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D. Linda Garcia and Neal R. Gorenflo
Foundation for Rural Service
Washington, USA
Today, advances in networking technologies provide some unique opportunities for developing countries. To expand their trading opportunities, for example, developing countries can use high-speed broadband networks to link up to foreign markets. Similarly, low cost networked information technologies, such as the Internet, can be used to facilitate political and community participation. Equally important, social services - such as health care and education - can now be provided via satellite on a much more cost-effective basis.
Recognizing this potential, many developing countries are poised to make major investments in communication infrastructure in the hope of fostering economic development and facilitating the integration of their markets into a knowledge-based global economy. Foreign assistance organizations are similarly considering telecommunications-related programmes to reduce the costs and enhance the benefits of providing foreign aid.
The time is certainly ripe to make such investments. Networking technology costs are plummeting, while their performance is improving phenomenally. Soon these technologies will be essential, given an increasingly information-based and electronically networked global economy. Countries that take advantage of these technologies will gain competitive advantages, while countries that fail to recognize their potential, or who cannot gain access to these technologies, will probably experience decline. In developing countries, advanced communication technologies can play a special role. These technologies not only allow countries to leapfrog to a modern infrastructure; they can also serve as a catalyst, helping to promote social and economic behaviour more conducive to development.
Although recent advances in communication technologies hold promise to improve political and economic conditions in developing countries, the realization of this promise is far from certain. As history bears witness, the evolution of technologies is replete with disappointments and unintended consequences. Success will depend not only on assuring the supply and deployment of advanced networks; of equal, if not more, importance will be the social, economic, and political context in which these technologies are deployed. If, for example, developing countries do not have the requisite skills and expertise, they will be unable to employ networking technologies to their best advantage. Equally important, if developing country leaders use communication technologies solely to perpetuate their own control, or to reinforce unproductive practices, technology deployment may serve to make countries worse off. If networking technologies are to promote development, deployment strategies must be integrated with complementary social and economic policies that address the full range of development barriers.
Designing a technology diffusion strategy to meet social as well as economic criteria will, however, be particularly difficult in an increasingly deregulated, global economic environment in which the political and economic modus operandi is to let the market take it course. For developing countries, the task is especially troublesome. Lacking capital and deeply in debt, many countries must depend on foreign investment for their telecommunications infrastructure development. Although such investment will surely be forthcoming, its provision will be based almost exclusively on market criteria. Thus, developing countries will need to fine tune their strategies, focusing on specific market failures and socio-economic contexts, in order to create appropriate economic incentives to ensure that technology deployment and diffusion is consistent with their broader development goals.
The experience of the rural telephone cooperatives in the United States provides an example of one type of strategy that might be pursued. These cooperatives were highly successful in developing innovative ways to provide affordable telephone services to the many rural communities in the United States that were unserved by the marketplace. Building upon, and reinforcing, the strengths of their own communities, they played a critical role not only in promoting the universal deployment of communication technologies and services, but also their widespread use in support of economic and community development.
Although countries differ considerably in terms of their social, economic and political contexts, the rural cooperative model has a universal appeal. In fact, this model has proved to be so versatile that it continues to serve today as the basis for providing rural Internet access in many United States communities. Drawing on this experience, this paper identifies and discusses some of the lessons that might well be taken into account when devising telecom related development strategies for developing countries today.
The need for a comprehensive approach focusing on rural communities
Networked information technologies can have far-reaching consequences. They not only affect relationships of time and space; they also help to structure social and economic organization as well as values. Thus, if networked information technologies are to serve developing country development needs, it is not enough to have timely access. Equally if not more important, these technologies must be designed for the task at hand, and deployed and diffused in a manner that supports and reinforces development goals.
Telecom strategies that support and reinforce comprehensive, holistic development approaches, and that focus on the most remote and poorest rural communities, are likely to have especially high pay-off in this regard. It is in rural communities that the barriers to development are most pronounced, with problems in one area typically spilling over and feeding on those in others (Hoff et al., 1993). The result is a vicious circle that spirals downward. To reverse this pattern requires a concerted community effort which addresses all these structural problems, at one and the same time. Only by adopting such a multifaceted approach will the solution be mutually reinforcing as well.
Community-based actions can also help reinforce a spirit of cooperation and the development of a civil society, upon which democracy and economic development ultimately depend. At the same time, the mobilization of a community and/or community-based organizations can help encourage entrepreneurship and build local competence, thus providing a powerful counter-weight to authoritarian governments and other vested interests opposed to social and economic change. As described in the Human Development Report 1993:
Decentralizing governance - from capital cities to regions, towns and villages - can be one of the best means of promoting participation and efficiency. Local officials and politicians can be much more open to public scrutiny than national governments - and more accountable to the communities and individuals they are supposed to serve. And public projects - be they dams, roads, schools, or health programmes - all become more relevant and effective if the communities have a real say in their planning and implementation.
Telecommunications based development strategies are well suited to support such a decentralized, holistic approach. Because communications is essential to all activities, networks can be employed for multipurposes, giving rise to many positive synergies and externalities. As a result, such networks can often sustain themselves in a market economy, complementing rather than competing with networks being deployed under more competitive conditions in higher density areas. If, however, public support is required, it can be both comprehensive and cost-contained. Similarly, small-scale pilot projects can be undertaken and deployment strategies can be most easily adapted to, and brought into line with, actual social, economic, and political conditions. At the same time, telecommunications projects can be customized to build on and take advantage of "local knowledge." Tailoring diffusion strategies to meet local needs is critical, because all too often infrastructure projects in developing countries deteriorate over time given a failure to transfer technological expertise and promote local entrepreneurship (Hanna et al., 1995).
Bottom-up approaches to technology deployment are not without precedent. In the United States, for example, a rash of telephone cooperatives and mutual societies sprang up at the turn of the twentieth century to establish innovative ways of providing affordable service to many rural communities. As described below, these telephone cooperatives generated a number of benefits far above and beyond the actual deployment of technology itself.
The origins of the United States telephone cooperative model
In the United States, rural communities first entered the telephone business in 1894, when the original Bell patents expired. Shunned by urban-based telephone companies, rural residents took it upon themselves to provide their own phone service, relying almost exclusively on local capital and labour. In many local villages, doctors and other local professionals generally took the initiative, whereas in more remote areas it was the farmers who set up the first telephone lines (Hatfield, 1940).
Rural phone companies organized themselves in a wide variety of ways. Some purely private companies, which functioned as intercom systems, consisted of a single line, which was owned and shared by a small group of people. Others were organized on a profit-seeking basis as privately owned and commercial stock companies. Mutual stock companies, in contrast, were owned entirely by users; organized on an informal basis, their members paid a prorated share of the capital expenditures, maintenance, and improvement fees. Farmer lines were typically set up as purely private or mutually owned systems (Hatfield, 1940). Thus, for example, to join the Liberty Telephone Company in 1910, one had to pay an up-front fee of US$25; provide a telephone, a pole, and some labour; as well as pay a flat annual fee of US$7 for service (Meyer, 1912).
Rural phone companies were able to make do with limited resources by keeping their expenses to a minimum. Local farmers, for example, often built networks using their own materials and tools. When neces-sary, they purchased equipment from independent manufacturers or through mail order catalogues distributed by such firms as Sears and Roebuck and Montgomery Ward. Having built their own networks, these farmers had little trouble maintaining them. Problems did arise, however, when they resorted to low-quality equipment and poles, which sometimes included barbed wire and fence posts (Atwood, 1984). Overall, however, the model was a great success; by 1920, 39 percent of all farmers had obtained rudimentary service, and in some Midwestern states the number of telephones per person exceeded that in the East.
The rapid diffusion of telephone service in rural areas was a measure of its value to users. Because of their remote locations, rural communities derived great benefit from the telephone. People used the phone to summon doctors, visit one another, obtain weather reports, learn about sales in towns, and keep abreast of prices. Whereas the telegraph and mass media technologies had directed local community attention outward, most telephone conversations were local in nature. Between 1907 and 1927, for example, the average person's local point-to-point communication - letters, telegraphy, and telephony - increased primarily because of the growth in telephone use (Olsen, 1986). This reinforcement of social interaction at the local level played "a part in the preservation - and even the enhancement - of local patterns of attitude, habit and behaviour, and served as an inhibitor of the process of cultural levelling (Wiley and Rice, 1935).
Despite their initial successes and the important service benefits that they provided, the rural telephone companies' fates were inextricably linked to those of the communities that they served. With industrialization and the onset of the Great Depression, they were increasingly unable to sustain themselves. With such hard times, many local companies failed. Because telephone companies from outside were unwilling to serve these thin, unprofitable markets, service in rural communities continued to deteriorate. Thus, by 1940, only 25 percent of all farm residences had working telephones ( United States Census, 1949:2). This trend was only reversed when the Federal Government decided to adopt a less market oriented, and more community-based, approach to telephone deployment in rural areas.
To promote rural telephony, the Government turned to the Rural Electrification Administration (REA), which had already proven successful in bringing electricity to rural areas. The model advocated by the REA - the cooperative - was designed to address the problem of market failures in rural economies.
As in the case of the telephone, rural residents had greatly lagged behind urban residents in assessing electricity. By 1935, less than 12 percent of all America's farms were served. Private utilities were unwilling to provide service because demand seemed low and the technical problems high. At first, the Federal Government sought to assist and encourage private industry rather than displace it. When industry failed to respond, President Roosevelt created the REA, which bypassed municipal and private utilities with its own grass roots, cooperative networks (Garwood and Tuthill, 1963). Although REA's goals were ambitious - universal high-quality service, rapid deployment, and low rates - it was successful in achieving them. Few rural cooperatives defaulted. By 1940, 30 percent of all farmers had electricity; by 1950, 77 percent were served; and by 1959, 96 percent ( United States Department of Agriculture, 1989).
Rural electric cooperatives also played an important role in economic development. The cooperatives aggressively recruited and served industrial, commercial, and suburban customers, which had the effect of increasing the number of consumers each year, from 5 million in 1960 to 12 million in 1987. In so doing, they greatly facilitated the movement of industrial, commercial, and non-farm residence to rural areas ( United States Department of Agriculture, 1989).
Looking for a new mission in the late 1940s, REA welcomed the task of helping to deploy telephones to rural areas. With its authority expanded by Congress, the REA helped to achieve high quality, state-of-the-art telephone service in rural communities. To serve widely scattered residences, it pioneered technology to reduce the size of wire, its cost of installation, and its vulnerability to lightning and icing. REA borrowers also replaced party lines with one-party service. Rates were standardized and comprehensive "area" coverage was provided. Attesting to the programme's success, 94 percent of all farms were served by telephones in 1990 (United States Department of Agriculture, 1989: 7).
The contribution of the Rural Electrification Administration to rural America was by no means limited to technology deployment, however. By educating and working jointly with rural telephone companies, REA fostered technology transfer without which the local telephone systems could not have been upgraded and maintained. In addition, by channelling its support to local providers, who relied as much as possible on local resources, the REA helped to reinforce rural economies. This policy, in turn, had positive cumulative effects. Because the independent and cooperative telephone companies were socially embedded in their local communities, their managers and owners were able to quicken the flow of market information and pass on their technical skills and entrepreneurial expertise. Moreover, in cases where telephone providers were organized as cooperatives - which operated according to democratic principles - the process of managing and administering the provision of telephone services help to build the "social capital" that can greatly facilitate economic development in a rural environment.
Although the REA has clearly fulfilled many of the goals originally assigned to it, its ultimate value has not been diminished. Equally, if not more, important than any of its specific accomplishments is REA's successful technology diffusion model for overcoming market failures associated with rural economies. In fact, it is a model that many United States rural cooperative and independent telephone companies continue to emulate today in their efforts to provide Internet access to their communities. Just as the REA model served to inform the United States rural cooperatives, so the rural cooperatives' recent experiences in providing Internet service can provide some useful insights about encouraging network diffusion in developing countries today.
Rural cooperatives and the diffusion of internet services
Today, many rural communities in the United States are not much better situated for the diffusion of the Internet than they were a half a century ago for the diffusion of the telephone. Although differing from one another significantly, most rural towns and communities continue to suffer from poverty, sparse populations, thin markets, low levels of investment, out-migration, and underdeveloped human resources. To overcome the barriers to the diffusion of the Internet, many local telephone providers are pursuing the same cooperative, community-based strategies that served them well in the past. Central to their approach is a focus on community, the sharing of resources, and an emphasis on education and technology transfer.
The importance of community in the telecom cooperative diffusion strategy was recently evidenced, for example, in a 1996 survey of the membership of the National Telephone Cooperative Association (NTCA), conducted by the Foundation for Rural Service (FRS). Responding to question about why they had decided to offer Internet service, most NTCA members stressed community-related factors rather than market opportunities or concerns. Hardly any of them had a business plan when they set out. Nor, for the most part, did they expect to make a profit. And, even when business factors took on greater importance, rural service providers continued to show an exceptional concern for their communities.
As in the past, rural independent telephone companies and cooperatives rely on the support of one other to help them overcome the high cost and complexity entailed in providing rural Internet services. Thus, the vast majority is working through partnerships of one form or another. According to the Internet Task Force Survey, out of the 470 rural telephone companies surveyed, 43 percent are partnering with a local internet service provider; 36 percent with a neighbouring telephone system, 20 percent with a state wide association, 7 percent with a local computer business, and 4 percent with a neighbouring electric co-op. (Passage to the Internet: a report of the Internet Task Force Washington DC: The Internet Task Force, March 1997, p. 30). Consortia have been especially important. By participating in consortia, for example, many rural providers first learned about, and were inspired to provide, Internet service. Working together with their counterparts across the state, they were able to share not only the costs of equipment and the provisioning of services but also their experiences and expertise. Technology transfer took place as a result. Moreover, because consortia are jointly owned, such an arrangement allowed companies to rely on outside help without sacrificing their hands-on control.
Where there were no formal consortia, other kinds of joint service arrangements were generally established. Thus, to avoid the high capital investment for routers, servers, modems and transport, many rural providers have become secondary Internet service providers. Accordingly, under a variety of configurations, a rural telephone company or cooperative might purchase access from a primary provider and repackage it under its own name as a dial up service or a dedicated access service. In addition, it might outsource customer support and billing services, while doing all of the advertising and marketing itself.
Overcoming the problems of cost and complexity for themselves has been only half the battle for rural telecommunication providers; to promote the Internet, they have also had to help users cope with the many difficulties entailed in Internet usage. This level of support is not surprising, given the nature of the Internet. Unlike the telephone, which was relatively inexpensive and easy to use, the Internet is both costly and complex. Just to get started, a user must purchase, install, and learn how to use a computer - tasks that are by no means trivial. Furthermore, mastering the subject is not a one-time event: it is an on-going, and often frustrating, process that requires considerable "learning by doing" (Nelson, et al, 1995). Compounding the situation, much of this learning must take place long before the benefits of the Internet are clearly discernible to the user, so coaching and on-going support has been required.
Rural cooperative and independent telephone companies have also helped to educate users through their marketing efforts. Most provide some kind of user training especially to their local schools and libraries. Some have gone so far as to provide "house calls." In addition, a number of companies have provided periodic newsletters or other announcements reporting on Internet developments and what's new on the Web. By packaging Internet information with local news, local telephone companies have made it easier for their customers to relate to it.
This type of close relationship between local providers and customers is mutually reinforcing. Explaining his company's eagerness to work with community schools, one rural cooperative manager said, for example, that such collaboration provided an excellent way to gain the "networking" experience required to expand beyond providing mere "dial-up" access. Rural customers who have little experience dealing with large telecommunications and computer companies can also gain from "knowing" their community providers. Local providers not only are more knowledgeable about local needs, they are also more likely than distant providers to be "on-call," and accountable for the quality of their services.
The applicability of the cooperative model on a broader scale
The successful experience of the United States with cooperatives is by no means unique. Similar bottom-up community efforts emerged in a number of European countries, including Norway, Sweden, Finland and the Netherlands. Although organizational approaches varied depending on local circumstances and political culture, all these efforts served - as they did in the United States - to speed the deployment of telecommunication services to rural and remote areas.
The broad applicability of the cooperative model has typically been limited, however, by a number of factors. Given, for example, the rising cost and growing size and complexity of networks, it became increasingly difficult to piece together at the local level all of the necessary financial and human resources necessary to create a community-based telephone system. Network interdependencies and the need for interconnections also favoured centralized network ownership and administration, essentially foreclosing the option of a decentralized, cooperative approach.
In today's global, more privatized environment there are few such constraints, however. Taking advantage of the higher performance and enhanced variety of new communication technologies as well as the much greater flexibility that they afford new networking solutions can be employed to deploy communication technologies on an ad hoc and customized basis. In developed countries, large businesses were the first to pursue this strategy by creating private networks to meet their own, specialized needs. Given the possibility of technology leapfrogging, there is no reason why developing countries cannot employ a similar approach to serve users in small communities and rural areas.
Already, many countries are deploying less costly communication systems. In Asia-Pacific and Latin America, for example, countries are increasingly using very small aperture terminals (VSATs) to provide both public and private services. Such systems can support voice traffic, facsimile, and low-rate data transmission. Moreover, between four and 40 channels can be provided at each site, depending on a community's demographics (Satellite Communications, 1994; Politi, 1994). In other countries, such as India, fixed cellular radio systems are often used. These radio-based systems are easier to deploy than wireline services, and they have lower up-front investment costs, which can be shared among subscribers. They can, moreover, be deployed on a step-by-step basis, with new cells added in response to growing demand. Because radio technology is more reliable, such systems also have lower costs of maintenance (Westerveld and Prasad, 1994).
Despite these new possibilities, bottom up cooperative networks might - as was the case in the United States - require initial public support and assistance. However, the costs should not be excessive, especially if the technologies used could be deployed in stages as demand increased. Any support, moreover, would be temporary since experience suggests demand will probably cover costs over the long term. Even greater demand can be anticipated if rural residents participate in network development, familiarizing themselves with the opportunities afforded and customizing systems to meet their needs. In some cases, where appropriate technology is used, the local production of some network components can even be encouraged.
Given their potential to strengthen local communities, one problem that may arise in establishing bottom-up networks is a political one. If, for example, governments in developing countries continue to jealously guard their monopolies, community networks may lack the means for interconnection with the public switched network. This possibility may be less likely in the future, however, because of the trends towards liberalization and privatization. But if rural communities are faced with such situations, some mutually advantageous arrangements will need to be worked out. National providers might agree, for example, to franchise the development of portions of the network to rural communities. And, if necessary, agreements might be made to allow national providers or privatized monopolies to subsequently acquire rural networks in exchange for some type of equity ownership (Bruce, et al., 1994). Foreign aid policies might be designed to encourage such arrangements as well.
Global cooperation to promote cooperative networks
Reflecting the growing appreciation of the role communication technologies can play in fostering economic development, there are today a number of forces promoting its greater diffusion. These activities are both public and private, national and multinational, trade-related and aid related. As in the case of the cooperatives themselves, policies that are designed to leverage all these complementary forces are bound to be the most cost effective. Equally important, they will probably have a synergistic effect resulting from many positive externalities. Communication and economic development serve not only to foster one another, they also feed on themselves.
Alluding to these possibilities, American vice-president Gore, speaking to the International Telecommunications Union (ITU) World Development Conference held in Buenos Aires in March 1994, noted that the time was right "to bring all the communities of the world together via a planetary information network." Calling on legislators, regulators, and business executives to cooperate in building and operating this global information infrastructure (GII), he urged conference delegates to promote policies in support of private investment, competition, and flexible regulations promulgated by independent regulators (Telecommunications reports, 1994: 24).
Vice-president Gore's vision of bringing all of these forces together in support of a global information infrastructure is very apt. It comes at a time when all major donor countries - struggling with trade and budget deficit problems - are being called upon to reduce foreign aid. Such pressures are particularly intense in the United States, which accounts for one-fifth of all government foreign aid. Gore's announcement reflects, moreover, the growth of private investment in developing countries, which is now three times greater than the aid provided by foreign governments, totalling $179.9 billion in 1994 (The Washington Post, 1995).
Speaking to the United Nation's social summit held in Copenhagen, vice-president Gore re-emphasized the need to move beyond the present institutional framework for providing aid. Noting that foreign assistance has not always been used in accordance with the purposes for which it was provided, Gore posited that, within five years, nearly half of all aid provided by the United States Agency for International Development (USAID) would be channelled to organizations instead of developing country governments.
Other major donors agree that steps must be taken to assure that foreign assistance is used more effectively. Many have suggested that new institutional methods and criteria such as targeting, decentralization, appraisal, evaluation and monitoring may need to be adopted. The targeting of women in allocating assistance is considered to be essential by all (UNCTAD press release, 1995).
The prospect for developing new types of cooperative arrangements is especially promising in the case of telecommunications related aid. Most, if not all, of the potential participants have something to gain by working together. Not surprisingly, there are a growing number of telecommunications related cooperative efforts underway that, drawing on a broad range of institutional resources, seek to achieve complementary national, international, and private sector goals.
One such initiative, for example, is WorldTel, an innovative investment venture that was recently launched by the ITU. Organized entirely around business principles, WorldTel was set up to help businesses identify and execute profitable telecommunications investment opportunities in developing countries. Private sector support for the plan spans the globe, including companies such as AT&T, Ameritech, Sprint, Cable and Wireless, NEC, Nokia, Teleglobe, Telekom Malaysia, and Telstra. A number of banks have also expressed interest in WorldTel, which, initially capitalized at US$30 million to US$50 million, expects to realize real rates of return on equity of up to 25 percent or more. By safeguarding investor interests, WorldTel seeks to attract funds to high risk countries where telecommunications would otherwise be unlikely. If successful, these joint ventures will generate new markets, thus benefiting both developed and developing country nations alike. Prime clients would be those developing countries that have regulatory and business environments conducive to commercially viable partnerships. As venture partners, investors will contribute information and expertise as well as funds. Focusing on wireless technology, most projects will be carried out on a build, operate, and transfer basis (Telecom Highlights International, February 15, 1995, p. 6; Lynch, 1995: 3).
Non-profit organizations are similarly working with governments and businesses to promote development goals through networking. For example, the Caribbean/Latin American Action (CLAA), is setting up a Telecommunication Task Force intended to improve access to health care throughout Latin America and the Caribbean. The task force's first initiative is a pilot telemedicine project that will examine how better communication among rural health clinics and six hospitals in Costa Rica might improve rural health care. CLAA is also working with the United States Chamber of Commerce's Western Hemisphere Telecommunications Committee, the Pan American Health Organization, the Inter-American Telecommunications Commission, the World Bank, and other organizations to expand the pilot project into an "Americas HealthNet" that would connect rural health centres throughout the region to the Internet, thus allowing health professionals to access global medical databases and other health resources.
A number of projects supported by USAID are similarly designed to promote cooperation among public and private sector telecommunication stakeholders. With grants from USAID, for example, the National Telephone Cooperative Association (NTCA) has launched an international programme to promote the development of rural cooperatives in various countries, including Hungary, the Philippines, Poland, and South Africa.
There are a number of benefits to be gained from collaborative efforts such as these. By working with, and gaining the support of all relevant players, it is possible to circumvent many potential and unforeseen road blocks. With First World businesses and developing country government organizations and local institutions cooperating as partners in joint ventures, the potential for technology transfer and the sharing of business expertise is great. At the same time, the need for monitoring and evaluation is likely to be less relevant because projects will be held more accountable to the conventional business standards - the bottom line. Moreover, by substituting business personnel, researchers and members of non-profit organizations for traditional aid field workers, the costs of projects can be more easily contained.
By collaborating to promote information networking for development purposes, even greater gains can be made. Network deployment encourages social, economic, and political interactions, which in turn stimulate network development and diffusion. When networks are subsequently linked to other networks, the benefits grow proportionately.
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