ICTworks

Mobile and internet services have the power to transform lives, offering life-enhancing financial, health, and many other services, as well as the simple ability to express oneself to one’s family and community.

Yet millions of people in emerging markets lack access to these services, and even those who have access often do not adopt services, because of constraints arising from limited affordability, perceived value, and ability to use the services. The resulting access and adoption gaps threaten to exacerbate existing economic and social inequities facing low-income, rural communities in emerging markets, particularly among women and girls.

The Market Alone Will Not Deliver

The market alone will not close the access gap. Over time, industry investment in mobile and fixed networks in the developing world may increase and extend existing network coverage, but will likely not expand to connect marginalized populations in unconnected and under-connected geographies because of the high capital and operational costs and low profit potential.

This market frontier, or the point at which economic incentives to expand and deliver connectivity fall to zero, will for the foreseeable future leave hundreds of millions of people unconnected as they reside beyond the point at which current service delivery, via the dominant model of network operators, makes economic sense.

The Digital Impact Alliance (DIAL) commissioned Closing the Access Gap: Innovation to Accelerate Universal Internet Adoption to understand potential business model and technology innovations for accelerating access and adoption of mobile phones and the internet at the emerging markets frontier.

Innovation in Key

This is where innovation has a role to play. A growing set of non-traditional service providers are testing new business models and technologies to reach consumers who otherwise might reside beyond the market frontier. Thus far, few, if any, of these innovations have yet to reach the type of scale that are substantially shifting the access and adoption equations. These diverse efforts, however, are important as industry, governments, and the development community explore how to close this gap.

To address the access gap, academics, technologists, and entrepreneurs, from major Silicon Valley firms to start-ups in rural Mexico, are testing new business models and technologies to extend the reach and affordability of mobile and internet beyond what the current mobile footprints and business models support.

Though these models all address the basic issue of internet access and adoption, they approach the challenge in quite different ways, providing a variety of potential solutions that may or may not be appropriate for a given market. A review of some recent and ongoing efforts provides both a framework to help decision makers consider where innovation can best address gaps in their specific contexts, as well as some lessons and opportunities for action across the ecosystem.

Three main conclusions:

1. A portfolio of diverse, innovative access solutions is required to meet unique market contexts. A range of innovative models are beginning to serve communities at the base of the economic pyramid. It is unlikely that a single “silver bullet” will emerge to close the access gap for billions of people across dozens of markets. Each model offers features that are appropriate in specific markets, but no single innovation will apply in every context.

Market dynamics, geographic conditions, regulatory constraints, and community characteristics all play a role in the potential success of different business models and the applicability of different technologies. To enable this portfolio to emerge, governments, donors, industry and investors all have a role to play in supporting greater innovation and experimentation to identify and accelerate scale-up of sustainable solutions.

2. An active community of innovators is implementing solutions, but many require risk capital to fully explore alternative business models. The business case for last-mile innovations for the most marginalized populations is still to be determined given the high costs for deployment and currently low profit potential. To help support entrepreneurs innovating for the last mile, risk capital is needed to help offset immediate infrastructure costs but must be carefully structured to avoid dependency.

Although industry will remain the chief source of investment in the sector, governments, bilateral donors, and impact investors have key roles to play in supporting innovation. Governments, donors, industry, and investors can all play roles with greater support through appropriate financing and risk capital, which supports testing of new business models and technologies.

3. Greater collaboration and knowledge sharing across the community, within bounds of market competitiveness, can play a role in accelerating innovation. Both innovators and investors alike require more actionable market intelligence (for example on end users, geographic characteristics, existing infrastructure, and regulatory constraints) in order to tailor different market models.

The type of market data commonly used to base investment decisions in mature markets is more expensive and difficult to obtain in low-resource environments. Most innovators, particularly smaller actors, struggle to navigate regulatory, technical, and financial challenges on their own, as well as to understand and foster the demand-side drivers needed to drive low income end user adoption. Both innovators and investors alike are hungry for better knowledge and more data and what works for different models. Greater government and donor investment to support research and knowledge sharing can help address these gaps and uncover these data.

Implications for Action

To realize the potential growth and adoption of innovation in this sector, a range of market participants all have roles to play. In addition to creating constructive enabling environments to expand traditional network connectivity in their countries, policymakers can consider how their policies and regulations encourage innovation, as well as provide risk capital in the form of grants or short-term subsidies to enable small companies or social enterprises to test the viability of potentially game-changing access innovations.

Access innovations are blossoming in policy environments that foster competition, provide flexible and streamlined licensing, and are open to trials and experimentation.

Innovators, including start-ups and forward-looking traditional operators, can learn from prior telephony and internet expansion efforts where history demonstrates that simply building infrastructure is not enough; thoughtful distribution that improves affordability and strengthens the incentives and ability of low-income end users to adopt service also is required to support economically sustainable models.

Bilateral and multilateral donors and other investors have an opportunity to accelerate adoption by providing risk capital to enable promising, early-stage innovations.

Market-based finance will be the key driver of sustainable, large-scale connectivity, but many potentially interesting models are at risk of being lost to the ‘valley of death’ between proof-of-concept and positive cash flow. Access advocates—comprising the growing set of global alliances, advocacy groups, academics, donors, NGOs, and corporate policy shops—can enhance their voices and effectiveness through stronger coordination.

Finally, given the magnitude and complexity of the challenge, governments, innovators, donors, and other investors, as well as access advocates, may want to consider a more coordinated approach to testing the viability of these innovations, including greater investment in testing such models, and more structured approaches to undertaking and sharing data and insights.

By establishing clear definitions of success, identifying areas of respective comparative advantage, harmonizing research agendas, and improving knowledge sharing, these groups can help accelerate sustainable access for and adoption by the underserved.