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Grameen Telecom's Village Phone


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-----Original Message-----

From: Don Richardson [mailto:drichard@UOGUELPH.CA]
Sent: Tuesday, March 21, 2000 8:37 AM
Subject: Grameen Telecom's Village Phone - case study released

Grameen Telecom's Village Phone - Case Study:


We have just released our case study of Grameen Telecom's Village Phone initiative in Bangladesh: The case study contains in-depth analysis of the operation of the Village Phone initiative, its impact on poverty reduction, the business case for rural telecommunications in Bangladesh, and analysis of gender contexts and phone use. The report also contains an extensive bibliography with hyper-text links to key documents and reports, including an earlier research report on the Village Phone initiative by Prof. Abdul Bayes. The report is accompanied by on-line video including an interview with Muhammad Yunus, Managing Director of the Grameen Bank.

This study was commissioned by the Strategic Planning & Policy Division of the Asia Branch Poverty Reduction Project, Canadian International Development Agency, as a case study amongst many undertaken as part of the Asia Branch Poverty Reduction Project, to investigate the impact of the GrameenPhone and Grameen Telecom provision of micro-credit cellular phone service on poverty reduction and the socio-economic situation of women Village Phone operators and users at large.

Grameen Telecom's Village Phone pilot project currently involves 950 Village Phones providing telephone access to more than 65,000 people. Village women access micro-credit to acquire digital GSM cellular phones and subsequently re-sell phone calls and phone services within their villages. Grameen Telecom staff have announced that when its programme is complete, 40,000 Village Phone operators will be employed for a combined net income of $24 million USD per annum.

Key findings:

1) The Village Phone programme appears to be the best available technical solution for rural universal access under current regulatory and commercial circumstances. The Village Phone programme is a technical and organizational solution to rural telecommunication access partly necessitated by a regulatory environment that is not conducive to advancing rural telecommunication infrastructure.

2) The concept of "universal access" is not gender neutral. In the case of Bangladesh, the gender of the Village Phone operator and the physical placement of the phone within a gendered village context can either inhibit or improve women's access to phones. A woman's home provides a space that is acceptable for other village women to access. From the standpoint of revenue generation and profitability, it is important to ensure that the Village Phone is fully accessible to the entire village population: if 50% of the user base faces obstacles to phone use, then a significant revenue stream is lost.

3) The Village Phone acts as a powerful instrument to reduce the risk involved in remittance transfers from overseas workers and family members working in Dhaka City, and to assist villagers in obtaining accurate information about foreign currency exchange rates. Transferring cash from a Gulf State to a rural village in Bangladesh is fraught with risks; remittances are thus a key factor in demand for telephone use. Reducing the risk of remittance transfers from overseas workers has important micro-implications for rural households and villages. At the micro level, remittances tend to be used for daily household expenses such as food, clothing and health care. Remittances are thus an important factor in meeting household subsistence needs, and can make up a significant portion of household income. Once subsistence needs are met, remittances tend to be used for "productive investments," or for savings.

4) Social calls to family and friends frequently involve transfer of information about market prices, market trends and currency exchange rates, making the Village Phone an important tool for enabling household enterprises to take advantage of market information to increase profits and reduce productive expenses.

5) Rural telephone service in Bangladesh is very profitable and, due to the existing regulatory environment (lack of interconnection being the biggest barrier), telecom operators are unable to meet the demand for services. Telephones in the Grameen Telecom Village Phone programme bring in 3 times as much revenue as urban cellular phones (an average of $100/month versus $30/month). One competing telecom operator reports having revenue from 12,000 urban cellular lines equal its revenue from 1,500 rural PCO lines.

6) GSM cell phone technology is a high-cost solution for universal access in rural areas. Limited cellular coverage of rural areas may only be viable under the current set of cumbersome regulatory practices - once the regulatory environment improves, cellular phone technology may not be the most viable and efficient means of providing universal service. GSM cell phone technology also places much higher tariffs on rural phone users than would be the case for wireless local loop (WLL) technologies. Without regulatory improvements, cellular technology is a practical solution. As well, cellular phone technology is currently not a viable option for inexpensive email/Internet/data connectivity. WLL and other options can provide much better bandwidth and cost of service.

Key replicable elements:

1) The Grameen Telecom experience in business planning leads us to suggest one potential solution for attracting telecom operators to serve rural areas: target un-served and under-served regions and provide support for acquisition of quality market appraisal knowledge and market data through market research in the field. Market research will help to prove the business case, attract investment capital, and reduce the effort required by investors and operators.

2) The Grameen Telecom experience points to a potential solution for telecom operators facing the significant challenge of managing the last mile of rural telecom operations: link existing and successful micro-credit organizations with telecom operators (fixed line and/or wireless) to expand public call office (PCO) coverage in rural areas. Small loans to rural entrepreneurs (perhaps targeted to women and youth) can enable entrepreneurs to establish PCOs and provide a range of services including telephone, fax, email and even web, photocopying and computer word-processing services. A franchise programme of this sort would also establish consistency of service across a region that would, in turn, support local social and economic development.

Don Richardson

TeleCommons Development Group

512 Woolwich St., Suite 200

Guelph, Ontario, Canada N1H 3X7



Tel: 519-821-5787 x 241 Fax: 519-821-4868

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Last updated: March 22, 2000