Grameen Telecom's Village Phone Programme: A Multi-Media Case Study

Conducted by the TeleCommons Development Group (TDG), this 104-page study was commissioned by the Strategic Planning & Policy Division of the Asia Branch Poverty Reduction Project, Canadian International Development Agency (CIDA). Its purpose is to investigate the impact of GrameenPhone, a commercial operation providing cellular services to rural and urban areas of Bangladesh. GrameenPhone developed a pilot programme through the Grameen Bank and a subsidiary (Grameen Telecom) called the Village Phone (VP) programme. This programme involves providing micro-credit cellular phone service to women VP operators and users at large. Specifically, village women access micro-credit to acquire digital global system mobile (GSM) cellular phones and subsequently resell phone calls and phone services within their villages. The project currently involves 950 VPs providing telephone access to more than 65,000 people.

This evaluation examines the extent to which a private sector development (PSD) programme in the telecom sector can make a contribution to poverty reduction and rural social and economic development. It includes a detailed portrait of the VP programme, examines the VP programme's impact on poverty reduction, makes "a business case" for rural telecommunications, and offers a portrait of telecom for rural development. Its many appendices include links to related (online and print) resources and a telecommunications glossary, among other information.

Excerpts from the Executive Summary follow:

Key Findings

Impacts on poverty reduction:

• The Village Phone programme yields significant positive social and economic
  impacts, including relatively large consumer surplus and immeasurable quality of
  life benefits. The consumer surplus for a single phone call from a village to Dhaka,
  a call that replaces a physical trip to the city, ranges from 2.64% to 9.8% of mean
  monthly household income. The cost of a trip to the city ranges from 2 to 8 times
  the cost of a single phone call, meaning real savings for poor rural people of
  between 132 to 490 Taka ($2.70 to $10 USD) for individual calls.
• The main reasons Grameen Bank members reported for using the telephone are
  discussions of financial matters with family, including discussions of remittances
  (42%) and social calls to family and friends (44%), accounting for 86% of all
  calls. Bangladesh is a labour-exporting country with many rural villagers
  (predominantly men) working in the Gulf States. The Village Phone acts as a
  powerful instrument to reduce the risk involved in remittance transfers, and to assist
  villagers in obtaining accurate information about foreign currency exchange rates...
• Reducing the risk of remittance transfers from overseas workers has important
  micro-implications for rural households and villages. At the micro level, remittances
  tend to be used for daily household expenses such as food, clothing and health care....Remittance funds are also spent on capital items including building or improving housing, buying cattle or land, and buying consumer goods such as portable tape/CD players and televisions. Once subsistence needs are met, remittances tend to be used for 'productive investments,' or for savings.
• Social calls to family and friends frequently involve transfer of information about market prices, market trends and currency exchange rates, making the Village
  Phone an important tool for enabling household enterprises to take advantage of
  market information to increase profits and reduce productive expenses.
• The income that Village Phone operators derive from the Village Phone is about 24%
  of the household income on average - and in some cases it was as high as 40% of
  the household income - and Village Phone operators become socially and economically empowered.

Analysis of the business case, technical choices and regulatory context:

• Rural telephone service in Bangladesh is very profitable and, due to the existing
  regulatory environment, telecom operators are unable to meet the demand for
  services. Telephones in the Grameen Telecom Village Phone programme bring in 3
  times as much revenue as urban cellular phones (an average of $100/month
  versus $30/month)...
• The Village Phone programme appears to be the best available technical solution for rural universal access under current regulatory and commercial circumstances.
  The Village Phone programme is a technical and organizational solution to rural
  telecommunication access partly necessitated by a regulatory environment that is not
  conducive to advancing rural telecommunication infrastructure.
• GSM cell phone technology is a high-cost solution for universal access in rural
  areas. Limited cellular coverage of rural areas may only be viable under the
  current set of cumbersome regulatory practices....GSM cell phone technology also
  places much higher tariffs on rural phone users than would be the case for wireless
  local loop (WLL) technologies....As well, cellular phone technology is currently not a viable option for inexpensive email/Internet/data connectivity. WLL and other options
  can provide much better bandwidth and cost of service.

Gender analysis:

• The Village Phone programme raises, perhaps for the first time, the important issue of gender when considering goals of universal telecommunication access.
• The concept of "universal access" is not gender neutral. In the case of
  Bangladesh, the gender of the Village Phone operator and the physical
  placement of the phone within a gendered village context can either inhibit or
  improve women's access to phones. A woman's home provides a space that is
  acceptable for other village women to access. From the standpoint of revenue
  generation and profitability, it is important to ensure that the Village Phone is
  fully accessible to the entire village population...

Key replicable elements of the Village Phone programme:

• The Grameen Telecom experience in business planning leads us to suggest one
  potential solution for attracting telecom operators to serve rural areas: target unserved and under-served regions and provide support for acquisition of
  quality market appraisal knowledge and market data through market research in the field. Market research will help to prove the business case, attract investment capital, and reduce the effort required by investors and operators.
• The Grameen Telecom experience points to a potential solution for telecom operators facing the significant challenge of managing the last mile of rural telecom operations: link existing and successful micro-credit organizations with telecom operators (fixed line and/or wireless) to expand public call office (PCO) coverage in rural areas. Small loans to rural entrepreneurs (perhaps targeted to women and youth) can enable entrepreneurs to establish PCOs and provide a range of services including telephone, fax, email and even web, photocopying and computer word-processing services. A franchise programme of this sort would also establish consistency of service across a region that would, in turn, support local social and economic development."

Editor's Note: A video documentary (approx. 12 minutes) in support of this case study has been produced by TDG and is available here for online viewing, or may be purchased as a VHS tape.