdiction over DoT, the largest
telecom service operator in the country. Although the cabinet of ministers later extended
TRAI’s powers over DoT, the jurisdiction granted was ambiguous because the regulator
only had powers over DoT as an operator and not as a policy maker. The courts ruled in
DoT’s favor when TRAI tried to block MTNL’s decision to enter cellular services with the
blessing of its owner DoT in 1998, claiming that the DoT had not sought the regulator’s
recommendation before deciding to issue a license to MTNL. The High Court ruled that
under the 1885 Indian Telegraph Act, the sole power to issue licenses was vested with
the Central Government. Subsequently, the private operators appealed against the
decision and the move was stalled till the announcement of the New Telecom Policy of
1999. Another blow to TRAI’s credibility was the regulator’s attempts to regulate
interconnect charges. The courts threw out TRAI’s attempts to make incoming calls on
mobile phones free by instituting a regime of calling party paying for the entire call. The
courts ruled that TRAI can regulate inter-connect agreements but does not have the
power set these charges or alter license agreements. With a growing number of cases in
court, between TRAI, the private operators and the DoT, the government in 1999, based
17
on the recommendations of another high-level committee decided to wipe the slate clean
and introduce a new telecom policy.31
There have been some radical changes within the telecom sector after the formation
of the ‘New Telecom Policy’ in 1999. Bharat Sanchar Nigam Limted (BSNL) was formed
as a public sector enterprise (PSE) on October 1, 2000 as a telecom service provider in
all places except where MTNL is present. Government divested 25% strategic stake of
VSNL, a public sector monopoly incumbent in ILD to Tata Group in the private sector out
of 52.97% equity held by the government. This was followed by opening up of ILD
business to private players from April 1, 2002, terminating VSNL monopoly two years
ahead of schedule.32 The current policy stance affecting telecom sector in India is
presented in Appendix IV.
The Government has played a key enabling role by gradual deregulation and
liberalization of the telecom sector, ushering in competition and paving the way for
growth. While there were regulatory irregularities earlier, resulting in litigation, these have
all been addressed now. Customs duties on hardware and mobile handsets have been
reduced from 14% to 5%. The government has merged the IT and Telecom Ministries to
speed up reforms and decision on the Communication Convergence Bill to enable the
common regulation of the Internet, Broadcasting and Telecoms. An independent
regulatory body (TRAI) and dispute settlement body (TDSAT) is fully functional.33
The Government has allowed unlimited competition in the basic sector and introduced
‘unified license’ for fixed and mobile service providers. This will allow all phone companies
to become mobile operators by offering cellular and landline/WLL-M services under a
single authorization, ending service-specific licensing. The DoT has allowed cellular
companies to buy rivals within the same operating circle provided their combined market
share did not exceed 67%. Previously, they were only allowed to buy companies outside
their circle. There is no restriction on the number of Internet companies and more than
200 companies are operational. Internet telephony has been allowed officially from 1st
April 2002. However, the industry continues to face a number of bottlenecks in terms of
regulatory treatment of ISPs, high bandwidth prices, low PC penetration, high cost of
telephone access etc. The ILD has been opened to competition from April 02. The ILD
prices have fallen by at least 40%-60% leading to a decrease in the grey market traffic. In
August 2000, the NLD service was finally opened to unrestricted competition.34
To achieve the projected teledensity, India needs incremental investments of USD 1015 billion over the next five years. Issues on foreign equity holding continue to hamper the
fund raising ability of the sector. While unified access license have been allowed based
on entry fee bid for the award of 4th cellular licenses, the Government has not allowed the
merger of basic and cellular licenses. This reduces the flexibility to small basic operators.
There is limited availability of Spectrum and Indian operators pay almost 100-200 times
more than Chinese for the right to use one-third of the same resource.35
31
Bagchi (2000, pp. 31-3)
VSNL, 16th Annual Report, 2001-2002, p.5
33
UK Trade & Invest, visit http://www.uktradeinvest.gov.uk/telecom/india/profile/overview.shtml
34
ibid
35
ibid
32
18
1.5.5.
Hypothesis #1
Hypothesis #1 is based upon the conclusions of these studies and therefore feel the need
to test the validity of such studies and to find out the opinion of the experts if it is
otherwise, due to the changes in the recent policies, if there were any. On the other hand,
it should be noted that the respondents express their own opinion to the best of their
knowledge and experience, as being an expert in the area of research, but this cannot be
generalized for all organizations related to their area of activity. Hence, the results are
drawn in the light of existing literature and the opinions of the respondents in order to
enhance their credibility.
Figure 1.3 shows that 89.5% of the respondents said yes that they were in favor of
deregulating and delicensing the telecom sector. Not a single respondent disagreed with
the question and 10.5% of the respondents did not want to comment upon it. Some other
suggestions/comments from the respondents were:
• Quite some delicensing has already taken place;
• Moving in the right direction;
• Government should introduce minimum license and entry fees for private players;
• License and regulation creates parameters that restrict the access to the poor and
limits growth;
• Delicensing would help the growth of SME sector;
• We must have robust, independent and transparent regulator.
Q4. Are you in favour of deregulating and
delicensing the telecom sector?
18
No. of respondents
16
14
12
10
8
6
Yes
No
No Comment
4
2
0
Figure 1.3, Self-created
Evidence from the interviews suggests that there was a general consensus over the
main question about the deregulation and delicensing of the telecom sector. Almost 90%
of the respondents believed that there is a strong need for further deregulation and
19
delicensing to encourage domestic and international competition, reduction in costs,
increase in profits, and provision of better infrastructure and services. Therefore, there is
sufficient evidence from the respondents’ opinion backed by literature review that our first
hypothesis is supported.
The government has been previously criticized for their policies that did not allow
effective competition among the public and private operators; faulty bidding practices
during the time of circle allocation; hefty license fees for private operators, etc. that led to
uneven level playing field amongst public and private operators. The current scenario as
manifested in Figure 1.4 shows that 47.5% of the respondents were of the opinion that
the Government authorities are doing enough to create a level playing field. 31.5% were
of the opinion that the government authorities are not doing enough and 21% chose not
to comment. Some other suggestions/comments from the respondents were:
• Efforts are being made but could do better;
• The policy needs fine tuning and tweaking;
• New entrants face problem from incumbents;
• Subsidies make tariff below cost;
• The situation in India is better as compared to other countries;
• Government is creating private monopolies. Example: VSNL.
No. of respondents
Q5. Do you think the Government authorities are
doing enough to create a level playing field for
the public and private operators?
10
9
8
7
6
5
4
3
2
1
0
Yes
No
No Comment
Figure 1.4, Self-created
This shows that the respondents were divided about the question regarding the
government’s role in mediating a level playing field for public and private players.
Surprisingly, 9 votes were supporting the government’s role, 6 votes were against and 4
abstentions. This clearly indicates the growing confidence in government that was absent
20
in the studies discussed earlier in this chapter. People seem to be quite upbeat about the
way reforms have actually been implemented and some results are showing up. Most of
the prominent results are discussed earlier in this chapter. It is rather difficult to predict
the abstentions but to my understanding but as some of the respondents are government
employees and are not in a position to comment about the government. Others are
perhaps in a double mind, having a certain image of the government and with time this
image may have changed and are still not clear and thus abstain.
Table 1.2, Source: Plammootil, A., et al. (2002)
In order to enhance the teledensity in rural and remote areas, guidelines for
implementing Universal Service Obligation (USO) have been issued by DoT, which are
effective from April 1, 2002. USO refers to the obligation of a telecom service provider to
provide basic telecom services in areas where it would not be feasible on purely
economic considerations. To meet the investment as also to compensate the telecom
operators, operating in the non-viable areas, initially a 5% Universal Levy has been
imposed on the Adjusted Gross Revenue on all telecom operators excluding the pure
value added service providers. The quantum of levy can be increased in the event of
increase in the scope of USO. The USO regime under National Telecom Policy (NTP) 94
required 10% rural coverage as a licensing requirement for basic fixed line service
providers.
The near total failure of this regime can be judged from Table 1.2. None of the
operators in any of the states that were thrown open to a 2nd operator managed to fulfill
even 1% of the USO by 2002. In fact, some of them didn’t install a single phone. Figure
1.5 doesn’t show a very different picture either after two years. The private contribution
has just increased by 1% in these two years.
21
Figure 1.5, Source: DoT Annual Report 2003-04
Q6. Do you think the Government’s plan for USO
is appropriate/sufficient to bridge the digital
divide gap in India?
No. of respondents
12
10
8
6
4
Yes
No
No Comment
2
0
Figure 1.6, Self-created
In the background of the USO issue, 52.6% of the respondents believe that the
government’s plan for USO is not appropriate/ sufficient to bridge India’s digital divide.
22
Where as 21% of the respondents were of the opinion that USO is the right plan and
26.4% of the respondents did not comments to this question (Figure 1.6). Therefore, we
may conclude that a majority of the respondents (52.6%) believed that USO is not the
right way to go in terms of bridging the digital divide.
Respondents are marginally supportive of the notion that USO is not the right
mechanism to bridge the digital divide. The plan so far has not worked to persuade the
private players to install VPT’s in rural areas where it is financially unviable to start
operations. The respondents were divided with 10 negative votes, 4 positive and 5
abstentions. In the next section we shall discuss an alternative approach to the VPTs in
rural areas.
1.5.6.
Hypothesis #2
In the case of India, lately there have been a number of initiatives by the central and state
governments along with NGOs and private sector to help the diffusion of ICT to different
economic sectors. Such initiatives have been unprecedented not only in terms of scale
but also with regard to new organizational innovations. While most are in their initial
stage, available evidence suggests that ICT could effectively be used to transform rural
regions even in a developing country like India.36 Some of these initiatives are well known
such as Gyandoot, Drishtee, TARAhaat, etc. just to name a few, which suggests that by
only installing a Village Public Telephone (VPT) in a village is not sufficient because of the
reasons that people in villages use telephone mostly for economic reasons such as
checking market prices of agricultural produce and thus saving money and time on
transportation outside the village; security protection and possibility of emergency are
also key reasons for using the telephone. But instead, if a network of Internet Kiosks (the
initiatives that I just mentioned) is established throughout at the district and village level,
that might prove to be more appropriate and beneficial to the villagers in terms of making
necessary phone calls as well as accessing information about various other relevant
issues such as government programmes for villagers, filing complaints, market
information, selling online, learning and training new applications, etc.
One approach to the problems of the digital divide has been the community
telecenters. Telecenters come with a variety of names, such as Internet kiosks,
telecottages, or information shops, and no single definition serves to satisfy all of them.
However, a common characteristic is a physical space that provides public community
based access to ICTs for educational, personal, social and economic development.
Telecenters are usually designed to provide a combination of ICT services, ranging from
e-mail to full Internet and World Wide Web connectivity (Harris et. al, 2001). Telecenters
provide an alternative to the model of one-to-one individual access to a computer that
predominates in the developed world. As community resources, telecenters offer
opportunities for development that are predicated on improved access to information for
whole communities (Harris, 2002). There is great diversity in what is called a telecenter,
and provides a set of key bi-polar variables associated with telecenters (Colle, 2000),
summarized in table 1.3 below.
36
Joseph, K.J. (2002)
23
Table 1.3, Source: Harris (2002)
According to another study, a telecenter is a common point of access for multiple
users (often an entire community), providing a range of ICT services including Internet,
fax, word processing, and even specialized information retrieval or applications (e.g.
distance education). Telecenters have been established widely in the developing world,
and vary in their service provision and means of funding. In Peru, the establishment of
numerous Cabinas Públicas has led to a relatively high rate of Internet use for the
developing world (1,150 per 10,000 inhabitants, on a par with New Zealand) and a
significant reduction in prices (Girardet, 2001). Several types of telecenters can be
distinguished. Some models have proved more successful than others. They run the
gamut from small internet cafes started by individual entrepreneurs through networks of
telecenters set up on a franchise model (often initially by an NGO, as with Peru’s Cabinas
Públicas) to telecenters affiliated with educational and training institutions to governmentsponsored (-subsidized) center established with or without financial support from foreign
aid donors. The Andhra Pradesh (India) model is one of telecenters underwritten by a
private company contracted by the state government also to provide a fibre-optic
backbone linking villages, with the government providing an ‘anchor application’ in the
form of web-accessed government services (Tschang et al., 2002).
24
Harris (2002) has proposed a telecenter success model that takes various parameters
into consideration. See figure 1.7.
Figure 1.7, Source: Harris (2002)
Some of the problems faced by individuals as a result of their experiences with
Internet kiosks have been documented by some researchers. These problems are
summarized in Box 1.1 below.
Box 1.1. Key Issues Regarding Internet Kiosks/Telecenters
The experience with telecenters has so far been a mixed one (see, for example,
Ernberg, 1998). In numerous cases, usage, particularly of PCs, has been lower than
expected or commercial viability has not been attained. Many telecenters have failed to
serve their particular target groups. Of the over 70 community telecenters established
since 1997 by the South African Universal Services Agency, only 40% remain open
today, with only 3 making enough money to cover costs (Girardet, 2001). This is
surprising given that several studies estimate a relatively high absolute amount, or
percentage of disposable income, that poor people in developing countries are willing to
pay for ICT access (Ernberg, 1998 puts the percentage at 3%). Torero et al. (2002), for
example, report on a contingent valuation survey of Bangladeshi and Peruvian rural
households to estimate their willingness to pay for public phone access. They find a
willingness to pay for both local and long-distance calls generally above current tariff
rates, suggesting significant welfare benefits of telephone access. Small, family-run
internet access center have been successful in many countries. Given the relatively low
start-up costs, the competition is intense. They tend to be concentrated in urban areas,
since it is only there that they can currently expect to be commercially viable. They
generally offer little more than an internet access device and refreshments. They are
not in the business of generating local content, as is the case for example with some of
the NGO, government and donor-supported center. Few large telecenters are
25
financially sustainable without ongoing external support. The more realistic projects,
such as in Mozambique, have business plans that show that the center will take at least
four years to become self-sustaining — and only then with the capital written off. At
best, these centers cover operating costs, while no major funded telecenter has been
able to set aside money for depreciation of equipment, let alone generate money to
repay the initial capital. Many telecenters are offering useful services in their
communities, though most are so young that evidence of their impact is mostly
anecdotal.
Source: Benjamin (nd)
Another key issue that needs to be dealt with is the creation of local content and
databases in the local languages, which has proved to be a major challenge so far for all
stakeholders.
Hypothesis #2 is based upon this conclusion that firstly, a network of Internet Kiosks
would be more suitable for bridging the digital divide between the rural and urban areas
and secondly, there needs to be a coordinated effort from the Government, Industry, Civil
Society and Community because the past experience has shown that the government
alone is not capable of handling the entire responsibility but there needs to be a sharing
model.
No. of respondents
Q1. a) Government must take the responsibility
alone to develop ICT infrastructure
9
8
7
6
5
4
3
2
1
0
1=Strongly
Disgree
2
3
4
5=Strongly
Agree
Scale
Figure 1.8, Self-created
Figure 1.8 demonstrates that on a scale of 1-5, 1 being strongly disagree and 5 being
strongly agree, 42% strongly disagreed and 10.5% disagreed that the government should
alone take the responsibility to develop the ICT infrastructure in the rural areas. A mere
26
5.3% strongly agreed and 15.8% agreed to the question. 26.4% were neutral to this
question.
Therefore, we may conclude that a majority of respondents (52.5%) were of the
opinion that the government cannot do this job alone and there needs to be some sort of
sharing of responsibility to be taken by others. It is also evident from the explanation in
hypothesis #1 that the government has not been able to meet its objectives.
Figure 1.9 exhibits that on a scale of 1-5, 1 being strongly disagree and 5 being
strongly agree, 52.6% strongly agreed and 31.5% agreed that Government, Industry, Civil
Society and Community must take the Internet kiosks to the villages in a coordinated
effort. Only 5.3% strongly disagreed and 5.3% disagreed to the above question. 5.3% of
the respondents chose to remain neutral. Therefore, we may conclude that a majority of
the respondents (84.1%) were of the opinion that there should be a joint effort from all the
four in connecting the villages through Internet kiosks.
The multi-institutional stakeholder networks, involving public and private sector
organizations, NGOs and other stakeholders as argued by Mansell (1999) must be
instrumental in the diffusion of ICTs in developing countries.37
Q1. c) Government, Industry, Civil Society and
Community take the Internet kiosks to the villages
together in a coordinated effort.
No. of respondents
12
10
8
6
4
2
0
1=Strongly
Disagree
2
3
4
5=Strongly
Agree
Scale
Figure 1.9, Self-created
However, it is worthwhile to note that not all stakeholders have shown interest in
making an effort to provide ICT for the poor. Primarily, it has been the central
government, which has been planning some programmes especially in the north-eastern
37
Joseph, ibid
27
states without any coordination from other stakeholders.38 Several state governments
have also taken some initiatives to promote ICT for the poor but most of the initiatives
have come from the states that tend to have better economic and social conditions. The
internal diversity of India plays a key role here that I discussed in chapter 2, such as
Kerala has very high literacy rate in the country; Karnataka and Andhra Pradesh are
known for their IT capabilities around the world and their ex chief ministers who were well
know for their IT ambitions; Tamil Nadu, Gujrat and Maharashtra are economically sound
due to their manufacturing hubs; Punjab and Haryana for their high agricultural output,
etc. but not much of these initiatives have been seen from states like Bihar, Orissa, Uttar
Pradesh, Madhya Pradesh, Rajasthan, etc. where the population at large is under
poverty, illiterate, unemployed and where exists a great need for such projects. Many
local politicians don’t encourage the use of technology in the rural areas of poor states for
different reasons: 1) As the famous saying goes in India that Politics is the only field
where there is no requirement for education and therefore, most of the local politicians
are themselves not literate and don’t have the vision of how to make the best use of
technology. 2) Transparency in politics and better education for citizens is something
negative for those politicians who are corrupt and rule in the name of religion and caste.
Because of the known fact that IT would improve transparency and provide more options
for the citizens, such politicians avoid any mistakes that would lead to transparency;
accountability; better information and education to citizens, that would eventually lead to
loss of votes during elections and thus, don’t encourage any IT related projects. It should
be noted that these are just some examples of how politics works in rural areas but we
cannot generalize this to all poor states in India. This may remind us of the discussion
that we had in chapter 2 that India has too much democracy, but that, in some significant
ways, has too little of it! In chapter 5, I examine the various roles that the government
must to play to bridge this gap and finally I offer some recommendations.
Various civil societies namely NGOs and academic institutions in different parts of the
country have been instrumental in promoting the use of ICT as an enabler for the poor.
Many such examples can be found in Appendix I related to education, health, agriculture,
e-governance, etc. From my analysis of the interviews that I had with NGOs and
academia, I found a similar pattern with these as in the case of local governments that
many civil societies are operational in states with better social and economic situation
than in poor states and apart form that, a high number of these civil societies are
operating from big cities or towns and not many of them are working on projects in the
rural interiors. There are various factors behind that, which are: 1) It is easier and cheaper
in towns and cities to set up infrastructure for projects to be launched rather than in rural
villages that require higher investments due to various reasons such as more traveling
time for civil society workers, building connectivity form the scratch, power outages, etc.
2) Most villagers are poor and work on hourly basis, therefore, they cannot afford to loose
time to see what new is happening in the village. So initially the response rate and
enthusiasm of local citizens may be low for any new project. 3) There may be some
resistance from local elite groups for any project that may lead to sharing of resources by
people from different castes due to the prevalent caste system especially in rural areas.
4) Lack of support from the local government or panchayat39 as they may have different
38
For more on this project see case study: National Informatics Center, Appendix I
Article 40 of the constitution directs the government to establish panchayats to serve as institutions of
local self-government. Most states began implementing this Directive Principle along the lines of the
39
28
priorities for development and a project associated with technology may not be on their
list at all. I must stress that these are some of the problems that the civil societies have
faced in carrying out their operations but we cannot generalize these for every village in
India due to its heterogeneity. In chapter 5, I examine the key roles of civil societies and
offer some recommendations.
Industry, which is the third main catalyst in this process of bridging the digital divide,
has been so far low key in its efforts. In some sense it is clear that if the people at large
are to use the ICTs for what so ever purpose, it is only the industry that can make it
possible in a cost effective manner because of their expertise in large scale
manufacturing; timely delivery of wide ranging services; maintenance of infrastructure and
equipment; responsiveness to customer; etc. There are various factors why industry has
not been instrumental to rural infrastructure development and these are: 1) The
opportunity costs for serving rural market is much higher as compared to urban market. 2)
It is highly expensive to start new operations in rural market where almost no telecom
infrastructure and no consumer base exist. 3) Regulatory policies that are anti-competitive
and heavy license fees further make it less viable for private telecom companies to
provide services in rural areas where they would initially make losses. 4) Most telecom
equipment manufactured in India or imported is still quite expensive and the low-cost
equipment that I talk about later in this chapter is not manufactured in India at large scale
and thus, does not guarantee the return on investment from rural consumers. In chapter
5, I throw some light on the important role that the industry has to play in the partnership
with other stakeholders as well as suggest some recommendations.
I perfectly agree with the article in The Economist (March 12, 2005) that advocates the
liberalization of telecom markets and removing state monopolies that would encourage
competition, but I completely disagree when the article suggests that the only way of
removing the digital divide is the spread of mobile phones and not PCs, Internet or
Telecenters. The article states “Plenty of evidence suggests that the mobile phone is the
technology with the greatest impact on development. A new paper finds that mobile
phones raise long-term growth rates, and their impact is twice as big in developing
countries ad in developed ones, and that an extra ten phones per 100 people in a typical
developing country increases GDP growth by 0.6 percentage points”. But as Amartya Sen
puts it that “economic growth is not the only yardstick to measure a country’s
performance,” then I believe until and unless there are any tangible benefits of the
technology to the poor such as improvements in health care, education, employment,
communication with government bodies, etc. there is no use of technology for the poor.
recommendations of the government's Balwantrai Mehta Commission report. According to these
recommendations, the popularly elected village council (gram panchayat) is the basic unit. Village council
chairs, elected by the members of the village council, serve as members of the block council (panchayat
samiti). A block is a large subunit of a district. In some states, blocks are coterminous with taluqs or tehsils.
In other states, taluqs or tehsils are divided into blocks. The district council (zilla parishad) is the top level of
the system. Its jurisdiction includes all village and block councils within a district. Its membership includes
the block council chairs. On December 22, 1992, the Congress (I) government passed the Seventy-third
Amendment, which gave panchayats constitutional status (previously panchayat matters were considered a
state subject). The amendment also institutionalized a three-tiered system of panchayats (except for states
with a population of less than 2 million), with panchayats at the village, block, and district levels. The
amendment also stipulated that all panchayat members be elected for five-year terms in elections
supervised by state election commissions. For more on this, visit http://www.indianchild.com/panchayats
_system_india.htm
29
As I mentioned earlier in this chapter that Telecenters serve a much wider purpose as
compared to just communicating by mobile phones or regular telephones.
The article was also critical about the newly launched ‘Digital Solidarity Fund’ (DSF)
and suggests that this sort of fund is the wrong way to go about addressing the inequality
in access to digital technologies. It further says that the objective of the fund is to provide
every house with a computer in the poor countries. In retaliation to this article, The
Association for Progressive Communication40 (APC.org) released another article
criticizing the previous article in The Economist by claiming that the news magazine is
defaming the fund through such baseless accusations. The article in APC.org claims that
“It is not proposing any plans to provide every house hole with a computer but has some
modest aims and financial resources. The DSF’s 1% financial mechanism is not 1% of the
profits of every technology company operating in poor countries (as claimed by the article
in The Economist). It is a 1% levy on IT procurement contracts that municipalities may
impose on winning bidders for such contracts. The difference between the two is massive.
The DSF -with its focus on cities and the local level- has a vital role to play in mobilizing
partnerships and resources, and directing attention to the importance of extending ICT
services to the poor. The Economist’s claim that ‘the digital divide that really matters is
between those with access to a mobile network and those without’ is one-dimensional
and hollow. The digital divide will not be bridged by one technology alone. It requires
more than this.”
Figure 1.10 suggests that on a scale of 1-5, 1 being strongly disagree and 5 being
strongly agree, 72.2% of the respondents strongly agreed and 22.2% agreed that the
local participation in designing the Kiosks and information base is important. Only 5.6%
disagreed. Many of the respondents felt that the villagers don’t have much of a role in
designing the kiosks but play a significant role in assisting the design of information base
due to its high relevance to them. The development process should be bottom-up rather
than top-down that would empower the community and help them develop themselves.
Another important point mentioned by some respondents was that the main attention of
the alliance should be given to the development of infrastructure and content creation.
Local content is the key for motivating the villagers for using these technologies and
Internet kiosks per se.
Ideally speaking, the community is the stakeholder that is most interested in seeing
this digital divide being bridged as it has to benefit the most out of it. But looking at the
current scenario, it is very much dependent upon the successful efforts by the other three
stakeholders. There are various factors for this dependency and they are: 1) Most
villagers are living in poverty in several states especially in North-Eastern India and have
other priorities to care for rather than seeing how computers can provide bread to them.
2) Most of the villagers are illiterate and are trapped in the traditional notion that
technology is for the literate and the urban rich. 3) In villages where some Telecenters
have been set up, due to the prevalent caste system in many rural locations, the lower
caste villagers have faced resistance from upper caste villagers regarding the use of
Telecenters or in general sharing of resources. It must be kept in mind that we cannot
generalize this for the whole country. It has been seen that the villagers in South India
have been more open in accepting the technology due to their high literacy rates as
compared to more illiterate and poverty stricken North Indian villagers. But on the other
40
To view the complete article, visit http://www.apc.org/english/news/index.shtml?x=31481
30
hand there is something to cheer about as the article in The Economist (March 12, 2005)
says “Rural ICTs appear particularly useful to the literate, to the wealthier and to the
younger – those, in other words sit at the top of the socio-economic hierarchy. In the
twelve villages surrounding Pondicherry, students are among the most frequent users of
the knowledge centers; the look up exam results, learn computer skills and look for jobs.
Farmers who own land and cattle, and who are relatively well-off, get veterinary
information and data on crop prices.” So we can see that there are still certain elements
of the society who are quite enthusiastic about using the technology and interested in
diffusion of ICTs throughout rural areas. Later in chapter 5, I examine the roles of the
community and provide some recommendations in bridging the digital divide.
Q12. Importance of local participation in
designing Kiosks & information base
No. of respondents
14
12
10
8
Series1
6
4
2
0
1=Strongly
Disagree
2
3
4
5=Strongly
Agree
Scale
Figure 1.10, Self-created
Evidence from other literature and opinions of the respondents suggest that
coordination of the stake holders is very crucial in establishing a network of Internet
kiosks that would enhance the brisk dissemination of ICT in rural areas and thus would
help in bridging the digital divide. Therefore, there is clear evidence from the respondents’
opinions and existing literature that our second hypothesis is also well supported.
On the basis of the chicken and the egg story, one may argue that unless there is no
demand for ICTs in villages, there is no need to provide them with it and vice-versa that
unless we provide the infrastructure and equipment we simple cannot imagine how
network externalities would play and expand the network of users. But as we discussed in
the previous chapter that the role of ICT for economic development is ever increasing and
that once people start using these technologies, in a short period of time there is an
31
automatic increase in the number of users as more and more people find it useful for their
individual purposes.
Therefore, assuming that there is a demand for ICTs in rural areas, the big question is
the accessibility of low cost infrastructure and equipment. A majority of villagers would not
be able to afford the services unless they are cost effective to these individuals.
Figure 1.11 shows that on a scale of 1-5, 1 being strongly disagree and 5 being
strongly agree, 41.2% of the respondents strongly agreed and 29.4% agreed that
provision of low cost infrastructure and equipment is important for rural areas. Only 5.9%
disagreed and 23.5% chose to remain neutral.
Therefore, we may conclude that a majority of the respondents (70.6%) were of the
opinion that low cost technology in terms of infrastructure, equipment and application is
the key for stimulating the demand of ICTs in rural areas. Later in this chapter we would
discuss in detail the various technological low cost innovations that are taking place in
various parts of India as well as in other countries.
Q9. a) Important to stimulate the demand of
ICTs: Access to low cost infrastructure and
equipment
8
No. of respondents
7
6
5
4
Series1
3
2
1
0
1=Strongly
Disagree
2
3
4
5=Strongly
Agree
Scale
Figure 1.11, Self-created
From the above analysis it is apparent that Internet kiosks is one of the most preferred
options when it comes to connecting villages to ICTs and provide various services to the
villagers. But it is not a very cheap option for the villagers who do not have the financial
capacity to start up an Internet kiosk as a small business. Banks are reluctant to provide
loans unless they see a viable business model that would ensure the probability of loan
repayment. Grameen Bank of Bangladesh is a very good illustration of how banks that
32
provides micro-credits to villagers to start small businesses can tap a large number of
customers who have previously been neglected or seen as unprofitable or
underdeveloped markets.
Figure 1.12 exhibits that on a scale of 1-5, 1 being strongly disagree and 5 being
strongly agree, 47.1% of the respondents strongly agreed and 29.4% agreed that the it is
imperative for the banks to take a lead role in providing micro-credit loans to villagers in
order to enable them to pursue small businesses especially by opening up an Internet
kiosk. Only 11.8% strongly disagreed & disagreed and 11.7% remained neutral.
Therefore, we may conclude that a majority of the respondents (76.5%) were of the
opinion that financial assistance from banks in the form of micro-credit loans would boost
the entrepreneurial spirit of the villagers and would encourage them to innovate new
business models for profit according to the local needs.
No. of respondents
Q8. b) Best way to disseminate Internet Kiosks:
Offering schemes like Microfinance/Microcredit
through local banks
9
8
7
6
5
4
3
2
1
0
Series1
1=Strongly
Disagree
2
3
4
5=Strongly
Agree
Scale
Figure 1.12, Self-created
1.6.
1.6.1.
Rural Technological Solutions
Low Cost Communications Network Infrastructure for Rural Areas
India is a large country with a majority of the population living in villages that amount to
more that six hundred thousand. These villages vary in population density and terrain.
Jhunjhunwala argues that India has a population density close to 300 persons per sq. km.
In most parts of the country, if one takes a circle of 10 kms radius covering a cluster of
33
villages, the total population in the circle of 300 sq. km. will be rarely less than 15,000.
Assuming that at least five connections would be required for every hundred population,
one must plan for a minimum teledensity of 2.5 telephones per sq. km. To begin with one
may install one telephone every two sq. km, but in most areas this would be inadequate.
There are many towns whose radius barely exceeds 3 to 4 kms. The population could be
easily 25,000. One needs to plan for at least 1,000 phones for each such town. In other
words, the teledensity required in Indian rural areas could be as low as 0.5 per sq. km. in
sparse rural areas to as high as 30 per sq. km as one comes to small towns.41
In the telecommunication sector, the digital technology has taken over mechanical
technology by large but when it comes to providing telecom access to rural and remote
areas with low average incomes and low population densities, cost poses a key
constraint. It is Internet access, which has transformed computers from mere computing
machines to drivers of the information age. The IT task force, therefore, rightly calls for
Internet access for all, recognizing that access to Internet or lack of it will create
tomorrow’s divide between haves and have-nots. The problem is that widespread Internet
access pre-supposes a widespread telecom network and access to telephones.
Jhunjhunwala asserts that It is generally not known that a telephone in India costs
upwards of Rs.30,000 (US$ 660) to install. Taking a mere 15% as yearly finance charges
on investment, and 15% as yearly operation, maintenance and obsolescence charges, an
operator requires a minimum revenue of 30% of Rs.30,000, or Rs.9,000 (US$ 200), a
year from each telephone to break even. This implies that the telephone bills needs to
exceed Rs.9,000 per year. Now, who in India can afford this? Not more than 1–2% of its
population. Even with cross-subsidy (a smaller number of people generating much higher
revenues) not more than 3–4% of the people can afford telephones.42
Jhunjhunwala further argues that in rural areas, the problem gets further complicated
as the telephone infrastructure itself is far more expensive. The numbers vary, but the
cost is often quoted at Rs. 70,000 to Rs. 80,000 (US$ 1,540 – 1,760) per line. A far larger
revenue (of the order of Rs. 20,000 (US$ 440) per phone per year) would then be
required for the operator to break even. This is far too high, not affordable to virtually
anyone who lives in rural areas. Therefore, it has been assumed that rural phones need
heavy subsidy and is a burden for the operator. Political compulsion often compels
installation of at least some rural phones but for political compulsions, an operator would
just ignore this for the time being. Quality and maintenance however is often very poor.
Using such telephones for Internet Access would be quite difficult.43
Internet access requires a data link between the Internet subscriber’s computer and
the router of an Internet Service Provider (ISP) as shown in Figure 1.13. In turn, the router
of the ISP is connected to the routers of other ISPs. Today both these connections
depend heavily on the telephone network (PSTN). The routers of different ISPs are often
connected using lines leased from telephone companies. In contrast, most Internet
subscribers are connected to the ISP using data modems on switched telephone lines. In
other words, having a telephone line is a precondition for getting access to the Internet,
as this is the only existing means for communication from homes and offices.
41
Jhunjhunwala, A. (nd), ‘Can Telecom and IT be for the Disadvantaged?’
Jhunjhunwala, A. (nd) ‘Can IT Help Transform India?’
43
Jhunjhunwala, A. (nd), ‘Can Telecom and IT be for the Disadvantaged?’
42
34
Figure 1.13, Analogue Internet Connection, Jhunjhunwala, A. (n.d.)
While this is the fastest means to deploy Internet, there are problems. The PSTN in
India has been designed to serve peak-hour traffic of 0.1 Erlang per subscriber, implying
that a telephone is presumed to be used on the average for 10% of the time during the
busy part of the day. While this is largely sufficient for voice telephony, Internet access
complicates the matter. While a voice call last mostly for a few minutes, an Internet call
usually lasts much longer.44 Most studies have shown that an Internet user offers a load
of as much as 0.3 Erlang during peak hour. As the ratio of Internet users to the total users
grows, the PSTN will just not be able to handle the load. The network will get congested
and fail to complete a large number of calls.
The second problem in using Internet in the manner shown in Figure 1.13 has to do
with the analog modem connection between the subscriber and the ISP. This analog link
in India is just not reliable as it often passes through some weak (old non-digitized trunk)
links. This is even more so when the subscriber is located in a small town. The quality of
this dial-up link varies, and while it does provide 28.8 kbps connection occasionally, it
provides only 9.6 kbps or 4.8 kbps at other times. Sometimes the modem link also drops,
requiring redialling and a new connection. Besides if an ISP is located in a distant
town/city, the subscriber has to pay long distance charges.
The third bottleneck occurs at the ISP end. If the ISP has 100 telephone lines with 100
modems, the 101st connection to ISP cannot be provided. In other words, the investment
increases rapidly and linearly with the number of customers an ISP serves.45
These problems was tackled by Indian engineers by producing a number of
innovations that, in terms of cost, among other socio-economic characteristics, as far
better suited to local conditions than the comparable technologies available from the
developed countries. It is worth emphasizing that the appropriate inference to be drawn
from these examples is not that Indian research efforts necessarily produce innovations of
this type. After all, there are numerous instances where, for example, research
capabilities in that country have led instead to new global products designed to meet the
needs of multinational corporations to satisfy high rather low-income markets (Reddy,
44
45
Sain, M. (1998)
Jhunjhunwala, A. (nd), ‘Can Telecom and IT be for the Disadvantaged?’
35
1997). The point is rather that Indian engineers are capable of generating low-cost
innovations even in complex areas of IT, when that is their specific objective.46
The preferred technology, or technology mix, for providing low-cost ICT access will
vary with local conditions. In any case, even using the lowest-cost technology available,
cost of access provision is certain to vary across locations depending on the degree of
remoteness from the backbone network and central node, user density and clustering,
and the type of service and traffic. The purpose here is simply to provide some
guideposts that may assist decision makers in weighing the relative attractiveness of
different technology solutions in specific circumstances, not to offer a ‘one-size-fits-all’
solution, which does not exist. In this area, technologies are evolving rapidly, so what
looks attractive technically and financially today may appear less so in a few years’ time.
Caspary and O’Conner (2003) argue that there are several options for signal
transmission. There are at least two segments of transmission that need to be considered
separately: ‘Long-Haul Transmission’ from a central exchange, usually located in a city
(serving roughly between 100 and 10,000 subscribers) – the ‘last 100 miles’ – to an
access distribution point node (serving roughly between 10 and 100 subscribers); and the
‘Local-Loop’ transmission from that distribution point to the end-users – the ‘Last Mile’.
Some of these transmission technologies are discussed in the following sub sections.
1.6.1.1
Very Small Aperture Terminals (VSAT)
Satellite access via Very Small Aperture Terminals (VSAT), which can be used for oneway or interactive communications via satellite, involves either leasing capacity on other
countries’ satellites or launching one’s own. Banks in remote areas of Brazil are currently
linked via VSATs; the National Stock Exchange in India links brokers via rooftop VSATs.
Using satellite access then involves a choice between Geostationary Earth Orbit Satellites
(GEOS) and Low Earth Orbit Satellites (LEOS). Whereas GEOS are strategically placed
in the geostationary orbit, at an altitude of 22,300 miles above the equator, LEOS travel in
a lower orbit, allowing for faster signal transmission but also requiring multiple satellites to
cover the same ‘footprint’ as a single GEOS.47
VSAT-based rural telephony solutions hold promise if one looks beyond offering plain
telephony to ushering in an era of connectivity. Change the mindset by moving beyond
just voice, VSAT-based solutions become far more attractive. First, they are scalable. A
VSAT can handle anything from low-bandwidth voice calls to high-bandwidth images of Xray photos and broadcast-quality moving videos. No other technology reaching the rural
market can do that. Second, a single VSAT can support multiple connections. Thus, a
VSAT installed in a village kiosk can be used to support not just a kiosk, but also phone
lines reaching villagers' homes — this alters the economics of rural telephony as the fixed
cost of the VSAT is spread over multiple sources of revenue. Third, depending on the
government's relaxation of DTH norms, we will see the introduction of small satellite
antennas that can be used to receive TV signals and also offer broadband Internet
access and Voice over Internet Protocol (VoIP), further driving penetration and improving
the economics of the business. All this ties into the long-term vision of the DoT, which is
to turn today's VPTs into ‘information kiosks’ offering everything from tele-medicine to
tele-education and the Internet. This will mean lowering costs of deployment by removing
46
47
James, J. (2003)
Caspary, G. and O’Conner, D. (2003), p.21
36
duties on VSATs used for rural telephony, subsidizing space segment charges, assured
electricity, working with village NGOs to employ and train local villagers to operate kiosks
and partnering with companies targeting the rural market (FMCGs, insurance, fertilizers
etc.).48 Box 1.2 summarizes some of the constraints of the VSAT technology.
Box 1.2. Constraints using VSAT
The deployment of rural telephony reveals a market that faces innumerable challenges
irrespective of whether the technology used is wireline, GSM, WLL or satellite. In fact,
the bar is set even higher for VSAT solutions because of the nature of the market, the
high capital cost and the sophisticated nature of the equipment installed. A VSAT based
VPT costs more than Rs 100,000 (US$ 2,300), without including the space segment
charges. In addition, precautions must be taken on equipment safety and the quality
(and, hence, the cost) of manpower hired to service the equipment is higher. VSATbased solutions face the additional barrier of having to compete with cheaper terrestrial
technologies such as copper, WLL and wireless. VSAT based solutions face
competition from such players as ACeS and Thuraya that offer portable and lowmaintenance satellite phones.
Source: The Hindu Business Line (2003)
1.6.1.2.
Cable and Microwave
Terrestrial access, usually via copper cable, a faster, higher capacity but also more
expensive option is fibre optic cable. Microwave systems, which cut down on the cost of
material compared to cable over longer distances, while limiting theft and maintenance
problems. These are generally used as key components of wireless networks and require
line-of-sight signal relay. The relative costs and user advantages of these options are
summarized in Appendix IV, Table A-IV-6. However, they should not be seen as mutually
exclusive, with long-haul network sometimes including ‘mix-and-match’ approaches. For
instance, Bhutan has chosen such an approach, combining international connections via
satellite with microwave connections between cities and ‘last mile’ connections that are
often established via cable.49
1.6.1.3.
Small-Scale Digital Exchanges
By far the most striking example of this approach is the design and manufacture of smallscale digital exchanges for rural areas in India. Against the background of the situation
where, in 1980, 97% of that country’s villages had no telephone at all, the motivation for
leapfrogging to digital technology in general, and small-scale exchanges in particular, is
best expressed in the words of the engineer (Sam Pitroda), who at the time most
forcefully argued the case for his policy. Pitroda suggested that India should abandon
electromechanical switching and move immediately towards digital systems for switching
and transmission. His reasoning was twofold. First, electromechanical switching was ill
suited to the Indian climate and to Indian conditions. With few available telephones, most
48
From the article ‘VSAT solutions for rural telephony — Waiting to connect’, Bharadwaj, R., The Hindu
Business Line, April 29, 2003, visit http://www.thehindubusinessline.com/bline/2003/04/29/stories/200
3042900060800.htm
49
Caspary, ibid, pp.21-2
37
lines were intensively used, and electromechanical equipment was much more likely than
digital to malfunction from overuse. It was later discovered that some public phones in
India generate as many as 36 calls per hour at peak volume, compared with maybe 10 to
12 in the United States. Electromechanical switches are also more vulnerable to dust and
moisture. Analogue transmission, finally, suffers over distance, while digital transmission
is what gives those astonishingly intimate connections halfway around the world. In a
country with low teledensity like India, distance – and therefore static – were nearly
unavoidable. Second, the development of digital technology would help build native
industries in electronics, software, and related fields. Moreover, India needed one piece of
digital equipment that no other country manufactured but that many developing countries
could use: a small rural exchange. In the United States and Europe, the smallest
exchange built will accommodate 4,000 to 10,000 lines, and in small towns and rural
areas, these exchanges are installed and then deliberately underutilized. This kind of
waste may be tolerable in a country where the number of small exchanges is tiny. In
India, exchanges with a vast overcapacity would have to be installed in hundreds of
thousands of villages. Development of an efficient exchange for 100 or 200 telephones
would not only solve India’s problem, it would give the country a valuable high-tech
export. What emerged in the late 1980s was not only a low-cost 128-line rural exchange
but also one that in certain other respects as well as suited to Indian conditions.
A low-cost solution needed to be found, for example, for the tendency of digital
switches to overheat when the electrical system malfunctions (a notoriously common
occurrence in rural India as mostly elsewhere in the third world). The solution that
ultimately emerged was simple but ingenious. First to produce less heat, low power
microprocessors and other devices were used that made the exchanges work just slightly
slower. Second, the circuitry was spread out to give it a little more opportunity to breathe.
The cabinet had to be sealed against dust by making the whole assembly a little larger
than necessary.50 After the successful deployment of digital exchanges, Pitroda
developed the STD-PCO model that we discussed earlier in section 1.5.3.
1.6.1.4.
Wireless Local Loop
An example of how modern telecommunications technology can be adapted to the needs
of developing countries is ‘Wireless Local Loop’ (WLL), which was originally designed to
provide narrowband telephony services in developing nations that lacked a telephone
infrastructure (Financial Times, Oct. 8 (1999), p. XVIII). WLL is a system that connects
subscribers to the public telephone network using radio signals rather than copper for all
or part of the connection between the subscriber and the switch. The advantage of this
technology is based on the recognition that cost is the main constraint, which prevents
cellular from being a viable alternative for first-time telephone users in developing
countries. One alternative is to strip away some of the functionality of a mobile cellular
system to reduce its price. This has given rise to a radio-based access technology –
generically referred to as WLL – that provides an alternative to the traditional way of
connecting subscribers to the local exchange using copper wire. Data suggest that cost of
WLL has declined overtime, making it price competitive with wire copper. As a critical
mass of users is reached, the cost of WLL systems should fall even faster. WLL’s low
50
Pitroda (1993), p.70
38
implementation and operating cost promises to significantly alter the expense equation of
building telephone networks, resulting in lower tariffs and enhanced affordability for
potential subscribers. (See International Telecommunications Union (1998).
According to one recent study, WLL would probably have been a lower alternative to
the cell phone that are currently being used in one of the most prominent attempts to
bring digital telecommunications to rural areas in developing countries, namely, the
Village Phone project in Bangladesh run by Grameen Telecom, which enables members
of the Grameen Bank to lease the phones for village use. The point is that, while village
phone uses a GSM system (the cell standard in most of Europe and Asia) ’fixed wireless
loop’ systems are less expensive to construct. GSM towers only reach 5 kms, but WLL
users can travel 50 kms from their towers, meaning many fewer wireless loop towers are
needed to cover a country and this system is less expensive to build. Thus technologically
Grameen Telecom’s GSM system is in fact not the most cost effective way of getting
universal telecommunications into these villages51.
Figure 1.14, WLL Model, Howard et al. (2001)
Given, however, that GSM was the first technology to arrive, it has effectively ‘lockedout’ the less expensive WLL system, which in contrast to the former, is a relatively new
technology. And part of the reason for this comparative newness, in turn, is that in
developed regions, wireless local access has been more than adequate, rendering
wireless networks commercially useful only for mobility purposes. Only with recent
deregulation has WLL gained popularity as a viable competitor for the local loop with
51
Burr (2000)
39
copper-based incumbent operators. In developing regions where wired infrastructure is
scarce, WLL promises to be a viable alternative (Kibati).
In fact, as with digital switching technology, WLL has also been modified by an Indian
telecommunications company to make it cheaper and more appropriate to conditions in
the rural areas of the country. Known as ‘corDect’, the modified WLL is all set to usher in
a rural telecom revolution in India by paring the cost of rural telephony by well over 50%,
besides pegging the maintenance cost including power changes to a bare minimum. The
project started in January 2000 has wired 50 villages successfully without using
expensive copper wire. WLL, using the radio communication platform, connects the
subscriber to the main exchange by radio waves instead of traditional wire loop. In the
case of rural connections, while the cost per connection using conventional technology
will be in the range of Rs. 40,000 (US$ 880) to well over Rs. 130,000 (US$ 2863) in the
remote villages with rocky terrain, the cost per telephone using the WLL technology will
cost only Rs. 17-18,000 (US$ 375 – 395) per unit (The Financial Express, Nov. 1, 2000)).
Again as with the Indian-designed digital switching technology described earlier, corDect
is being used in a number of other developing countries. In particular, the technology has
now been licensed to a few companies in Singapore, Tunisia and Brazil, while systems
are operational in Madagascar, Fiji, Kenya, Tunisia, Argentina, and Nigeria (see TeNet).
WLL has some major advantages over ‘wired’ end-user access, but also some significant
drawbacks (summarized in Box 1.3). One example of how with the help of this technology
(WLL), people in the state of West Bengal are trying make a living as well as provide
services, refer to the case study GRASSO in Appendix I.
Box 1.3. Summary of Advantages and Remaining Challenges of Wireless Local
Loop (WLL)
Advantages:
•
Cost: In rural areas, the segment connecting the subscriber to the exchange often
accounts for more than 50% of initial investment. The cost advantage of WLL is
based on three factors:
i)
Quick deployment compared to copper wire, meaning that revenue streams
begin sooner and investment is recouped more quickly;
ii) Cost structure: WLL typically tends to have a low ratio of fixed to incremental
costs. Once base stations and the link to the telephone exchange have been
installed, new subscribers can be added quickly and at relatively low cost;
iii) WLL tends to be less prone to failure than copper wire and is less likely to be
stolen or damaged, lowering maintenance costs. Furthermore, it is much easier
to locate the point of failure in WLL networks than in hard-wired ones.
•
Flexibility: new customers can be added easily (i.e. without the need to lay new
sets of cables). Moreover, WLL systems are redeployable, which is particularly
useful in the case of fast-growing areas or areas where subscribers switch
providers or cancel contracts frequently;
•
Speed: In order to lay cable, permission has to be obtained from municipal
authorities or landowners which delays implementation. WLL systems can be
40
implemented more quickly and less obtrusively than copper wires. Furthermore,
obstacles of various kinds (hills, forests, rivers) can increase the cost of installing
copper wire;
•
WLL systems can be used in the mobile mode: WLL users can theoretically roam
freely with their handsets within the coverage area of their base station, which can
range up to 50 kilometres.
Remaining challenges:
•
No global standard: Most WLL systems are based on existing technologies;
•
WLL systems tend to suffer attenuation where there is heavy rainfall or extensive
foliage;
•
The need to have frequency allocated for WLL imposes constraints on operators
planning to use this technology. The price to be paid for this will raise costs;
•
Concerning the possibility for ‘roaming’, incumbent mobile cellular operators may
complain, arguing that the WLL service provider infringes on the exclusivity of their
existing licenses (as has happened in India and Poland). The problem is more
serious where spectrum is allocated at low cost for a WLL system which then
competes with mobile cellular operators who have paid in some cases high
spectrum fees in competitive auctions;
•
Some WLL technologies have relatively low bandwidth, restricting ability for
broadband applications and some of the most advanced services (one has to bear
in mind, however, that provision of these most advanced technical solutions is
probably not required for low-cost rural telecommunications).
Source: ITU, 1998.
1.6.1.5.
Wireless Fidelity (Wi-fi)
Woodside (2003) suggests that the technology known as Wi-Fi is open-everything. It's
open standards, open spectrum, open source software, open hardware. Anyone can build
a Wi-Fi device and the plethora of options means very low cost to buy and deploy a highspeed wireless Internet network. Wi-Fi is the common name for the 802.11 wireless
network. The standard sets out the design for radios that use free, open spectrum radio
waves to carry Internet data. As the standard gained widespread adoption, price
competition drove the cost of the radios down from US$ 500 just a few years ago to US$
100 or less today. Originally, businesses used Wi-Fi radio in their offices to help roaming
laptop users. But the technology sprung an unexpected dividend as enterprising
communities used it to bridge the ‘last mile’ between their houses. Now, the last mile is
increasingly 5, 10, or 20 miles, driving the creation of community wireless networks.
The radios and equipment are commodity goods that can be purchased off the shelf,
just like commodity PCs. They all work the same way, but there are different levels of
quality on offer, from Linksys at US$ 100 up to Cisco at US$ 500 or more, like the Dells
and IBMs of the computer world. Since they all interoperate on the same channels at the
2.4 GHz frequency, antennas, cables and adapters are also cheap and easy to find, with
41
the total antenna and accessory kit for about US$ 50 to US$ 100. A typical Wi-Fi network
uses a ‘hub-and-spoke’ design. The hub is a location that is high up, at the top of a
building, hill, or tower, where it can be seen visually from many locations. At the hub, the
operator of the network installs a sector array of antennas.
For rural areas in developing nation, most likely the model is going to be internet
cafes, and community computing center, and schools, so that simply bringing the link into
the location is going to be enough.52 For an example to see how some villages in India
have already embraced Wi-Fi technology for their benefit, see case study Wi-Fi Villages
in Appendix I.
Stata (2000, p.1) concludes that these various examples like the ones discussed
above do not suggest that the digital divide between India and the developed countries
and within India is about to be branched in the near future. On the contrary, the challenge
still remains a formidable one with a great deal that remains to be done. The main point is
rather there appears to have emerged in that country an independent, ingenious telecom
industry, which is capable of providing affordable Internet access solutions, and which
reduce the need for import as the telecom infrastructure rapidly expands.
1.6.2.
Regional Technological Options
Mehrotra et al. (nd) assert that after evaluation of all the technologies as well as the
Grameen Phone business model it is clear that there is no one pan Indian model that can
be applied to increase rural teledensity. Figure 1.15 exhibits different parts of India
marked into different circles recommending the kind of technology or model to be applied
to that particular circle and also delineated the reasons for doing so. A comparison of
three WLL based technologies and GSM based Grameen Phone is made in table 1.4.
1.6.2.1
North-Eastern and Selected Northern States: (corDECT)
CorDECT is going to offer lots of benefits to these states. Low density of population, bad
weather conditions which can be served by an India specific rugged technology like
corDECT, modest bandwidth requirements which are beneficial for the armed forces
since all of these are border states, low cost of installation and maintenance which is
required for the economically lagging N-E states as well as the mountain states like
Himachal Pradesh, Uttaranchal, Gujrat and Rajasthan.
1.6.2.2
Punjab, Haryana, Delhi: (CDMA, corDECT)
These states are much better off economically as compared to the other states in India,
thus the purchasing power is higher. CDMA is soon going to offer a lot more benefits as
more advanced technology is introduced. This would be beneficial to the residents of
these states, higher quality of communication and security, No prior frequency planning
required and thus fast rollout is possible.
52
Woodside, S. (2003)
42
1.6.2.3
Central and Eastern States: (GrameenPhone business model)
Central and eastern states include Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh,
Chattisgarh, West Bengal, Orissa are among the poorest of states and Grameenphone
model would provide employment and revenue to this regions. Grameenphone also uses
micro-credit, which is given to the women of the household. This region has also a large
network of rural banks, which can take on the role of Grameen Bank. Also this model
needs a high population density, which is present in these populous states. Cellular
operators who can extend their coverage easily by adding base stations for not much cost
cover all of these states. They will also benefit from increased usage of cellular airtime.
Table:1.4 Comparison among the different WLL Technologies
TECHNOLOGY/
(BUSINESS MODEL)
PARAMETERS
CDMA
corDECT
Cost of connection
32000
17000
(Rs)
5 months
Implementation Time 3-5 months
high
Low
Scalability
<10 kbps
70 kbps
Internet
n.a
Low
Density of population
favorable not favorable
Govt Regulations
Source: Mehrotra et al. (n.d.)
1.6.2.4.
PAS
GrameenPhone
18000
3-5 months
high
64 kbps
low
nascent
17000
< 1 month
medium
<10 kbps
high
not required
South-Western States: (PAS/ Grameen Phone)
These states include Maharashtra, Goa, Karnataka, Andhra Pradesh, Tamil Nadu and
Kerala. Most of the above-mentioned factors are as applicable to the southern states and
the GrameenPhone model could be adopted by these states also. It is also recommend
that PAS networks could be implemented. The reasons for this are: PAS is a WLL
platform that is less expensive than CDMA based WLL. PAS provides one of the lowest
costs of implementation but more importantly mobile communication devices are used in
the PAS networks. These would help the rural customers to have limited mobility. The
inhabitants of these states have generally more purchasing power and would benefit from
the mobility. Also PAS networks are highly scalable and would provide a lot of add on
benefits to the customers. Another very important consideration is that all of these states
are coastal regions and would be having a sizeable sea faring rural population. For these
people having mobility is a major boon, also PAS provides 64kbps net connectivity which
can keep them updated about rough weather in the offing.53
53
Mehrotra et al. (n.d.)
43
corDECT
CDMA /corDECT
corDECT
Grameen Phone
PAS / Grameen Phone
Figure 1.15, Regional Technological Options for India, Source: Mehrotra et al. (n.d.)
1.6.3
Low Cost Communications Equipment and Applications for the Poor
Even though it is conceptually possible to separate the hardware and software aspects of
low-cost computers, it is often difficult to do so in practice because of the interrelatedness
between them.54 Some examples with potentially far reaching implications for developing
countries will serve to illustrate the point.
1.6.3.1.
1.6.3.1.1.
Hardware
Computer Aid International (CAI)
Computer Aid International was set-up as a registered charity in 1998 in response to the
enormous demand for quality and affordable access to computers from the developing
world. CAI has already shipped over 37,000 PCs to more than 90 developing countries.
25,000 of those have gone to educational institutions and the remaining to community
organizations working in fields as diverse as HIV/Aids, environment, human rights, and
primary healthcare.
Their work in developing countries is to identify those potential recipient organizations
where the application of IT will have the most positive social and economic impact and in
the UK, CAI talks to businesses as they upgrade to the very latest technology and
encourage them to donate their PCs to CAI for re-use in schools and community
organizations in the developing world. All donated PCs will be thoroughly data-wiped to
54
James, J. (2002), p.101
44
the highest standard. To cover the cost of collecting, testing, refurbishing, and packing of
a single computer CAI charges £39. There is an additional cost for freight.55
1.6.3.1.2.
Simputer
Named by MIT's Technology Review magazine as one of the seven hottest academic
start-ups of 2001, PicoPeta is a company founded by the co-inventors of the Simputer.56
They share a common vision to make computing affordable and accessible to the people
of developing countries who face barriers of price, language, and literacy.
Apart from supplying the hardware for the Simputer, PicoPeta provides developer
tools and all technical information needed to develop Simputer applications. PicoPeta
also has the resources and expertise to build software solutions on the Simputer platform,
and provides project management, consulting, and system integration services to help
industry in this goal. PicoPeta has already implemented several Simputer solutions,
including an educational project in rural schools and a microfinance project in Karnataka.
PicoPeta’s focus in building the Simputer and Simputer-based applications has been
to keep everything simple and extremely user-friendly so even illiterate people can use it.
The PicoPeta team includes experts on Human-Computer Interaction (HCI). The
Simputer's innovations include a touch screen interface, and the development of a
standardized interface language called IML (Information Markup Language). The
Simputer is a powerful and full-fledged handheld computer. The architecture of the
Simputer integrates various devices such as Smart Card reader, a Modem, a Touch
Screen, a Multi-lingual Text-to-Speech system that is specifically designed for people who
are illiterate. Combined with low cost, the Simputer fits into a variety of computing
situations, both traditional and unconventional. Equipped with an icon-driven interface, a
high level of computer literacy is not essential for using the Simputer. All it takes is the
ability to point and touch an icon on screen with a stylus. PicoPeta is currently focusing on
the following business domains for the initial deployment of Simputer solutions:
• Education;
• Banking;
• E-governance;
• Sales Force Automation;
• Healthcare;
• Agriculture & Rural co-operatives.
The latest from PicoPeta are two developments that are sure to excite developers,
business and users worldwide:
• Simputer for spot billing;
• Announcement of the Amida brand name;
• The revolutionary Malacca Interface;
• Alliance with Bharat Electronics Limited (BEL).
55
Computer Aid International, visit http://www.computeraid.org/howwework.htm
This case study information has been gathered from a personal interview with Mr. Vikram Srivats and
website of PicoPeta, visit http://www.picopeta.com/index.php
56
45
1.6.3.2.
Software
India faces one of the most difficult problems of any nation. There are eighteen official
Indian languages. Software that is in the local language with locally relevant content is the
key necessity. Some of the initiatives in this direction are mentioned below:
1.6.3.2.1.
International Open Source Network (IOSN)
Developing countries in the Asia-Pacific Region can achieve rapid and sustained
economic and social development by using affordable yet effective Free Open Source
Software (FOSS) ICT solutions to bridge the digital divide. While FOSS has become more
accepted, there is a lack of understanding on its benefits, policy implications and
resources available to Governments to implement FOSS solutions. FOSS software refers
to applications and operating systems with open source codes for other parties to review,
comment, refine, and extend. Very often this model includes a bug reporting process and
is often quoted as a good model for producing resilient software. This open concept
allows easy customization of the software to users' needs. FOSS represents an
opportunity for developing countries to adopt affordable software and solutions toward
bridging the digital divide. Cost-savings will allow funds to be used on other priorities and
development objectives.
The International Open Source Network (IOSN) is a Center of Excellence for FOSS in
the Asia-Pacific Region. It shapes its activities around FOSS technologies and
applications. Via a small secretariat, the IOSN is tasked specifically to facilitate and
network FOSS advocates and human resources in the region. The secretariat will:
• Serve as a clearinghouse for information on FOSS in Asia-Pacific;
• Strengthen current FOSS capacities;
• Assist with the development of needed toolkits and resource materials, including
localization efforts;
• Assist in the coordination of FOSS programmes and initiatives through information
sharing and networking in the Asia-Pacific region.
Much of the IOSN coordination work will be undertaken online via the IOSN Portal so
that governments, individuals, advocates, and others can have access to information,
tools, resources, and discussion. IOSN is an initiative of the Asia-Pacific Information
Development Programme (APDIP), which has been supporting the strategic and effective
use of ICT for poverty alleviation and sustainable human development in the Asia-Pacific
region since 1997.57
1.6.3.2.2.
Mailjol
Indian language e-mail service, mailjol.com, has registered 50,000 beta users within two
months of its launch. Gujarati language users top the list among the non-resident
members. More than 20% of the Indian subscriber base is Telugu language users
followed by Hindi, Marathi and Tamil language users who constitute 15%, 12% and 10%
respectively.
57
International Open Source Network, visit http://www.apdip.net/iosn/about/
46
This is based on the response received by www.mailjol.com that provides e-mail
service in 12 Indian languages and also in English. Mailjol's subscriber base comes from
different parts of the country and from all over the world. Around 40% of the users are
from countries with large populations of Indian origin, namely USA, UK, UAE and
Singapore. Subscribers for this service come from nearly 50 different countries that
include places like Germany & Finland.
Mailjol is looking for partnering or acquiring Indian language portals for content and
applications. It is also working out an arrangement for a data center to host Indian
language sites and applications on the Internet. The proposed Indian language ready
data center will provide the resource back -bone for deploying Indian language
applications based on the open standards of ISCII/Unicode.58
1.6.3.2.3.
Drishtee
Drishtee is an India-based organizational platform for rural networking that provides ITenabled services to rural and semi-urban populations. Drishtee’s aims to serve all of
India’s villages through the empowerment and enterprise of local entrepreneurs.
Government sponsored loans allow a villager to purchase the equipment necessary to
open a franchise and revenues generated by the delivery of government services allows
the owner to pay off the loan and earn a livable income.
Drishtee is facilitating access to various services through its state-of-the-art software
platform. The villagers are able to access a wide range of online services on Drishtee's
intranet. The first set of offerings includes access to government services (especially
government loans, applications for various licenses, making complaints etc.). This allows
the villagers to save on very high opportunity cost by avoiding costly and time-consuming
trips to the city where government offices are located. This also gives an immediate
recognition to the Kiosk in the minds of the target market. Drishtee’s proprietary software
facilitates transactions and communication within a secure localized intranet between
villages and a district center. Consequently, as the network grows, Drishtee is
increasingly able to negotiate arrangements with corporations such as insurance
companies, financial institutions, and others seeking a cost-effective means to serve rural
communities.
Drishtee has designed its own Portal with following special features to aid kiosk and its
village customers:
• Multi-lingual content, accessible to all users across all regions of country;
• Centralized application on web server, no hassles of installation or data mismatch;
• Data modification possible at user end, without actually downloading/uploading
webpages from source;
• Elaborate administration mechanism, to monitor node activities and maintain
quality of services offered to the people.
Using E-governance as its core offering, Drishtee has been able to build an
impressive network of IT-enabled kiosks in rural India. Drishtee's network spans across 6
states and covers a total of 7 districts with over 300 operational Kiosks, majority
population of which resides in the rural areas. After the concept demonstration phase, a
58
From the article, ‘Mailjol.com Multilingual Service Sees NRI Rush’, Financial Express, July 7, 2000, visit
http://www.financialexpress.com/fe/daily/20000707/efe07016.html
47
string of private value added services are introduced. This includes Computer based
tutorials for Language education, IT awareness, Adult literacy and agricultural courses.
Also the same channel is utilized for partner product marketing such as Life Insurance
Policies, General Insurance Products, Micro Credit etc. Kiosk owners after achieving a
certain degree of comfort in operations of computer are also provided with BPO jobs in
the field of data entry and market research activities. Train and bus ticket bookings, online
auction facilities for second hand products, commodity market rates and matrimonial
services are some of the local offerings for the villagers through the Kiosks.
Using a tiered franchise and partnership model, Drishtee is facilitating the
infrastructural development for intranet and Internet access at the village level. Drishtee
has established intranet hubs at the national, regional and district levels. These hubs are
established and managed by Drishtee, its partners or its franchises depending upon the
social, economic and political context of the state of operation. At the village level, the
access is provided through a Drishtee kiosk. This kiosk is owned and managed by a local
village entrepreneur who runs it as a self-sustained, profit-making unit. The kiosk is
connected to the Drishtee hubs through the intranet. As services provided through the
Drishtee network expand, the incomes of the local entrepreneurs will increase, and this
virtuous, self-sustaining cycle will inexorably contribute to the nation’s infrastructure
serving the needs of rural India.
Drishtee has bagged the Development Market place Award (www.development
marketplace.org), ICT award (www.iicd.org/stories) from the IICD/Infodev (World Bank)
and has been recognized as the most promising social enterprise from Digital Partners,
US (www.digitalpartners.org).59
1.6.4.
Innovative Business Models to Serve the Poor
Connecting rural areas with ICTs is a costly affair as we learnt from our discussions
earlier in this chapter. In order to be able to provide access to technology to the poor, we
need to come up with innovative business models that facilitate the provision of cost
effective services; are financially sustainable; as well as generate employment and
stimulate entrepreneurial spirit. Let us now examine some of the business models that
have been implemented as pilots within India as well as other countries. The objective is
to identify the current models being implemented within India as well as to learn from
other countries, which can be implemented in India or vice-versa.
Figure 1.16 reveals the importance of entrepreneurial spirit within the rural
communities. On a scale of 1-5, 1 being strongly disagree and 5 being strongly agree,
28% of the respondents strongly disagreed and again 28% disagreed that rural
communities lack any sort of entrepreneurial spirit. On the other hand only 22% agreed to
this question and another 22% remained neutral. Therefore, we may conclude that a
majority of respondents (56%) believed that rural communities are very active in
developing solutions and business models suited for their environment and needs.
59
This case study information has been gathered from a personal interview with Mr. Satyan Mishra, CEO of
Drishtee and website of Drishtee, visit http://www.drishtee.com/
48
Q11. c) Obstacles that prevent technology to
reach Villagers: Lack of entrepreneurial spirit
within the rural community
No. of respondents
6
5
4
3
Series1
2
1
0
1=Strongly
Disagree
2
3
4
5=Strongly
Agree
Scale
Figure 1.16, Self-created
1.6.4.1.
Grameen Village Phones (Bangladesh)
One of the best-known experiments in extending telephone access to the poor has been
undertaken by Grameen Telecom (a member of the Grameen Group). Grameen Telecom
(GT) uses two main methods of extending phone access: firstly, the provision of phones
directly to potential subscribers (often businesses) and, secondly, the leasing of phones
to Grameen Bank (GB)60 members who then provide telephone services on a fee-forservice basis to the rest of their community (the ‘Village Pay Phone’ – VPP – system).
Service provision to direct subscribers rests on the idea that there are many potential
sources of demand for telephone service in the rural areas that are currently going unmet.
These include health center, secondary schools and colleges, large farmers, and local
businessmen. The VPP initiative of GT combines the GB’s expertise in village-based
micro-enterprise and micro-credit with the latest GSM digital wireless technology of a
sister company, Grameen Phone (GP), which primarily services the urban mobile phone
market. GP has become the country’s dominant mobile carrier, providing services in
urban areas and along the major railway routes via a network of cellular towers linked by
fiber-optic cable. It has approximately 600,000 subscribers. GT and GB work together
towards the dual objective: to help the latter’s members shift from relatively low-yield
60
Grameen Bank is best known for its successful microfinance programme targeted at poor rural women of
Bangladesh, the model having been replicated throughout the world over the past decade.
49
traditional ventures (mostly animal husbandry and agricultural activities) into the
technology sector, and to provide whole villages with connectivity.
Aminuzzaman, (2002) suggests that one cause of reluctance on the part of
commercial telecom operators to extend access to low-income rural communities is the
difficult logistics of bill collection. The GB network is already extensive, and the
information the bank collects on creditworthiness of its customers provides a strong basis
for judging the trustworthiness of prospective telephone operators. Among the criteria GT
uses for selection of VPP operators are: at least two years as a GB member and a record
of on-time loan repayments. GT provides the phones and related equipment (approx.
value: US$ 420), while GB provides a loan of about US$ 300 to the prospective VPP
operator. Repayment with interest (at 22%) is made from the operator’s cash flow, with a
three-year grace period
The phones are made available to all users in the village, whether for outgoing or
incoming calls, all on a fee-paying basis. The operator charges the market retail rate,
while GT charges the operator half that rate, while buying bulk airtime from GP at a
discounted rate. Each month, an average of 70 customers uses each phone. The ‘sharedaccess’ business model concentrates demand and creates relatively high cash flow, even
in poor villages, enabling operators to make regular loan payments and still turn a profit.
Repayment rates to GB are 90-95% (Cohen, 2001). From the perspective of GP, the VPP
is a profit-making venture, despite the low wholesale charge, because of high airtime
capacity utilization and low operating costs (Torero et al., 2002).
Recent research by the Telecommons Development Group (TDG) has shown that the
VPP programme yields significant economic benefits. TDG estimates the full value of a
single phone call for VPP users in terms of consumer surplus based on the estimated
cost of travel between the village and Dhaka. The cost of the trip (including out-of-pocket
expenses plus the opportunity cost of travel time evaluated at the average rural wage)
ranges from 3.7 to 7.1 times the cost of the phone call, meaning real savings of between
51 and 91 Taka per call (see Table 1.5).
The same study compares prices received by farmers in VPP villages with those in
control villages, finding that the former receive on average 70-75% of the paddy price
paid by the final consumers, discernibly more than the 65-70% received by the latter.
Moreover, a survey of perceptions of VPP users suggests the following benefits:
• Lower cost of information;
• More stable supply of inputs (particularly fuels);
• Quicker and more effective communication during disasters;
• Reduced spoilage of perishable products;
• Better access to health-care services.
Allowing for methodological deficiencies of such surveys (e.g. there was no attempt to
isolate the ‘pure’ Village Phone-effect), these findings point to considerable benefits to
villagers from access to ICTs. Aminuzzuman (2002) has conducted a more recent
assessment, based on a sample of 350 VPP owner/operators and users. Most
owner/operators found VPPs a profitable investment and ownership has substantially
raised their average monthly incomes. The mostly female owner/operators have
experienced some social and economic empowerment by virtue of the income the phones
bring to their households. On the other hand, more often than not it is male household
members who interface with users (in other words, the owner is not usually the operator),
and only a small fraction of users (22%) are women. So, the effect of VPPs on women’s
50
social and economic status has been rather modest. Still, those women who do operate
and use VPPs are convinced of their positive impact on their economic and social status.
61
Some of the constraints facing the GP’s are discussed in Box 1.4.
Table 1.5. Estimates of Consumer Surplus Provided by Grameen Village Pay
Phones (in Taka, except column 2)
Transport Opportunit
Total
Total cost Consu
Hours
costs
y
cost
of
costs
of
of Village
Economic
required
mer
entailed in
time
alternativ
Pay
Status
by
Surplu
required
e
Phone
alternativ alternativ
s
e
for
methods
call
e
methods
alternative
methods
methods
(3 + 4)
(5 - 6)
1
2
3
4
5
6
7
All poor
3.67
60.89
34.32
95.21
17.35
77.86
Extremely
poor
3.08
54.97
26.41
81.38
20.08
61.30
Moderately
poor
4.15
65.82
40.89
106.71
15.07
91.64
Non-poor
2.54
45.80
21.71
67.51
16.73
50.78
Entire
sample
2.70
48.02
23.57
71.58
16.82
54.77
Note: 49 Taka = $1 (at 1999 exchange rate)
Source: Bayes et al., 1999.
Box 1.4. Constraints on Grameen Rural Phone System
Despite being widely heralded as a success in bringing ICT access to rural areas, the
Grameen rural phone system still grapples with a number of problems that might either
limit its future expansion or be solved by means unlikely to be available to other rural
ICT providers in developing countries.
Infrastructure
Grameen Telecom’s original goal was to have a phone in every one of Bangladesh’s
65,000 villages by 2000, but only 4,543 village phones were in service as of March
2001. The primary constraint has been a distorted telecommunications market
controlled by a monopolistic government provider, BTTB. Because BTTB has been
unwilling to increase its interconnect capacity, despite GP’s offer to pay for the
upgrading, GP and other mobile companies have been unable to connect additional
phones to the national switched network and instead have had to offer primarily mobile61
This case study information is drawn from Caspary, G. and O’Conner, D. (2003)
51
to-mobile phone services. This infrastructure barrier has also limited expansion of the
rural phone network, and points to the central importance of interconnectivity to fixed
line networks being resolved through appropriate regulatory policy if initiatives relying
on wireless communications to extend ICTs to rural areas (such as the Grameen
Telecoms system) are to be viable. A second constraint is GT’s use of cellular
technology for its VPPs, a choice that is neither efficient nor probably competitive over
the long run (at least in rural areas). GSM — used throughout much of Europe and Asia
— is far more expensive than fixed wireless local loop (WLL) systems used by GT’s
competitors, Sheba and BRTA. While GSM towers can provide service within 5
kilometres, WLL towers provide coverage within 50 kilometres. Moreover, WLL provides
better bandwidth for data transmission at a lower cost. This raises the possibility that
GT may be put at a severe ‘first-mover’ disadvantage due to technology lock-in effects.
Policy
Bangladesh’s telecom regulatory regime is both antiquated and anti-competitive. One
consequence has been BTTB’s ability to maintain control over the switched network
without expanding its capacity, even in the face of high demand. Scarcity forces
Bangladeshis to pay large inducements to BTTB officials in order to obtain phone
service. BTTB’s control of the network is likely to become an even more significant
market disadvantage to GP and other mobile operators once BTTB launches its own
GSM mobile network, although the telecoms regulatory authority is supposed to ensure
a level playing field.
Enterprise
Grameen Telecom’s village phone venture would not be feasible without access to the
credit and bill collection services provided by Grameen Bank and the infrastructure and
urban network provided by Grameen Phone. Village phones would be far less
successful if GP were not able to discount by 50% the rate charged to GT for a phone
call, an underlying subsidy made possible by the more profitable urban part of the
business — and a significant advantage unavailable to rural-only competitors BRTA
and Sheba.
Source: Cohen, 2001
1.6.4.2.
The N-Logue Multi-Tiered Franchise Business Model (India)
The Indian startup n-Logue has created a for-profit business model to tap into what it
believes to be a latent rural demand for connectivity. N-Logue was incubated by the
Telecommunications and Computer Network (TeNet) Group of the Indian Institute of
Technology in Madras (now Chennai) as part of the group’s strategy of disseminating lowcost communications technologies to the rural poor.62
Drawing on some important lessons from the successes of business models such as
the STD-PCO phones, very much underlines the role of entrepreneurship in promoting
use of technology for the masses.
Unlike the Grameen Village Pay Phone Model or the majority of telecenters, N-Logue
takes the franchise concept above the level of the retailer to other levels of the network.
N-Logue has fashioned a franchise-based business model that consists of three levels of
interdependent networks:63
62
63
Prahalad and Hammond, (2002), p.32
Howard et al. (2001)
52
•
At the foundation-level, n-Logue forges and facilitates relationships among a range
of institutions—hardware and equipment providers, NGOs, content providers, and
government— that support the businesses of franchise owners;
• At the intermediary level, n-Logue maintains regional networks of franchised Local
Service Partners (LSP). These cooperate with n-Logue to establish Access Center
or Nodes to which individual kiosk operators are connected, using WLL
technology;
• Finally, at the highest level, local entrepreneurs are recruited by the LSPs (who are
usually established businesspeople) to establish village-level kiosk franchises to
provide Internet and telephone access to the local population. The LSPs provide
training, business advisory services, and collect revenues from the kiosk operators,
which are then passed on to n-Logue. Through the LSP, n-Logue offers low-priced
‘kiosk packages’ consisting of a subscriber wall set (that connects the kiosk to the
Access Centre), a computer, printer and backup battery. Local franchise owners
are themselves responsible for developing additional product and service offerings
(e.g., computer courses) as well as marketing strategies.
N-Logue employs a unique fixed WLL technology designed by TeNet for its villagelevel communications package. As with other WLL technologies, voice and data are
transmitted over radio frequency rather than wires, in this case with a fixed unit emitting
the signal. The subscriber wall set can communicate both voice and data simultaneously
to an Access Centre that must be located within a 25 km line-ofsight distance. Because
the central base station handles traffic from 200-1,000 subscribers, it works well in small,
dispersed markets and does not require the large subscriber base that traditional landline
or cellular systems do to be profitable.64
N-Logue offers to set up a kiosk for Rs. 40,000 (US$ 920) that includes telephone,
Internet and low-end Pentium PC with color monitor, speakers and microphone, 16 hrs
backup for phone and 4 hrs backup for PC and Indian language software. With Rs.
10,000 (US$ 230) more, a printer, camera and CD-Rom would also be provided.
To date, use of the Internet in many regions of India is inhibited, inter alia, by the
dearth of Internet content in any of the 18 national languages. N-Logue has responded to
this challenge by setting up strategic alliances for local language software and content,
commodity market price information, school education augmentation, agri-services,
animal husbandry, money transfer, sales of financial products, and e-governance
applications. In pilot projects, LSPs have taken an extremely active role in generating
content. In some pilot projects, kiosks are connected only to the LSP intranet, but these
have nevertheless managed to generate strong returns, suggesting the particular
attractiveness of local content to villagers (Howard et al. 2001).
While there is so far little empirical evidence on the comparative financial sustainability
of these access models discussed here, the n-Logue and Grameen Village Pay Phone
models seem to have one considerable cost advantage over most telecenters: by not only
providing shared access at the point of the end user, but also shared resources (including
bandwidth) at the nodes further up in the 'system', they are able to offer lower prices.
Moreover, N-Logue's work at the foundation level is likely to contribute further to lowering
end-user prices by enabling it to organize equipment bulk-buying for village kiosks as well
as by lowering maintenance and repair costs through harmonization of equipment and
64
Prahalad, ibid, pp.32-3
53
software throughout the kiosk network. Finally, N-Logue uses the headquarters staff
expertise to choose high-quality hardware and software and certify its reliability to the
kiosk owners. In this way, the risk of kiosk owners’ buying low-quality, or even faulty
equipment and thus jeopardizing their own ability to repay loans is minimized.65 For other
examples of innovative business models that are being implemented in India and
elsewhere in other countries please refer to Appendix II.
1.6.4.3.
Project Shortcomings
According to one estimate by Keniston (nd), there are at least fifty grassroots projects
currently using modern ICT's for development in India. A few of these projects (e.g.
Gyandoot, Pondicherry) have been publicized; the great majority has not. Surprisingly,
these projects have rarely been studied; no comparisons have been made between them;
they are not in touch with each other; lessons learned in one project are not transmitted to
others; appropriate technologies are rarely evaluated; financial sustainability, scalability
and cost recovery are seldom addressed; and the opportunity to learn from the diverse,
creative Indian experience is so far almost entirely wasted. Because of all these reasons
one of the most popular projects in India is in a pitiful situation (Box 1.5).
Box 1.5. MP’s Ambitious Gyandoot Programme Flounders
Gyandoot, an intranet e-governance programme started by the Madhya Pradesh
government in 1999, in Dhar district, to provide essential services and agricultural
Information at the village level, now is in a pitiful situation. The operator at the
information centre in Nalcha Block in Dhar has no clients. Electricity outages for hours
are a common problem and as a result information kiosks are deserted. Gyandoot has
not been able to provide all the 44 services it was set up to deliver. Thirty-nine
information centers were set up to make people computer literate in 500 villages and
serve as one-stop shops for information. Of these, seven centers have an average of
35 visitors a day and six centers are non-existent due to various problems, one being
phones out of order. The administration, however, refutes claims of the system’s
inefficiency and ineffectiveness. The Gyandoot programme bagged the 2001 Stockholm
Challenge Award and the 2001 Tata Consultancy Award for the use of IT at the
grassroots level.
Source: NDTV, January 27, 2003
1.7.
Conclusions
India has done relatively well in terms of catching-up with the developed countries by
leapfrogging to new technologies and narrowing the international technology gap. While
many foreign, large and small companies not only shifting low cost jobs to India but also
shifting their R&D laboratories in order to benefit from the well-qualified and relatively
inexpensive English speaking workforce. As one recent study from Yasheng Huang of
MIT Sloan School and Tarun Khanna of Harvard Business School, published in Foreign
Policy (July/August 2003), states, “With the help of its diaspora, China has won the race
to be the world‘s factory. With the help of its diaspora, India could become the world's
65
N-Logue case study information is drawn from Caspary, G. and O’Conner, D. (2003)
54
technology lab.” The study even goes further and states, “China is clearly in the lead. But,
the future belongs to India.” According to another study by Deutsche Bank, “India will be
among the top five growth centers between now and 2020, and clock an annual average
GDP growth of 5.5% as compared to Malaysia's 5.4% and China’s 5.2%. In terms of
purchasing power parity (PPP), India will surpass Japan as the world’s largest economy
after the US and China by the end of the decade. India’s per capita GDP performance
would still be an improvement over its past trends as human capital will improve and the
country will probably continue to open strongly to the rest of the world.”66
On the other hand, the gap within India still posses a huge challenge. This positive
looking scenario could change suddenly when one talks of the villages in India and their
current state of affairs with respect to ICT infrastructure and accessibility.
As articulated in many case studies mentioned earlier and in appendixes are the
successes but on the other hand, there are many despairs as well. A recent article in The
Economist Technology Quarterly (March 12, 2005) expresses some backlash of rural
deployments against new ICTs as they have fallen out of favor. The article asserts, “It
seems foolhardy to throw money at fancy computers and Internet links. Far better, it
would appear, to spend scarce resources on combating AIDS or on better sanitation
facilities.” It further says, “…the recently concluded Copenhagen Consensus project,
which brought together a group of leading economists to prioritize how the world’s
development resources should be spent. The panel came up with 17 priorities: spending
more on ICTs was not even on the list.” On the other hand Charles Kenny, a senior
economist at the World Bank who has studied the role of ICTs in development, says that
traditional cost-benefit calculations are in the best of cases “an art, not a science”. With
ICTs, he adds, “the picture is further muddied by the newness of the technologies;
economists simply don’t know how to quantify the benefits of the Internet.”
Studies and articles that represent despair have much to do with the approach they
take. The more they elaborate upon connecting every house in the country or world with
computers and Internet, the more difficult it gets to justify the use and cost of technology,
especially when many people are still without adequate food, water, shelter, clothing etc.
It would be prudent to take a different approach that would envision the networking of
village or a group of neighboring villages with Internet kiosks which provide essential
services to the villagers at an affordable cost. It should be well understood that these on
going projects require some time before their importance is acknowledged by the villagers
as we as the stakeholders and it seems that the analysts have been too hasty to predict
about the opulence of computers in rural areas.
When looking at ICTs, one has to view them as enabling tools that are to be used for
the people and not necessarily in the hands of people. It would be still a long time from
now that we may start thinking of providing a computer and Internet in every household.
Right now the priority should be to provide the benefit of Internet to the ones who need it
but don’t know where and how to get it.
A more aggressive strategy is required for liberalizing and delicensing the telecom
sector so that the small players can also participate and stimulate the market forces. And
a more robust and transparent regulator should be in place to solve the issues between
the government and the players as well as to facilitate the market growth. In that respect
TRAI has been doing a better job.
66
For more on this article, see Economic Times (14/04/2005), ‘India will outshine China in 15 years’.
55
Finally, as one of the interviewees said that India is full of projects and experiments in
the area of technology for the poor but there is no policy in place per se. In the long run
there need to be a government policy that deals with the infrastructure and accessibility
issues in rural areas, but in the short run these projects that are examined in this paper
run by various organizations, though, in an unorganized manner, with many problems
related to financial sustainability, information sharing, networking, infrastructure etc., still
hold a hopeful scenario based upon the successful replication throughout the country.
56
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