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Monday, March 30, 2020

Wealth And Lifestyle

Can a Silicon Valley Moonshot Finally Bridge the Digital Divide?

Steve Schmida

Those of us in rich-world economies and urban centers take ubiquitous Internet access for granted, like running water or electricity.  Yet, according to the UN, more than 3.5 billion people lack access to the Internet. Most of the unconnected live in rural areas where it is difficult and expensive to build and maintain fixed line or mobile network infrastructure.  To highlight the importance of the so-called digital divide, the UN has set a goal of universal Internet access as part of its Sustainable Development Goals (SDGs).

For more than a decade, Silicon Valley has been dreaming up ways to beam Internet from the sky directly to people – skipping over traditional fixed line and mobile networks – with the goal of connecting every single person on Earth with cheap, ubiquitous broadband.  Google tried floating weather balloons in the stratosphere that could beam Internet to areas below. Meanwhile Facebook spent a small fortune trying to develop drones that would soar above rural Africa and beam Internet to the unconnected. Unfortunately, these ‘moonshots’ ran into a wide range of technical, regulatory and business model issues and the companies have largely abandoned them.

More recently, a new generation of companies has been taking a different approach to bringing Internet to the unconnected: low-earth orbit (LEO) satellite constellations.  SpaceX, Amazon and OneWeb are just three of the companies racing to build out constellations of thousands of small satellites that can deliver broadband to anyone, anywhere on the planet.  Indeed, according to its website, OneWeb “envision[s] a world where all people have access and hold the power to create opportunity for themselves and others wherever they are.” By using large numbers of inexpensive satellites orbiting relatively close to Earth, these constellations have the potential to overcome some of the challenges of traditional telecommunications satellites, which are extremely expensive and suffer from latency issues (delays in transmission) due to their higher orbits, many thousands of miles above Earth.  SpaceX has already successfully launched dozens of satellites and expects to launch limited Star Link service later this year in North America. OneWeb has also launched its first satellites and Amazon’s Project Kuiper is expected to begin launching its constellation later in 2020.

While these companies should be applauded for overcoming some truly massive technological hurdles in getting their constellations off the ground, they face two major challenges in achieving their dream of delivering broadband to the unconnected in developing countries:

In-Country Distribution Channel. Just because a constellation overhead is beaming Internet, does not mean you can pick it up on your smartphone- the technology does not (yet) support direct-to handheld device use.  Instead, these companies will probably initially focus on the enterprise, maritime and residential markets by offering some form of Customer Premise Equipment (CPE) – a modem/terminal to access the network.  That’s easy enough in rich economies such as North America and Europe, where retail distribution channels are well developed and capable of reaching rural consumers. However, in developing countries, particularly in rural Africa and Asia, retail distribution channels are essentially non-existent.  What’s more, the price of the CPE may make it difficult for rural customers to afford. According to SpaceX’s Elon Musk, the Star Link CPE will cost between $200-$300 – well out of reach of many rural consumers and institutions in developing countries.

Policy and Regulatory Hurdles.  Perhaps the biggest hurdle is the policy and regulatory environment as these companies will be required to get approvals from telecommunications regulators in each and every country in which they want to operate.  Not only will this be time-consuming, the companies will likely face significant opposition from incumbent mobile network operators and ISPs who will see the constellations as a major disruptive threat to their existing business.  In addition, in many developing countries, telecommunications are a major source of government revenue, so countries may see these well-financed constellation operators as an opportunity to fill government coffers. If the level of licensing fees or taxation is too high, the customer price for broadband may not be affordable and, therefore, accessible.

These twin challenges are significant and, if they are not overcome, the constellation operators may simply ignore these markets and, instead, focus solely on large, rich economy markets in Europe, North America and Asia.  This would be a real tragedy for both the operators, who will lose out on a truly massive business opportunity and for developing countries, whose rural communities will be increasingly cut off from the economic benefits that affordable Internet provides.

If the LEO satellite constellations are really going to fulfill the dream of universal Internet access for all, they cannot solely rely on their cutting-edge technology and deep pocketed investors. Constellation operators will need to collaborate with host governments, international donor agencies and NGOs as well as local entrepreneurs to help overcome these distribution and regulatory challenges.  Specifically, here are three ways the constellation operators can overcome these hurdles to deliver Internet to everyone:

  1. The constellation operators should partner with international donor agencies, such as USAID, the Gates Foundation and the World Bank, to work with local entrepreneurs to develop and scale business models that help address the distribution challenge in rural parts of Africa, Asia and Latin America.  For example, in Kenya, USAID, OPIC and Microsoft helped incubate Mawingu, a successful rural Wireless Internet Service Provider (WISP), which developed a new business model for reaching thousands of Kenyans with highly affordable wireless Internet.  The partners’ investments helped de-risk the business model, opening the door for private investors to provide capital to scale the model. By partnering with donor agencies and local entrepreneurs, the constellation operators can better reach rural consumers in Africa, Asia and Latin America much more quickly and with less risk.
  2. Development finance institutions, such as the US Development Finance Corp, the International Finance Corporation and others, can help the constellation operators develop affordable financing options to make their CPE affordable to low-income consumers and institutions in developing countries.  Here, SpaceX and the other operators should follow the example of m-KOPA, a successful Kenyan off-grid solar power company, that uses a pay-as-you-go (PAYGO) model to make solar panels affordable for rural consumers.  Here, the development finance institutions can provide lower cost capital and first-loss provisions to help bring down the financing costs for PAYGO for broadband access for rural consumers.
  3. The constellation operators should partner with NGOs and donor agencies to ensure a transparent and responsive regulatory review process in developing countries.  Civil society and donor agencies can bring legitimacy and regulatory expertise that can help ensure that the regulatory approval process is fair and focused on optimizing the benefits for rural consumers.  The Alliance for Affordable Internet, which brings industry players such as Google and Cisco together with development organizations, such as the World Bank, USAID and Mercy Corps, offers the constellation operators a model for cross-sector collaboration focused on improving the regulatory environment around Internet affordability in developing countries.

Fulfilling Silicon Valley’s dream of bringing the entire world online requires more than cutting edge technology.  To bridge the digital divide, these new satellite constellation operators will need to develop and test new business models and approaches. By collaborating with NGOs, entrepreneurs, donor agencies and governments in the developing world, the constellation operators can overcome these challenges and truly deliver on their promise to bring everyone into the Internet age.


Written by Steve Schmida.
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Steve Schmida
Based in the city of Burlington, Vermont, Steve Schmida is the founder and Chief Innovation Officer of Resonance, a corporate sustainability and global development consultancy. He is the author of the forthcoming book, Partner with Purpose: Solving 21st century business problems through collaboration, published by Rivertowns Books. Steve Schmida is an opinion columnist for the CEOWORLD magazine. Follow him on LinkedIn.
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