25303 NOTE NUMBER 251 P U B L I C P O L I C Y F O R T H E privatesector JANUARY 2003 Sustainable Telecenters Björn Wellenius Björn Wellenius A Guide for Government Policy (wellenius@attglobal.net) is an independent Fo r at l e a s t a d e c a d e g ove r n m e n t s a n d n o n p ro f i t o rg a n i z at i o n s , o f t e n consultant on s u p p o r t e d by b i l at e r a l a i d , h ave ex p e r i m e n t e d w i t h t e l e c e n t e r s a s a telecommunications policy, regulation, and m e a n s t o ex t e n d a c c e s s t o c o m p u t e r s , t h e I n t e r n e t , a n d o t h e r T H E W O R L D B A N K G R O U P PRIVATE SECTOR AND INFRASTRUCTURE NETWORK economics. Until 1999 he i n f o r m at i o n a n d c o m m u n i c at i o n s e r v i c e s t o r u r a l a n d l ow - i n c o m e was the World Bank’s telecommunications u r b a n a re a s o f d eve l o p i n g c o u n t r i e s . R e s u l t s h ave b e e n m i xe d . T h i s adviser. One of his areas N o t e p ro p o s e s a g u i d e f o r g ove r n m e n t p o l i c y o n t e l e c e n t e r s c o n c e i ve d of interest is the private provision of rural a s p r i vat e b u s i n e s s e s — t h o u g h w i t h d eve l o p m e n t f u n c t i o n s — t h at a re information and c o m m e rc i a l l y s u s t a i n a bl e b eyo n d i n i t i a l p u bl i c s u p p o r t . communication services in competitive environments, Telecenters provide public access to information els, social and economic links, other infrastruc- using markets to and communication services and technologies ture, and familiarity with modern technology— determine and allocate any subsidies. The author that are expected to contribute to development. all probably correlated with income—are needed is grateful to David Widespread rollout of telecenters, however, can for demand to build up and for telecenters to con- Townsend, Pedro Hepp, be achieved only by mobilizing private sector tribute to development. Peter Smith, Robert entrepreneurship and investment. Yet relying Schware, and Charles solely on the profit drive of private providers is What is a telecenter? Kenny, who commented unlikely to fully achieve the desired development Ranging in size from one-person microbusi- on drafts of this Note. outcomes. Extending access to the 3 billion peo- nesses to enterprises or cooperatives employing Anupama Dokeniya ple living in the developing world’s rural areas 10 or more people, telecenters can be adapted contributed background requires some initiative and help from the gov- to a variety of local needs and circumstances research. ernment. But not all telecenters are worth sup- and evolve from one form to another in porting. Limited government resources should response to changes in technology, business go to projects that yield high returns to the econ- practice, and the economy. The simplest tele- omy as a whole. Telecenters may not be able to centers have one or two telephone lines, a per- achieve commercial sustainability beyond initial sonal computer with dial-up Internet access, public support in localities with very low incomes, software for several functions, and a combined with low population densities, or without access to printer, copier, scanner, and fax machine. good-quality, competitively priced telecommuni- Examples include privately run telephone cations infrastructure. Minimum education lev- shops (Senegal), a telephone company’s public S U S T A I N A B L E T E L E C E N T E R S A GUIDE FOR GOVERNMENT POLICY calling offices (Argentina), add-ons to fast food tainment centers, using multimedia services restaurants (McDonald’s in Brazil and Israel), and production to bring people together. and cybercafés set up by small entrepreneurs in An essential element is access to content rel- countries at all income levels. evant to the local community. Language may be One step up the size range, standard telecen- critical: the local dialect, not the official lan- ters are small businesses with more equipment, guage, may be the one used in day-to-day activ- more sophisticated technology, dedicated ities and transactions. Content is costly to Internet and facsimile lines, and a meeting develop and difficult to keep current. To give room. At the high end of the range, multipur- users a tool to produce their own material, 2 pose community telecenters provide more national or regional content platforms could space, staff, and equipment to support a wide be developed and made available locally. range of uses, perhaps including facilities for Besides allowing access to information, tele- local radio broadcasting, distance education and centers also need to facilitate contact with the health services, government information, and organizations that provide it. Portals serving electronic commerce. Large telecenters may many telecenters can help build networks of eventually extend connections to homes and communities and provide commercially viable businesses in the neighborhood or to smaller solutions for developing and maintaining for- communities nearby. mal content. What services do telecenters provide? How are telecenters best managed? Telecenters provide the public with access to One key to the success of a telecenter is to have it and training on basic information and commu- run by a local entrepreneur who has a substantial nication technologies at affordable prices. stake in that success and is capable of developing These services are typically delivered using a and implementing a business plan. Local entre- common network infrastructure and software preneurs are best able to identify and respond to platform, such as the public telephone network, the needs of clients, investigate the market, and and may be subsidized for development pur- promote services to a broad population. But all poses. They allow people to: this requires that they be fully in charge of the ▪ Make and receive telephone calls and send business, with the authority to determine the best and receive faxes and voice mail. location for the telecenter; to decide on the mix, ▪ Use the Internet for email and Web browsing. quality, and prices of services; to manage revenues ▪ Use computers for a range of applications, and expenses; and to address problems with such as word processing, spreadsheets, resources within their reach. small-business tools, CD-ROM searches, and Telecenters also benefit from being part of a printing. larger organization that contributes scale and ▪ Use technical support services, such as print- network economies. A network of telecenters ing, photocopying, and desktop publishing. under a single management can share experi- ▪ Become familiar with the technology ence and best practices and provide quality stan- through classes, tutorials, and other dards, start-up support, an operating manual, assistance. recruitment and training guidelines, name Telecenters also offer more elaborate ser- branding, and standard payment vehicles (such vices on a fully commercial basis, charging fees as prepaid cards). A franchising company can to cover the costs of local add-ons to the basic develop infrastructure networks and undertake network infrastructure and software platform bulk procurement of equipment and of soft- and additional human resources. Public or ware licenses, while leaving delivering services quasi-public agencies may become important and dealing with clients to the local franchisees. commercial clients or partners of telecenters A large organization can also provide technical that can carry out some of the agencies’ func- assistance to communities and entrepreneurs tions more cost-effectively. Telecenters might preparing proposals for telecenters and during also serve as community cultural and enter- investment and start-up. But launching a telecenter is not entirely a services must cover operation and maintenance, private sector endeavor. The initial impetus may additions and replacements of equipment, and, come from local officials, volunteers, educators, ideally, part of the initial investment. or other community activists. Local govern- The commercial viability of telecenters ments may help plan, implement, and some- depends on connection to data transmission times fund a telecenter project. But local capabilities of reasonable quality, especially governments, as well as grassroots and non- Internet access and connectivity to government governmental organizations, are generally less information networks. Telecenters in many effective than private businesses or entrepre- developing countries have been plagued by 3 neurs in owning and managing telecenters. delays in getting hooked up to the public telecommunications network, limited band- What does it take to be commercially width, poor reliability, and high costs for viable? Internet connections because of a lack of local To be sustainable, telecenters must become points of presence. Compounding these prob- commercially viable fairly quickly. Telecenters lems are prices well above cost for domestic and that cannot finance themselves in the long run international calls and leased circuits— become a drain on public resources and are common under monopoly regimes and early in continuously at risk of failure. And telecenters the transition to competition. not subject to market disciplines lack incentives Effective use of the Internet beyond email to perform well and the ability to face competi- requires transmission speeds of at least 34 kilobits tion when it arrives. per second—and preferably much higher. A case Setting up a standard or multimedia tele- may be made for connecting telecenters immedi- center in a secure locality within reach of the ately to broadband networks allowing multimedia public telecommunications network typically services (including television, for which there is costs US$8,000–18,000, with annual operating often pent-up market demand), then adding and maintenance costs of US$12,000–21,000. voice and Internet access at marginal cost. Smaller installations may have much lower Telecenters flourish in competitive environ- investment and running costs, especially if they ments. Competition among telecenters (if sus- are housed in existing facilities, such as stores, tained by sufficient demand) and with schools, post offices, or community centers. alternative providers can lead to low prices and Telecenters equipped to provide more sophisti- to business strategies that encourage use. cated services, such as videoconferencing, soil Competition in prime locations drives small and water testing, and electrocardiograph and entrepreneurs to serve poorer communities. blood analysis, may cost much more. And competition among telecommunications Even poor people are willing to spend a sig- networks dramatically reduces the prices nificant part of their income on information charged to telecenter operators for data traffic and communication. In some cases telecenter and leased circuits. revenue comes mainly from the sale of com- puter and Internet time; in others, from tele- What is the role of government? phony, photocopying, and entertainment. Telecenters arguably should be run as busi- Other potentially important sources of revenue nesses, which places the main responsibility are providing domestic and international tele- squarely on the private sector. But since a pri- phone service and retailing phone cards. mary aim is to contribute to development, there Providing multiple services at a single site may are some functions that the government must strengthen overall commercial viability, but each perform. The government’s initiative may be service must pay its own way, expanding as justi- needed to launch the process, establish the fied by demand and revenue. If users pay less than legal and institutional framework, start up pilot the full cost of basic services, government subsi- projects, and develop national or regional sup- dies may be needed to make these services com- port. As the idea proves itself, the government mercially viable. Eventually revenues from all may be able to reduce its role to a support func- S U S T A I N A B L E T E L E C E N T E R S A GUIDE FOR GOVERNMENT POLICY tion and public reporting and regulatory price distortions (such as long-distance call responsibilities. Eventually the support func- charges above costs) or inefficiencies resulting tion could be jointly owned and managed by from lack of competition (such as the high price participating telecenters, perhaps through an of leased circuits). Thus they typically can be jus- industry association. tified only after a country has undertaken mar- In the early stages of developing a telecenter ket reforms in telecommunications. viewpoint program the government could: Subsidies are best determined and allocated ▪ Publicize the program. through the market. Competition for the subsi- ▪ Remove regulatory and administrative obsta- is an open forum to dies should be open to any business model that encourage dissemination of cles to market entry and competition. meets service and other requirements. The public policy innovations for ▪ Specify the minimum service requirements amount of subsidy needed will vary considerably private sector–led and to meet development needs. among telecenters, depending on service market-based solutions for ▪ Assess the eligibility of telecenter proposals requirements, market size, and other factors. development. The views and business plans for public support. Telecenters within easy reach of the public published are those of the ▪ Facilitate operators’ access to information, telecommunications network have reportedly authors and should not be technology, and infrastructure. required one-time subsidies ranging from attributed to the World ▪ Provide or channel financial support for US$9,000 for a single-computer facility to about Bank or any other affiliated investment and start-up if needed. US$30,000 for a telecenter with 3–12 computers. organizations. Nor do any of ▪ Provide training and support services for the conclusions represent operators. Conclusion official policy of the World ▪ Monitor and evaluate results and dissemi- All these propositions for government policy Bank or of its Executive nate best practices. are consistent with international experience, Directors or the countries Public subsidies may be justified if the ser- but they have not yet been fully tested as a pack- they represent. vices required for economic efficiency or social age. Moreover, they deal primarily with the sup- equity reasons would not be profitable at the ply of services, giving less attention to factors To order additional copies prescribed prices and other terms. This situa- that influence the development of demand and contact Suzanne Smith, tion may arise for several reasons. Scale thus affect sustainability. The propositions may managing editor, Room I9-009, economies constitute barriers to technological not apply to facilities that are part of other pro- The World Bank, innovation that must be overcome if the new grams, such as those providing public access to 1818 H Street, NW, services are to get a fair chance in the market. the Internet in schools, libraries, or health cen- Washington, DC 20433. Measures needed to reach large numbers of ters, which are subject to different requirements low-income people (such as promotion cam- for performance and sustainability. Telephone: paigns and training) have high social value but 001 202 458 7281 also high costs that private businesses are unpre- Fax: pared to bear alone. Telecenters can help build References 001 202 522 3480 social capital in the community, but since the Oestmann, Sonja, and Andrew C. Dymond. 2001. Email: benefits do not accrue directly to the telecen- “Telecenters: Experiences, Lessons and Trends.� In Colin ssmith7@worldbank.org ters’ users and operators, they do not translate Latchem and David Walker, eds., Telecenters: Case Studies into a willingness to pay. and Key Issues. Vancouver: Commonwealth of Learning. Copyedited and produced by Subsidies should generally be limited to part Proenza, Francisco J. 2001. “Telecenter Sustainability: Communications of the investment and start-up costs. Once ini- Myths and Opportunities.� Journal of Development Development Inc. tial obstacles are overcome, information and Communication 12(2). communication services are expected to Townsend, David N., Daniel Espitia G., Sonia N. Jorge, Printed on recycled paper become sustainable businesses. After all, recur- and Christopher B. Lee. 2001. “Telecenters and rent costs of rural telephone, electricity, and Telecommunications Development: Options and water services are subsidized only in exceptional Strategies.� David N. Townsend & Associates, Cambridge, cases, and there appears to be no reason to treat Mass. [http://www.dntownsend.com/dnta/Telectr1.htm]. access to advanced communication and infor- mation technology any differently. Moreover, subsidies should not be used to compensate for This Note is available online: www.worldbank.org/viewpoint/