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Electricity and the internet: two markets, one big opportunity

Anna Lerner's picture
The markets for rural energy access and internet connectivity are ripe for disruption – and increasingly, we’re seeing benefit from combining the offerings.
 
Traditionally, power and broadband industries have been dominated by large incumbent operators, often involving a state-owned enterprise. Today, new business models are emerging, breaking market barriers to jointly provide energy access and broadband connectivity to consumers.
 
As highlighted in the World Development Report 2016, access to internet has the potential to boost growth, expand economic opportunities, and improve service delivery. The digital economy is growing at 10% a year—significantly faster than the global economy as a whole. Growth in the digital economy is even higher in developing markets: 15 to 25% per year (Boston Consulting Group).
 
To make sure everyone benefits, coverage needs to be extended to the roughly four billion people that still lack access to the internet. In a testing phase, Facebook has experimented with flying drones and Google has released balloons to provide internet to remote populations.
 
But as cool as they might sound, these innovations do nothing for the one billion people who still live off the grid… and don’t have access to the electricity you need to use the internet in the first place! The findings of the Internet Inclusion Summit panel which the World Bank joined recently put this nicely: “without electricity, internet is only a black hole”.
 
That’s why efforts to expand electricity and broadband access should go hand in hand: close coordination between the energy and ICT sectors is probably one of the most efficient and sensible ways of making sure rural populations in low-income countries can reap the benefits of digital development. This thinking is also reflected in a new generation of disruptive telecom infrastructure projects.

The challenge? People who lack both electricity and internet are often overlooked by traditional operators because they are typically considered either too remote or too poor. Several smaller players are now stepping in to serve these neglected segments of the market and challenge the way internet and electricity are delivered.
 
The classification of these firms is often complex. Some see themselves as electricity service providers or innovative telecom companies, while others are best described as durable goods retailers or financial service firms. As diverse as they may be, these companies share a common inclination to do business differently and leverage technological innovation.
 
In rural Africa, some of these innovative service providers are working to increase wireless networks by combining solar panels with cell towers to provide internet connectivity. In the same vein, a Kenyan startup has developed shock-resistant WiFi access points that can be powered with small solar systems. Using a different model, a company in Sub-Saharan Africa plans to offer a new type of satellite-based wifi, a change in technology that reduces the electricity requirement. For remote communities, bundling a public wifi access point with a solar and battery mini-grid is another affordable option.
 
In addition to offering electricity in a new way, Distributed Energy Service Companies (DESCOs) have started bundling pay-as-you-go solar electricity and mobile or wifi services. For example, Fenix International and Lumos, have partnered with MTN, Africa’s largest mobile telecommunications company, to integrate mobile money systems and financial platforms that allow customers to rent-to-own solar home systems and pay for electricity through a mobile phone. With Lumos selling their systems at MTN kiosks as MTN services, the two industries combine customer experiences and after sales services. In the same spirit, some solar companies are starting to offer low-cost smart phones as part of their offering.
 
Beyond the obvious benefits, there are also many challenges when considering synergies between connectivity and power infrastructure.
 
One of them is competing policy objectives. In Niger, for instance, energy availability in rural areas is often lower than mobile connectivity, therefore energy and broadband providers may want to prioritize different areas when looking to expand their services. The Mobile for Utilities team at GSMA are playing an important role here, disseminating good practices, policy advice, and market analytics. A recent publication from USAID also offered valuable insights on how to remove market barriers for disruptive start-ups.
 
Better harmonization between internet providers and power companies will go a long way in addressing the rising demand for high-speed internet and reliable electricity. With support from the Digital Development Partnership, our team is working with ICT and energy experts across the World Bank Group to support these disruptive business models, including those that bundle energy and internet access.


The Digital Development Partnership (DDP) is a platform for digital innovation and development financing and brings public and private sector partners together to catalyze support to developing countries in the implementation of digital development strategies and plans.

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