Re: [GKD] A Crack in the SAT-3/SAFE Monopoly Pricing?

[Roland H. Alden]

On 4/19/05, Ken DiPietro wrote:

> It appears that the cartel is starting to fall apart. This could be
> excellent news for the spread of ICT and Telecommunications throughout
> Africa.

I would not get your hopes up too much. The "cartel" is still fully
intact. In this case NITEL, the PTT telephone company of Nigeria, is
still the only "gate keeper" to SAT3 bandwidth in Nigeria. What the
article states is that NITEL has a customer, and that customer is going
to resell bandwidth, and is going to charge "less" for the product.

Let's look beneath the surface here.

This arrangement is nothing more than a simple wholesale/retail business
model. NITEL wants to "sell in bulk" and have a small list of customers
that pay high prices for interconnection to SAT3 infrastructure. This
lowers NITEL's costs because it has fewer customers to deal with, both
technically and from a credit risk perspective. It is these customers
who in turn will sell to, support, and try to get paid by, the many
"retail" customers in Nigeria, such as Internet cafes, schools,
government agencies, hotels, etc. Each of these customers is a challenge
to serve, in part because the rest of the NITEL network is such a
useless mess everyone must lay their own fiber, and/or build their own
wireless networks to distribute bandwidth. NITEL can't do any of this
well because it is a bankrupt and dysfunctional branch of the
government.

NITEL's strategy is in my opinion a reasonable response to the realities
of the situation. But it does not create any kind of competitive market
for SAT3 bandwidth in Nigeria since all buyers of that bandwidth still
have to go through NITEL, or go through somebody who goes through NITEL,
etc. etc.

In reality, "direct" access to SAT3 allows a technically capable party
to obtain a circuit of at least DS3 in size (45mb/sec) to Portugal. In
Portugal the owner of said SAT3 (sub)circuit has to then either buy
bandwidth in Portugal, or more likely, buy yet another DS3 to somewhere
else like London or New York, where one then buys internet bandwidth to
make the end-to-end circuit useful. When dealing with a pipe like SAT3
the smallest quantity that makes any sense is no less than a DS3, so all
this takes a fair amount of money and credit exposure. Also, the set up
for these circuits is still a very manual process. No telecom company
wants to sell, configure, and operate a DS3 for one or two months, and
then tear it all down when the customer fails to pay the bill. It's a
very different type of business relationship than selling pre-paid phone
cards in denominations of $1 or $5.

NITEL does not have enough equipment to sell 100's, much less 1000's, of
DS1 sized circuits all over Nigeria to sell SAT3 bandwidth, and there is
a fairly short list of potential customers that are both technically
capable and credit worthy enough to operate their own connection via
SAT3 through to the Internet. Note that there are other barriers to
consider. For example, Nigerian currency, the Naira, is not accepted in
Portugal or the US or London; so arrangements with vendors there would
require not only a lot of money, but a lot of money in liquid
international currencies. If the Nigerian telecom company is setup to
sell telecom services to Nigerians, and is paid mostly in Naira, then
this becomes a long term issue and in the startup phases of any
entrepreneurial telecom company can be a very high hurdle.

So NITEL is doing something that makes sense under the circumstances.
What they are doing concedes the realities of their own situation, their
ability to deliver, and the capacity of the majority of their potential
customers.

However, if you ARE a credit worthy and technically capable telecom
company in Nigeria then this "news" is of little interest. You are still
forced to buy SAT3 bandwidth from NITEL (or someone who is buying it
from NITEL...). If you buy "Internet" bandwidth from NITEL then you do
not have to make your own arrangements in Portugal, and you can pay in
Naira. But, this puts you at further risk of NITEL technical failure,
and you not only are dealing with a monopoly vendor for the raw circuit;
you are dealing with a monopoly vendor for the Internet bandwidth as
well.

This is a very different situation than if you were to have an ownership
position in SAT3 that gave you equal status with NITEL, and using these
rights you obtained a circuit which ran through to London, or New York,
or perhaps both. In those cities you could arrange for your SAT3 circuit
to terminate in rack space you would rent in a collocation (exchange)
facility where there would be a free and highly competitive market for
all kinds of telecom services. You might simply buy Internet bandwidth
in bulk, but you could also have separate sub-circuits that connected
directly to certain "peers" or just to different telecom companies for
fault tolerance, or optimization of their network footprint. You could
buy telephone call "minutes" at very competitive prices as we

Re: [GKD] A Nigerian Farmer Using ICTs to Seek Information

[Roland H. Alden]

Here is what I would suggest.

He should identify a dealer/trader from which he can buy the tractor. I
gather he has not yet saved enough or a tractor is simply not yet
available. What I suggest is that he essentially entrust a downpayment
to a trustworthy intermediary pending the ability to close the final
deal.

A bank might also cooperate. Obviously this somewhat depends on how far
he is from a centre of business but he probably must travel that far to
get a good deal on a tractor anyway. If he has to make two or three
trips to safely escrow money and properly shop for the tractor it will,
in the end, be worth it.

He might also want to consider renting the tractor (or plowing for
nearby farmers) as an additional source of revenue to support the
purchase.

The important thing is to move the accumulated money outside his
immediate social millieu into some "escrow" sufficiently complicated to
his relatives such that they will consider the money gone and not pester
him. Of course, until the tractor materializes he will probably still
have hell to pay, but that might be manageable. :)


On 1/14/05, Pamela McLean wrote:

> A Nigerian farmer has asked for advice (because he knows I can get
> information from the Internet and he is now in a position to exchange
> emails with me).

..snip...

> Does anyone know how to help him to use his savings to start to purchase
> a tractor and improve his farm, as he has been trained to do?





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Re: [GKD-DOTCOM] Can Technology and a Business Approach Make Globalization Work for the Poor?

[Roland H. Alden]

Dear Colleagues,

It would be good if we could agree on a few details.

1. The "poor" seem to cover a range of peoples. Some are so desperately
poor that any kind of direct ownership, or even use, of ICT is
impossible.

2. Simply because "ownership or direct use" of ICT is not relevant for a
certain class of poor does not mean that the introduction of such
technology into the proximate context of those people will not be
helpful to their situation. It is not necessary for every citizen to
become a doctor in order for the general state of health to rise with
the introduction of some doctors and medical infrastructure.

3. If we want to discuss the *very* poor then ICT may not be very
important; it may offer little in the way of short term improvements
under any scenario.

4. If we want to discuss technology and business then we may be limited
to discussing options which cannot reach the poorest people directly. We
may be forced to deal with scenarios that necessarily involve the "less
poor" or even the "elite" in any particular context.

5. Simply because #4 may be somewhat inevitable due to cost and skill
shortages does not mean that ICT can't have a dramatic impact on the
circumstances of the poor. For example, the introduction of
telecommunications has clearly placed pressure on authoritarian
political regimes. This is less true when the ownership and control of
telecom is entirely in the hands of the state but it is clearly not
necessary for a society to reach the point where everyone can afford a
cell phone before liberalized telecom unleashes a torrential array of
forces; most of which generate positive long term benefits for the poor.

Outliers may muddy the statistics but they provide role models and more.
Sure India is an outlier is many dimensions; it has enough poor people
to rank low on lots of surveys; it has enough millionaire Ph.D.'s living
in California to rank high on others. Big deal. It is a great role
model. Nigerians are incredibly annoyed that India sells more software
than they do and they can't quite figure out how that happened. South
Africa may be so rich and powerful relative to most of Sub-Saharan
Africa that it is hard to see how lessons from there can be applied
elsewhere until you think globally and notice that there are already
companies in SA that have "out grown" it and are seeking business
opportunity in neighboring countries. Sure mega-centers "attract"
capital and brainpower but they also aggregate resources as well, until
a point where they inevitably "overflow" and seek opportunity elsewhere.

One of the barriers to development across Sub-Saharan Africa is the
inability of the individual countries to coordinate, so that from a
business perspective the entire region can be addressed as a single
economic opportunity. I think it is no surprise that satellite
television and cellular networks are two businesses that have managed to
grow pan-African footprints; because they can to some degree escape
regulation, and they support business processes which are largely
uninterested in "artificial" boundaries. Other industries will require
more supportive governments before the good that they can do can migrate
more easily. When we can get to a world with less artificial isolation
then the poor will be less isolated as well.




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Re: [GKD-DOTCOM] Can Technology and a Business Approach Make Globalization Work for the Poor?

[Roland H. Alden]

or the most
part, these ex-patriots are not working at jobs digging ditches or
lifting boxes; they are the intellectual elite of their generation who
are selling skills and brainpower in markets more receptive than their
home countries. Why? There are two problems; one is making the home
country a more hospitable environment for this intellectual output to be
put to good use. This may be, long term, a very hard problem in the
poorest places. The other, allowing the intellectual work output of
these people to be made available to the rest of the world without
requiring immigration; this is a problem that telecommunications can
solve, at least in part.

If telecommunications allows productive work to be located "anywhere"
then might it not be possible for some of it to be relocated to places
that could most benefit from the introduction of a viable,
self-sustaining economic engine? I realize there is a "chicken and egg"
problem here but there are some "industries" which might have pioneering
qualities. Take education for example. The "natural resources" required
to create a great educational institution are somewhat understood. They
include 1) a supportive cultural community for the faculty, 2) students,
and 3) access to all the knowledge in the world. Today #3 is
inexpensive, thanks to technology, and also "culture" is becoming
increasingly digitized to the point where the Internet itself is
creating new culture and enabling many "sub-" cultures to thrive.
Students who are young are themselves rather portable; absent other
barriers like war and disease that might make it impossible to locate a
globally important university in certain parts of the world. So, by this
example we can see there are things which technology makes possible, and
things for which technology has few answers.

I would like to close by suggesting that each situation requires a
realistic assessment of natural resources and strategic opportunities.
These are the lessons of business and they can be applied to the
business development of nation-states. In today's world there are few
business opportunities which cannot be enhanced by the clever use of
technology, but at the same time technology no longer grants a strategic
advantage to many enterprises because it is freely available to all (at
some cost of course). So it is almost impossible for technology in and
of itself to form the core of strategy.


Roland H. Alden
United States


Roland H. Alden <http://www.ralden.com> has worked in the
computer/telecom industry for over twenty-five years; with some limited
experience developing telecom in emerging countries.





This DOT-COM Discussion is funded by USAID's dot-ORG Cooperative
Agreement with AED, in partnership with World Resources Institute's
Digital Dividend Project, and hosted by GKD.
http://www.dot-com-alliance.org and http://www.digitaldividend.org
provide more information.
To post a message, send it to: <[EMAIL PROTECTED]>
To subscribe or unsubscribe, send a message to:
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