Community Microtelcos

Philanthropy is always vulnerable to the loss of interest and funding. Both can be maintained if the investments, while enhancing the status of the poor, also generate returns for the investors. Making a profit by selling services to the Bottom of the Pyramid is possible but it requires technological innovation and new business models.

While the privatization of state-owned enterprises and increased market competition has led to tremendous growth in Peru’s telecommunication sector there still remain many rural and marginal areas without access to these services as the growth has occurred mainly in the urban areas. Given the low population density in the rural areas – 15.8 inh./km2 compared to 231.8 inhabitants/km2 in Lima - ) this project will use wireless telecommunications to be the unique and effective way to connect low density isolated communities and deliver microfinancial services. Research showed that wireless telephony in rural areas is low; fewer than 6% of rural households have access, compared with almost 60% in Lima. Internet access from rural households is practically nil at 0.14%, compared with 16% in Lima. 29% of households in Lima have computers, compared to 0.7% of rural households. A better access to telecommunications will help bridge this digital divide, opening up new possibilities to deliver basic and low cost public and microfinancial services to families in rural regions.

The project will in particular employ an extremely economical open source technology (Meraki, CUWiN) which support all Web2.0 services and the Wireless Commons License (WCL) which describes the terms and conditions of use.

This project will provide 1,000 rural families (per year) in the Andes of Peru with access to mobile telecommunications and microfinancial services which have been developed and implemented to suit the specific requirements of the community to be served. Bringing easy and affordable access to telecommunications services to rural families will them to better their businesses, increase access to education and health services, and provide a forum for interaction with government services. It will also enhance the overall local competitiveness and in turn stimulates economic growth and substantive social benefits.

A sustainable business model for the project is proposed in which the most important premise of the model is that the community will own the network. A local organization will represent the community and be the legal owner. This legal owner will delegate the administration of the network to an administrator or local operator; the administrator will manage the network as a micro-enterprise. In a two-tiered approach to the betterment of rural communities in Peru, while we will provide these services in its provision we will empower the youth in the community, giving them responsibilities for managing and operating the network. We are planning to form a partnership with local microfinances institutions to deliver microfinancial services. The first year operating budget is $120,000; we hope to receive $60,000 from FITEL (National Fund of Investment in Rural Telecommunications) through the program for rural projects and raise the remaining $60,000 from local partners, local operators and international foundations. Revenue for the following years will be generated from selling services to rural communities. Our model ensures capital-efficiency as the code we will use to set up these networks is open source software developed by our local team with regards to the specific needs of rural communities to ensure that the model is scaleable and replicable.

Financial Assumptions of the System

• Customer Pricing: $6/month shared internet access and VoIP

• Size of system: 400 customers, can handle up to 1000

• Total CAPEX $120,000

• System breakeven, including recuperation of CAPEX: 36 months.

• Operating expense breakeven: 10 month, 250 customers.

Communications equipment

Transmission and switching equipment $10,000

Backbone link $20,000

Terminal equipment $40,000

Import duties (43%) $30,100

Installation $5,000

Total communications equipment $105,100

Operations centre

Communications towers $7,000

Commercial installations $4,000

Information system, billing and customer service $3,900

Total operations centre $14,900

Total CAPEX $120,000

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