Providing Rural Phone Service Profitably in Poor Countries

In poor countries, most people -- in all, half the world's population -- still live in rural areas. Village phone service is rare, Internet service non-existent, and poverty widespread. In Bangladesh, for example, 90 percent of the country's 68,000 villages have no phone service of any kind and average annual income is less than $200 per person. It might not sound like a promising commercial telecom market, but appearances can be deceiving.

Since 1997, GrameenPhone has provided commercial cellular services in Bangladesh, operating primarily in urban areas. A subsidiary, working with the microfinance organization Grameen Bank, provides service in rural areas via local entrepreneurs, usually women. Each local entrepreneur owns and operates a cellular phone that typically serves an entire village. Villagers pay for phone calls in cash, by the minute. Grameen Bank helps by loaning the entrepreneurs money to buy the phone and collecting payments from them for phone usage on behalf of GrameenPhone. 

These shared-access village phones are very profitable, generating revenues that now average $1,200 per year per phone, more than three times as much as the company's urban phones. Each phone serves an average of nearly 70 customers -- in effect, tapping the buying power of a whole village. Per phone revenues have more than doubled in two years of service, and some phones in larger villages generate revenues in excess of $12,000 per year, in one of the world's poorest countries. A study by the Canadian International Development Agency shows that the village phones also have a big social impact. For villagers, access to phones often substitutes for a trip to Bangladesh's capital, Dhaka, that could take days and cost many times as much as the call. Villagers also use phones to find out current market prices for their crops, arrange remittances from family members working abroad, and obtain urgent medical help. 

If it works in Bangladesh, how about in rural areas elsewhere? If phone and perhaps Internet services can be provided profitably to rural communities through shared access, then opening up such regions to commercial telecom competition may be an effective way of stimulating rural development and providing significant social and economic benefits to impoverished areas. The business opportunity also seems large enough to stimulate private investment: becoming the phone company and the Internet service provider for nearly half of humanity.