Meaningful-Broadband-Indonesia

Meaningful Broadband: Indonesia

In 2019,  ten years after the activation of Meaningful Broadband – Indonesia, our new focus is all about financial innovation.  

In partnership with the National ICT Council (“Wantiknas”),  Digital Divide Institute (DDI) hopes to articulate  an economic model.   For the first time, we intend to produce hard metrics that define costs and risks entailed in bringing full benefits of digital technology to hard -to-serve citizens,  not just the affluent.   We’ve been waiting a long time for this!   Since we first organized a 1999 global conference in Seattle called “Financial Solutions to the Digital Divide,” this  year is the first time we been invited to find such solutions for one large developing nation.  We are very grateful and excited to do this.

            Here are the finance questions we are examining with the help of stakeholders in that nation:

  • The Price Tag:  How much will it cost to activate Meaningful Broadband Ecosystems for the regions (kabupaten) where the Indonesian low-income population are concentrated? 
  • Mixing  Instruments of Finance:  Will the necessary funding come from market forces, from government budgets, or from consumers themselves – or some “cross-sector” mixing of all three sources of finance? 
  • Scaling:  What is the cost for one specific test-market location?  And how will costs drop as we anticipate economies of scale when Meaningful Broadband deployments reach millions of citizens, incorporating remotely located island’s within nation’s archipelago?
  • Regulation:  How would this financial scenario change  if the government chooses to introduce new regulations which cause investors to put their money into Meaningful Broadband Ecosystems?
  • Supply/demand dynamics:  How are the costs divided between supply and demand?    
  • Pricing the “meaningful factor”:  If we add an ethical dimension of “meaningful” – meaningful supply and meaningful demand – which  extra costs would be involved? 
  • ROI:  What payback formulas can we anticipate for investors? 
  • Reinvestment:   As locations become self-sustaining, how can wealth be reinvested so that each Meaningful Broadband Ecosystem is able to fund upgrades to incorporate ongoing innovations, e.g.  software bundling, satellite deployments, cloud services,  digital ID programs, data centers, etc.

Why Indonesia?  Why now?   It is because of the close alignment between aims of the country’s universal services obligation (USO) agency, BAKTI,  and the priorities of the Meaningful Broadband Kabupaten Initiative, managed by Wantiknas.  BAKTI is seeking innovative answers to a problem that now vexes developing nations around the world: how to optimize funding for Universal Services Obligation (USO).   

The USO Concept is in trouble.  After a number of studied by global think thanks – OECD,  ITU,  UNCTAD and the World Bank’s IFC  – a new consensus has emerged that suggests that USO programs must be rethought entirely in light the new dynamics of each nation’s digital economy,  which are being shaped by ecommerce,  cloud services and other factors.  To find answers to this global problem, the Indonesian agency has identified innovative criteria:  its USO funding should be “kabupaten oriented”;  it should be “bottoms up;”  it should be “ecosystem oriented;”  and the funds should be aligned with a range of other national policies.  By establishing  these priorities,  it became possible that Indonesia’s USO funding could conceivably support Meaningful Broadband.  Digital Divide Institute offered to step forward to produce financial scenarios that show how the aims of BAKTI and Wantiknas could be fulfilled by inserting USO funding into the establishment of Meaningful Broadband ecosystems.

If we can find the answer to this national problem, we may be able to contribute to the rethinking of USO at a worldwide level.  This year, governments will collect billions from their own telecommunications operating companies to pay for projects that increase internet access and use, subsidizing citizens who are too poor or too remote to otherwise attract business. But, according to ITU,  only about half of that money actually gets spent from year to year. 

Consider India, for example.  Led by tech-savvy Prime Minister Narendra Modi, the Digital India program’s has aimed to uplift 500 million poor citizens who aren’t adequately connected to the internet grid, using the USO program as a centerpiece. Yet, according to media reports,  most of the money has remained in a Delhi government bureau — its unspent funds reached $4.1 billion in 2017. The program gathered so much criticism that Modi decided to roll back the tax from 5 to 3 percent of telecom spending and it may get shut down altogether.

What to do? Many nations have adopted partial solutions to their USO problems.  They focus on revamping the content of their projects – like adding mobile apps and cloud services to USO agendas rather than follow Indonesia’s aspiration to fundamentally challenge the separation between public and private that USO implies.  

The key to this new approach is that it does not assume that markets are unable to serve the poor. 

When the first USO programs were created by the US Telecommunications Act of 1934, market failure was taken for granted. All governments assumed that telecom companies were incapable of providing phone service to all on a profitable basis, which meant that all others must be subsidized if there was to be universal access, a public policy goal. This separation between public and private services survived in the first major digital update of telecom policy: the US Telecommunications Act of 1996, which became a benchmark for other nations. The Telecommunications Act of 1996 argued that companies should pay into a fund to be used to subsidize the build-out of infrastructure to remote areas and pay the extra costs of providing internet-based education, health care and training for the poor. The assumption of market failure continued. In other words, USO programs aimed to create separate, publicly-funded telecommunications systems that sit alongside commercial systems.

Now that we are in an era in which universal broadband is considered necessary for equitable human development – as well as for corporate success – market failure can no longer be taken for granted. Our initiative – called USO X 8 has proposed a fundamental remake of USO that would obliterates distinctions between public and private altogether. In this case, USO would serve as a catalyst to induce private investment to enter locations and serve users who, in the past, were considered to be unprofitable.  The project suggests that, if properly deployed, every dollar spent via a USO fund would trigger an additional eight dollars from other private and public sources. If this idea spreads globally, the billions USO funds annually would multiply dramatically.   This sum could be used to remake digital economies altogether, affecting not only telecommunications but also other industries that are destined to undergo their own digitalization. It could reverse the growing digital divide in the global economy at large.

To test the “USO X 8” idea, DDI received support in 2016 for a project which will we expect to conclude at the end of 2019.  The combined partners will invite investors from public and private sectors (domestic as well as international) to pool their money, their policies and their expertise. These public/private coalitions will stimulate investments that could affect the overall economy.  “If the idea works and spreads to 500 other regional units across the Indonesian archipelago, the entire nation’s digital economy would change,” says Dr. Ilham A. Habibie, who oversees Wantiknas.  the Indonesian ICT Council. He adds that data centers and cloud services centered in Jakarta could be activated by the initiative. Consumers will benefit from Metcalf’s Law, which will assure a “network effect” as the project brings millions of lower income Indonesians onto the Internet grid. That would lower costs of goods and services for rural Indonesians, giving them a level playing field to benefit from eCommerce and data services and give birth to home grown start-ups that will benefit from low costs in outlying areas. So stay tuned. We may soon learn how USO funds could emerge as a vital tool  to establish more equitable spread of wealth as each nation digitalizes its operations.

Craig Warren Smith 

SpaceX-Falcon9

Will Space X Close Digital Divide?

Elon Musk is known for his brash plans for interplanetary and under-the-earth travel, but his real impact may be to close the world’s digital divide.

Next year SpaceX will launch satellite internet connectivity for the world.  Or maybe not. Over the past 15 years, Digital Divide Institute has watched as other billionaires (e.g. Bill Gates) and big companies (Google, Facebook) have announced such plans. All failed.

Without announcing details, we at DDI suspect Musk will have the same fate.

Meaningful_Broadband_Bangladesh

Meaningful Broadband: Bangladesh

A few years ago, after DDI’s Craig Warren Smith lectured in Dhaka, we were invited by Bangladesh’s prime minister to bring our Meaningful Broadband framework to that country. But we were not ready. We needed to go further in Indonesia where were testing our model in Indonesia’s regions and, quite frankly we did not have the right person to work with to drive Meaningful Broadband-Bangladesh.

But here in Seattle we began working with a bright young economics grad student in “development economics” named Dipanwita Barai, pictured above. She is DDI’s latest researcher with the right ideas and passion needed to do the job. She spent August 2018 in Bangladesh to consult with Bangladeshi stakeholders on the design and activation of test-market activity for Meaningful Broadband.

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How Jeff Bezos Could Remake Philanthropy

The news from Forbes that Jeff Bezos is officially the world’s richest person reminded me immediately of a chat I had decades ago with my first mentor, a brilliant economist named Kenneth E Boulding, nominated repeatedly for the Nobel Prize in economics. As his research assistant 50 years ago, he made an off-handed comment that changed my life.

“As capitalism matures, it will reach a crisis when just a few of the richest business leaders will own most of the world’s wealth.” He said. “At that point, the key to the very survival of capitalism and to democratic societies will rest with the philanthropic foundations created by the these wealthiest of these individuals.”

His comment led me to the ambitious decision to become an adviser to philanthropists, a career that culminated in a consulting role in the l990s when my role was to design Microsoft’s corporate philanthropy and create the strategy framework that led to the Bill and Melinda Gates Foundation. Back then, I was doing a lot of networking among Seattle’s up and coming digital philanthropists. One of them was Jackie Bezos, whose son Jeff had just put her and her husband Mike in charge of the family foundation. “It allowed our son to focus their energies strictly on his business agenda. After all, he is trying to leverage his position as an online bookseller to become a player in all of retail,” she said, sighing. A concerned mom, Ms. Bezos told me, “I really do think that Jeff is trying to do too much.”

Well, since then, Jeff Bezos did a lot. He made more money more quickly than any other human in history. Warren Buffet says he’s got the smartest business mind of our era. With 17% ownership of Amazon stock, his current fortune seems only to be the beginning of his personal fortune.

And yes Boulding’s prediction has come true. According to Oxfam, just eight persons own wealth equal to the combined wealth of the bottom half of the world’s economy. So it makes sense to inquire what sort of philanthropy concepts are emerging from the top of the heap and what sort of incentives are encouraging and shaping their donations.

We should begin by considering the incentives that are likely to shape Bezos’ future donations.

One incentive, to be sure, is to maintain the essentially deregulated nature of telecommunications in the digital era. Amazon is considered target number one by those who would seek to reign in the “winner-takes-all” economy. Even the Bezos-owned Washington Post published an article questioning whether Amazon is getting too big. In the wake of its big charge against Google, the EU has a far lower bar than the US for anti-trust violations. In the past, Amazon’s chief counsel, David Zapolsky has been keeping litigators at bay by arguing that the company benefits consumers by their lowering prices. But now in the Trump era, economic nationalism is the new cause.

Interestingly, that matter relates to philanthropy. The real question is how Amazon’s wealth — even the amount in Bezos personal bank accounts– could be put to optimal use.

If it could be used to restore balance as the economy that Bezos himself is disrupting through ecommerce, his outsized wealth (and Amazon’s big market share in many industries) may well be justifiable.

So here’s DDI’s recommendation. For Amazon’s own good and the good of society. Bezos should be as bold in philanthropy as he has been recently in his invasion of the grocery business in the World Foods purchase. Well, bigger actually. Our recommendation is that he should announce a big personal philanthropic foundation that outpaces Bill and Melinda Gates Foundation in size and scope. His cause? It should be the same cause as his business: to transform the Internet. He could use his cash, his expertise and his passion to fix the global internet so that reaches every one and helps everyone.

It may seem shocking that we propose that he link his personal giving with his business interests. Isn’t that a no-no? After all, no direct relationship is legally permissible between a CEO’s personal giving and his or her business. But an indirect relationship is fair game and it is safe to say that a philanthropist does the most good for society by doing what he knows best. In Bezos case what he knows best is how to bend the internet to meet specific purposes – which could be social as well as economic.

A good example is George Soros, whose Open Society Institute, is the philanthropic correlate of the philosophy he used to reap billions in business. There is no reason that Amazon.com itself could not or should not reap a dividend as a result of the impact of its founder’s own philanthropy.

If there is any doubt about this, we need only look to the very successful example of Bill Gates, whose philanthropy had a very positive – but appropriately indirect – effect on his business that did not raise eyebrows in the legal community. In the year, 2000 the US Department of Justice ordered the break up of Microsoft on the grounds that it was an illegal monopoly and guilty of antitrust violations.

After Microsoft’s legal strategy was frustrated, its PR firm went to work, convincing Gates to pursue a “soft path” to success” by announcing the debut of the world’s largest philanthropic foundation: The Melinda Gates Foundation established in that same year, focused on fixing health care among the world’s poor. Though his philanthropy was personal not corporate, his hero image created a kind of golden halo around Microsoft. The breakup of his company eventually became politically untenable and the US. Department of Justice backed off.
With antitrust concerns out of the way, Microsoft’s stock value continued its steady climb, increasing many times in value till. Gates became the richest person in the world by 1994, a status that he held for 21 years till now, despite (or perhaps because of) his big giveaways.

Bezos has even more reason now to follow the same path. With 17% of Amazon’s stock portfolio now worth about $500 billion. Of that, Bezos owns 15% of Amazon, while Gates owns just 4% of Microsoft. World governments are alarmed. For good reason. Bezos wealth jumped $43.5 billion in just the past two years.

Beyond these macroeconomic concerns is the Trump factor. Every day the opinion pages of the Bezos-owned Washington Post gives a poke in the eye to the President of the United States who put “raising Amazon’s taxes” on his to do-list for this first 100 days. It is only a matter of time. In Asia, where Alibaba is Amazon’s big competitor, Bezos’ personal leadership could shape public/private partnerships that will be welcomed from Delhi to Jakarta.

With his inspiration clearly tied to the space-travel plans of Blue Origin, Bezos seems not yet to have given serious consideration to how his insights and resources could combine to solve big problems here on earth.

Can This Guy Regulate Tech?

The mood among telecom regulators worldwide is to reign in tech companies so that they optimally serve the public interest. How to do that? Check out this guy.

One answer is to get ideas from a US Congressman named Ko Kannon. He is filling a void in Washington, helping lawmakers consider what do about Facebook after CEO Zuckerberg’s hearing embarrassed lawmakers who didn’t even understand how facebook works. The most significant aspect of his views is that tech companies shouldn’t just lower costs or improve services to consumers. They should support community and economic development. He may be the key to “smart regulation” of ICTs in developing nations.

Can Asia’s villages benefit from the spread of Ecommerce into the countryside?

This brief blog post announces Digital Divide Institute’s newest initiative: “Ecommerce for All.” This is an economic modeling exercise which brings together stakeholders from around the world to consider the socioeconomic impact of ecommerce as it spreads into developing nations. Rather than stress the dangers or benefits of ecommerce we are simply going to predict outcomes of ecommerce under various regulatory and market conditions in a number of key emerging-market nations. This is intended to advise governments seeking to regulate ecommerce. We aim to show that ecommerce could dramatically benefit or harm nations depending the nature of business-government interactions and the pattern and timing of investments.

The initiative comes at a tender moment. As ecommerce growth tapers in advanced nations, its fastest growth is now in developing nations, particularly those in Asia. One must note the enormous benefits that can be brought to their “digital economies.”

Asian ecommerce markets are quickly being saturated in urban middle class enclaves. From India to Brazil, most citizens are shut out of ecommerce and are not able to receive its many benefits unless governments step in. The problem is not a new one. It is called the “Digital Divide” which separates those able to benefit from digital technology from those who cannot. After 25 years of efforts, governments have failed to establish the complex menu of policies and campaigns to close the Digital Divide.

Among these nations, the ecommerce boom has outpaced the ability of governments to consider what policies should be in place to make ecommerce work optimally for their citizens and small businesses. Chief among their concerns is the matter of “digital divide.” Though educated middle class consumers who share Western lifestyles are able to benefit, they are zooming ahead of three 2.5 billion less fortunate Asians, mostly located outside major cities who lack access to the logistics, finance and distribution systems.

Facing political fallout as gaps between rich and poor accelerate, many developing nations are rapidly struggling to revamp