Co-Author: Hannah SKelly
5 min read
- In order for the benefits of the digital economy to scale and impact, internet connectivity is key
- To tap into traditionally hard-to-reach markets, entrepreneurs and businesses are entering the space with alternative solutions.
- Join the AVPN Conference 2018 session, Investing in Digital Inclusion and Last Mile Connectivity in Asia, to explore growing opportunities for innovation and investment in last-mile connectivity enterprises.
The digital economy is booming
The digital economy is poised for unprecedented growth in Asia Pacific and a special session at AVPN 2018, titled “Investing in Digital Inclusion and Last Mile Connectivity in Asia,” will focus on opportunities for social impact investors to play an outsized role in spurring digitally-enabled social development. A string of recent reports have made headlines across the region highlighting the increasing relevance and value of the booming digital economy, with one International Data Corporation (IDC) study forecasting that a whopping 60 percent of Asia Pacific’s GDP will come from digital products and services as soon as 2021, compared to 6 percent in the past year. This acceleration is not limited to a select few economies – a multitude of countries, including Bangladesh, China, India, Indonesia, Malaysia, the Philippines and Vietnam, are considered among their peers, prime for growth and highly attractive for investors.
Along with the rest of the world, social impact investors in the region have taken notice. A review of the April 2018 AVPN deal share report shows that over 60 percent of the value of the $160 million in deals shared went towards investing in enterprises providing digital services and products. As the enthusiasm for these services grows, it remains important to keep a key point in mind: among the digital services and products that we see trending in news deals daily – digital financial services, pay-as-you-go solar, tailored market information services for farmers – every single one of them ‘rides-on-top’ of mobile networks and internet services critical for their success. To be profitable and to achieve social impact, they require connectivity infrastructure to be in place and the end users to be connected to the digital world.
To take advantage of digitally enabled services, internet connectivity is key
In order for the benefits of the digital economy to scale and impact all levels of society, everyone needs to have the ability to connect. Yet, this is far from the case. Across the region, approximately 1 billion people (28 percent of the population) lack even basic 3G mobile cellular service (which allows for data communications). An additional 2.9 billion people have access to 3G and/or 4G/LTE services but remain offline for a number of reasons, one of which is affordability. These unconnected individuals are primarily those that impact investing, blended finance facilities and donors alike are aiming to reach: rural and/or low-income populations that are often disproportionately illiterate and female.
Photo Credit: WiFi Interactive Network (WIN)
Innovative last-mile connectivity enterprises are offering solutions
Mobile network operators face significant challenges and few incentives to expand their coverage to these unconnected populations – the network economics simply don’t allow for profit in these sparsely populated and price-sensitive markets under the business-as-usual operator model. Operators must commit huge one-time costs to deploy new towers and even steeper ongoing costs to maintain them in areas that are often off the electricity grid and the beaten path of technicians. Potential revenue from a relatively small and price-sensitive user base simply does not offset these high costs. Densely populated urban centers with lower costs and millions of data guzzling users with smartphones are typically more attractive for both the operators and their shareholders.
Tapping into these traditionally hard-to-reach markets will continue to pose a challenge for operators, but offers a set of opportunities for new entrepreneurs and businesses entering the space with alternative solutions. A growing number of innovative connectivity enterprises and community networks are seizing the chance to meet the demand for access among unconnected rural and low-income urban consumer segments and drive inclusive growth. These enterprises are taking advantage of improved technologies, in particular solar, and locally trained technicians and agents to drastically reduce the costs of deploying and maintaining cell towers and hotspots. Many are also developing additional revenue streams through value-added services, from digital payments to phone charging, and a diverse set of sponsorships, including advertisers, content providers and fast-moving consumer goods brands.
AirJaldi is one example of a last-mile connectivity enterprise operating a wireless internet service and network of wi-fi hotspots in India. Through the use of wi-fi links and relays as well as locally trained staff for deployment and operations, the company has been able to offer affordable prices for their incredibly loyal rural and low-income users. AirJaldi now has over 250,000 users, a 250 percent increase in the last two years. Their business model demonstrates a case in which a new rural network can be profitable within 12-18 months. We’ve captured many more examples of enterprises deploying solutions in the region or looking to enter the market in our recently completed database of last-mile connectivity enterprises. This initial landscaping revealed over 50 enterprises and 50 current investors channeling capital into last-mile connectivity.
Through the U.S. Agency for International Development’s (USAID) Last Mile Connectivity Initiative, we’re working to increase the market information available on last-mile connectivity and drive investment into sustainable and market-driven solutions. At the 2018 AVPN conference in Singapore, we encourage you to join us on Monday, June 4 at 2:30pm in a special session, Investing in Digital Inclusion and Last Mile Connectivity in Asia, focused on exploring the growing opportunities for innovation and investment in last-mile connectivity enterprises.