Global Economics

Asia: Telecom's Rural Revolution


Local providers are working with giants Alcatel-Lucent, Intel, and others to bring service to the region's most remote areas

In the remote agricultural province of Lao Cai in Vietnam a few shared community phones are being replaced with high-speed WiMAX broadband connections and VoIP telephony for thousands of residents. In rural Cambodia, a new 3G/UMTS mobile network is being deployed for delivery of high-bandwidth wireless services, including live streaming of mobile TV channels. In rural India, farmers can monitor crop prices and place orders for goods electronically by visiting broadband "community centers" that are taking root around the country.

All are examples of a "rural revolution" enveloping less-developed countries in Asia and around the world, made possible by advanced telecommunications technologies such as Wi-Fi, WiMAX and 3G. This revolution is bringing high-speed Internet access and next-generation telephony to millions of users who previously had little or no access to even the most basic telecoms services. Local service providers, working in partnership with large multinational telecoms companies such as Alcatel-Lucent, Intel, Nokia-Siemens and others, are stretching the boundaries of the telecom grid to encompass even the most distant and remote areas. Often, they are also working with national and regional government officials who view the new services as a way to bolster economic development and empower local citizens.

"There's a big digital divide developing between cities and rural areas in many countries," explains Nathan Burley, an analyst with Ovum based in Melbourne. "Governments are becoming aware of this digital divide, and they are trying to connect the unconnected." At the same time, Burley adds, many operators face customer market saturation in urban areas, so they are pushing out into rural regions to capitalize on new growth opportunities. Large telecoms vendors face much the same challenge as developed markets mature. And there are plenty of places to turn for economic development funds, especially for projects in remote rural regions.

"We are starting to see increases in [rural telecom] deployments," says Phillip Marshall, VP of enabling technologies for Yankee Group. "In the lion's share of cases, the primary drivers are political initiatives to bridge the digital divide, municipal and local government initiatives, and support from economic development funds like the World Bank and USTDA (the US Trade and Development Agency)."

VIETNAM TAKES LEAD

The project in Lao Cai illustrates the trends of joint cooperation between vendors, operators and governments to tap new opportunities for economic development.

Intel Corp., the US Agency for International Development (USAID) and Vietnam Data Communications, a local service provider that is part of Vietnam Post and Telecom Group (VNPT), joined together last year to deploy WiMAX in the rural agricultural province of 600,000 comprised of 25 different ethnic groups. Lao Cai is located in a mountainous area of northern Vietnam, abutting the Chinese border. There had been some limited fixed-line telephone service and DSL broadband available within the city of Lao Cai, but even these services disappeared for the bulk of the population when they stepped outside the immediate town borders.

"This is the first WiMAX deployment in Vietnam," says Bernard Mazer, the project's architect and manager for USAID. "We wanted to show this was a viable technology. We also wanted to pick a rural spot; Hanoi and Ho Chi Minh City already have a telecom infrastructure established. We looked at different areas, but another important factor here is that we have some good, local political support."

The area is one of Vietnam's poorest regions, with current per capita GDP of $330. The hope is that traditional industries such as agriculture and forestry can use the new telecoms infrastructure to grow their business and perhaps attract more cross-border trade with China. Another hope is to attract foreign investment to the region.

Mazer says the installation has brought both broadband and VoIP service to the area. Technology used includes an Alvarion BreezeMAX base station and some 20 WiMAX fixed-access customer-premises equipment (CPE) devices scattered around the city. The BreezeMAX antenna was installed 70 meters above the ground on a local tower, with the base station connected to a fiber-optic backhaul service.

The VoIP server is hosted from a site in Hanoi. A VoIP gateway and session border controller also were installed in the province. CPEs or WiMAX modems were installed in key spots around the city, such as the local post office, health care centers, secondary schools, hotels and a farm on the town's outskirts. At each site, a SIP-compatible VoIP phone was linked to the CPE unit, providing high-speed broadband and telephone service with minimal cost and complexity.

Mazer says a second-phase WiMAX rollout has just begun in a nearby mountainous area that lacks any fiber backhaul. In that case, the WiMAX base station is being linked to an IPStar satellite backhaul service to provide Internet and VoIP connectivity. The second phase is to be completed in October

The Lao Cai deployment was undertaken as part of USAID'S Last Mile Initiative, a global program launched in 2004 to bring modern communications infrastructure to farmers and small businesses in rural areas that have been bypassed by major telecom networks. Similar programs are also underway in Sri Lanka, Guatemala, Peru, Ethiopia, Nigeria and Macedonia.

Intel has its own rural development effort, the World Ahead Program, a $1 billion, four-year attempt to improve technology access to developing communities. The company has worked with governments in more than 50 countries under the program, which includes a strong WiMAX component. Intel has also established four research and design centers in Shanghai, Mumbai, Cairo and Sao Paolo to help the effort.

The company says it has helped promote more than 250 WiMAX trials worldwide as part of the effort to extend low-cost broadband access to undeveloped areas. Intel supplies the silicon chips used in such WiMAX deployments.

Intel is hardly the only company to actively engage bringing the telecom rural revolution to less-developed areas in an effort to grow local businesses. "Nokia-Siemens Networks believes that by 2015, there will be five billion people, or 70% of the population, connected via devices that will connect them to other people and to content and to services from the Internet," says Dick Helmstaedt, strategy manager, broadband access for Nokia-Siemens. "The developing world is key to that growth."

Helmstaedt adds that as much as 50% of those newly connected will come from China and India. "If you think about the innovation, particularly in wireless as many of these areas will deploy wireless networks, it's really quite exciting," he says. In June Nokia-Siemens struck a deal with India's BSNL to modernize the carrier's network. BSNL began a mass rollout of DSL technology in rural areas earlier this year.

SLEEPING GIANTS

India and China may well be the sleeping giants of the rural revolution. "In major emerging markets like China and India, rural broadband services are virtually non-existent," notes Marshall of the Yankee Group. "The business case to date has typically made it extremely challenging for these services to be offered."

However, Marshall adds that new cost structures are emerging that could enable rural broadband "in areas where there are already anchor communications services such as mobile. The greatest challenges we see include a lack of available transmission and backhaul capability for economically delivering the broadband services and availability of low-cost devices and premises equipment."

Rural deployments in China have also been challenging. Ovum estimates that broadband growth is slowing dramatically in the country, challenging operators to find new sources of growth. In a recent report, analyst Kevin Lee noted that the slowdown "will entrench a digital divide because broadband is approaching maturity in the big cities, while the rural markets remain almost untapped."

Another complication is that the lack of a clear policy by China for spectrum allocation and use has largely blocked the wireless broadband option. And the research firm adds another barrier is being created by an ongoing conflict between the country's two powerful regulatory agencies. As a result, Ovum suggests carriers expand their networks in smaller cities to maintain their growth in broadband connections.

Such challenges, however, haven't prevented vendors from moving into these markets, especially India. Alcatel-Lucent, for example joined with Indian service provider ITC in 2004 to establish a rural deployment called e-Choupal that involved installing computers with Internet access in rural farming villages. "Choupal" means "gathering place" in Hindi, and officials say the service serves as both a social center to exchange information and an e-commerce hub for local farmers.

The aim is to re-engineer the procurement process for soy, tobacco, wheat, shrimp and other crops in rural India. The result, however, also created an efficient, profitable e-commerce platform for IPTV that is also a low-cost fulfillment system for rural agricultural communities. ITC estimates that in its first year, the e-Choupal program saved approximately $280,000 on just a single crop, soya. The program has now expanded to tens of thousands of villages in India.

Paul Ross, director of corporate communications for Alcatel-Lucent's APAC region, says the program exemplifies how the company works with service providers in undeveloped regions of India to establish broadband community centers at locations throughout the country. Each center contains telephones, modems and PCs, and provides communities with voice telephone service, Internet access and links to electronic government, business, educational and agricultural services, including market prices.

"This kind of center is on the rise in different forms," says Ross, adding that is an example of how vendors and carriers are rolling out new and different services in under-served areas to cope with market saturation in urban regions.

"These are grassroots initiatives. You can definitely see there is a pent-up demand in these rural areas for telecom services," Ross adds.

Alcatel-Lucent engages in such implementations under its Broadband for All program in 130 countries. Southeast Asia is an especially active region.

ccording to its annual global broadband user survey released in June, Southeast Asia is emerging as one of the fastest-growing markets for broadband services and offers a largely untapped user base for service providers to grow their businesses. The survey found that broadband is at the early-adopter stage in Southeast Asia, compared to more developed markets like Japan and South Korea.

Those results dovetail with a recent Ovum research showing that broadband penetration of the entire population in countries such as Indonesia, Malaysia, Thailand, Vietnam and the Philippines is between zero and 3%, compared to 30% in Korea and 21% in Japan.

Like other vendors, Alcatel-Lucent has been active in the region, deploying a GSM/EDGE network for Indonesian service provider Indosat and providing a 3G/UMTS mobile network to CamGSM (Mobitel), a leading service provider in Cambodia. The Cambodia contract will allow integration of video telephony and streaming applications, including live streaming of mobile TV channels, into CamGSM's existing network.

Such advanced telecoms services likely will become much more common in remote regions as the rural revolution takes root during the next few years, potentially transforming the lives of millions of users.

"Internet access and voice communications will be the primary services," notes Yankee Group's Marshall. "People in the rural markets will benefit from having availability to information, the ability to communicate, which will have a positive impact on social and economic conditions for these regions."

RURAL AREAS LEAD MOBILE GROWTH

Developing countries account for more than half of mobile subscriber growth worldwide, with the top 10 adding around 285 million new subscribers in 2006 alone.

Mobile growth in emerging markets has accompanied economic expansion, deregulation and the need for communications infrastructure where there is a shortage of fixed-line connections. With every 10% increase in mobile phone penetration, a nation's GDP increases by an estimated 0.6%.

India and China are far ahead of the pack in terms of numbers of mobile connections: India added more than 73 million new mobile customers last year while China added nearly 68 million. Pakistan is third with 29 million additions.

US GIRDS FOR RURAL BATTLE

The US has lagged behind in rural broadband penetration for years, and a variety of technologies such as WiMAX, satellite and even broadband over power lines (BPL) are competing for mind and market share. But what makes the US battle even more intriguing than most is that the money already exists for deployment. The government has collected a tax for years from every telephone user to subsidize rural telephone needs. The tax now stands at 11.7% and the universal services fund (USF) it supports, controlled by the FCC, now tops $7 billion.

Some US carriers are turning impatient. In June, regional service provider Qwest, which services 14 states in the west, petitioned the FCC to shift $500 million from the fund to support high-speed rural Internet projects. In a media briefing, one Qwest official called the USF program a well-intentioned effort that has gone astray.

Qwest wants state regulators to identify areas that need high-speed access and award grants to low bidders who pledge to build the facilities. The company also wants the FCC to reform collection of the tax from a per-user levy to one per household, which could cut the annual amount collected to $500 million from $1 billion.

It's unlikely there will be any action taken soon. The USF has generated controversy for years, and many wireless carriers are against reducing the subsidy.


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