Peter Orne - Wireless Government
03/13/2007
Tackling a Telco, Connecting Rural Macedonia
In June 2004, Glenn Strachan, former CIO and VP at the Academy for Educational Development in Washington, DC, began consulting on a US AID objective in Macedonia to connect 460 schools to the Internet. An e-Schools project had provided 5,400 computers to the schools, but Internet connectivity was an unmet challenge. Because of the predatory telecommunications environment in Macedonia — at one point, the incumbent telecom tried to undercut the project by announcing free broadband to all schools and then masquerading as USAID — Strachan stayed on for two years. W2i interviewed him at the Digital Cities Convention in Philadelphia (Dec. 5–6, 2006).
Watch a video overview of Macedonia Connects:
Glenn Strachan: What are the inhibiting factors to the growth of the Internet in Macedonia?
A: First is a legacy telecom owned by the government that was very predatory. It was a single-monopoly telecom. When I arrived in June 2004, Internet connectivity was on the order of 200 euro for a broadband account, and the country had only a 2% broadband penetration rate. Just for measurement sake, Macedonia is about the size of Vermont, but it’s 80 percent mountainous.
The provider was trying to run all the alternative ISPs out of business. There are only five. It was illegal to bring any international traffic in and out of the country. So, given that, USAID, asked for help in trying to deal with this issue, and that’s when I was brought in.
Q: What was the scope of this project?
A: It was basically a nationwide connectivity project, and I suggested that they create the schools as an anchor tenant of the network, since US AID was going to fund the growth in the schools. But they changed their perception of the network substantially, to providing connectivity to all the citizens of Macedonia, including utilities, hospitals, schools, and the consumer market, and selecting through an appropriate process an Internet provider capable of doing this growth.
None of this could be accomplished, however, until we changed the regulatory environment. So we worked initially on passing new legislation. In January 2005, the new telecom laws allowed alternative bandwidth solutions other than from the monopoly.
Q: The network would be countrywide, which meant tackling all those rural areas.
A: Roughly 52% of the population is rural. Skopje, the capital, had broadband connectivity. ISPs would build in the city, but outside Skopje, they don’t believe there’s any demand. So what we determined is that it had to be a holistic network. We actually built a rural network. Anyone can build a city network.
Q: What about existing cellular service and rural infrastructure assets?
A: There are presently only two cell providers. The one legacy of the former Yugoslav Republic is extreme paranoia of its neighbors to the south in Albania, so they set up a radio diffusion system, and they had hundreds of towers built throughout the former Republic. Access to towers was the easiest part of the whole picture — particularly in the mountains. People live in the valleys, they don’t live in the mountains, so you were able to broadcast down.
The cell footprint covers approximately 80% of the country, because the were only going to put equipment where they felt people would use cell coverage. When we finished, we were on 190 towers, with a footprint of 95% of the country. So there are points where you actually have Internet access and VoIP, and you don’t have cell.
Q: What was the project timeline and early impact?
A: Our vendor selection was announced on April 21, 2005. The network was completed by September 1, in time for the school year, so we’re talking several months with 300 people actively building out 190 towers. We ended up with a distribution of 545 sites throughout the country. The vendor itself has been expanding by almost 1,500 customers per month over the past six months. The prices have gone from 200 euro to as low as 10 euro per month. Unlimited home service is 17 euro. It’s a Motorola Canopy solution, where you get the customer premise equipment (CPE) in your home. They also have mesh networking in Skopje, and several other larger cities. It’s fairly ubiquitous wherever you go in country.
Q: What was US AID’s role and objective?
A: The agreement with US AID is that they didn’t want to buy any equipment. They just wanted service provisioning, so they allocated funds for that provisioning. Writing the RFP was complicated. In total we ended up spending $2.1 million for provisioning of services over a 28-month period. The goal was that the pricing at the end of the activity, which was Oct. 1, 2007, at the school would be 20–25 euro per month, which they could afford. Going into the activity, we assessed it at 120 euro, which nobody could afford.
Q: Could the schools continue to be an anchor tenant at those rates?
A: We knew the schools could not be wholly responsible for being an anchor tenant after our subsidy because they are the poorest element within Macedonia. That’s why we needed the network to be built out and have access to all the other constituencies — consumers, government, municipal government. Since then, our vendor has entered into an agreement with each municipality — 84 of them — to provide connectivity for e-Gov initiatives, which US AID is also providing. They are adding small and large business connectivity solutions, and it’s really become a very diverse network. The school system itself is 330,000 students. Within one year, Internet penetration went from about 2% to 4%, depending on how you measure it, to 14%. We suspect it will be over 20–25% by March 2007.
Q: Describe your experience with the incumbent telco.
A: Telcom didn’t cooperate in this process at all. When the project was announced, and we explained that we would be providing connectivity to 460 sites, the telecom, about a week later, announced that it would be providing free broadband connectivity to all schools in Macedonia. The problem is that DSL is an urban solution, and they had no plan for distribution to the rural sites. But basically, it was a cannon shot at us, trying to derail our activity. We could have stopped then, but we went forward.
During the rollout process, the telecom went out and identified themselves as us, installed DSL services to the urban schools, and signed them up for two and three year contracts. It was the ignorance on the part of the schools, not knowing that they weren’t dealing with us instead of the telecom. We had to get the prime minister to step in and communicate with the telco, which was 48 percent owned by the government, that this was an illegal practice and they should cease and desist.
The regulatory body was empaneled in May 2005, but they had no real power. It’s been a learning experience for them. Our project had to be built with no interconnectivity with the telco monopoly because we could have been shut down very easily. Now they’ve signed the first interconnect agreement between our vendor and the telco, and our selected vendor is now the second landline provider. So they actually have a telephone dialing sequence that will use VoIP to get into the homes of the people who subscribe to the service.
Q: How will the project be replicable?
A: The business model itself is usable anywhere. It’s the creation of competition and public-private partnership. It’s the only way it will work. We’re finding many of the countries we’re trying to go into have very restrictive environments, particularly in Montenegro. But I think the same business model will work in any country, and we’ve actually been called into Greece to provide guidance on how to provide rural connectivity. They’ve got the city taken care of, but they don’t know how to do the rural part, and Greece is 10 million people, whereas Macedonia was 2.1 million.
