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What Is the Optimal Technological and Investment Path to "Universal" Wireless Local Loop Deployment in Developing Countries?

Mugo KIBATI <mkibati@mit.edu>
Massachusetts Institute of Technology


This paper addresses the information technology gap between developed and developing regions. Specifically, two issues are investigated: the continued investment by developing countries in voice-centric/low-speed data infrastructure, and the control of access gateways to the international Internet network by bottleneck public monopolies.

The research results outlined in this paper will show that holding out for poor economies to grow before installing data infrastructure is a sub-optimal solution that is dominated by the superior economic strategy of incorporating high-bandwidth data communications as an integral part of growth policies. Furthermore, the paper will demonstrate that monopoly control by public entities is a major factor responsible for the high costs of international access for Internet service providers (ISPs) in developing countries, negating the positive effects of the otherwise competitive end-user markets.

This paper argues that the results are significant since they highlight for policymakers in developing countries just how increasingly ubiquitous and pervasive the Internet and other information technologies (ITs) will be. In addition, the paper recommends policies that will best prepare the developing world for the inevitable Internet and IT Age.

With regard to the optimal bandwidth path issue, the following question will be asked and answered: Should voice/low-speed data compatible wireless local-loop installations be deployed in the short term and later be upgraded to multi-service (voice/low- and high-speed data compatible) installations?

Toward this end, cost models will be developed for three scenarios -- all analyzing cellular networks: a) discontinuous scenario: installation of voice-centric (low-speed data) wireless networks in the interim followed by installation of separate and completely new multi-service (voice and high-speed data) networks in the long term; b) single-step scenario: installation of multi-service networks immediately; and c) incremental scenario: installation of voice-centric networks with provisions for upgrading to multi-service networks later.

With respect to international Internet network access, the costs incurred by ISPs in different countries will be contrasted. The analysis will show that in most developing countries, by far the most widely prevailing type of market is the partially competitive one in which ISP services are fully privatized and liberalized while the state monopoly controls the only international gateway.

In conclusion, the paper will advance policy recommendations based on the results of the cost models and the ensuing analysis. Policies should encourage the expedient deployment of high-speed data networks and the privatization and liberalization of access to the international Internet network.


Why worry about data infrastructure?

Table 1. Drivers of communications technologies in developing countries
Now Future Our Model
Voice Yes    
Video   Yes  
Data, low Yes    
Data, high   Yes Yes

Although voice and low-speed data services are the current drivers of technology, high-speed data and video applications will likely drive the future. The model anticipates the future and assumes that the driver is high-speed data. It will be based on the premise (which is representative of the actual situation) that either (1) voice-only networks are in place, or (2) no networks are in place, but plans to construct voice-only networks are under way.

Growing communications in developing countries

Perhaps the most immediately obvious justification for the deployment of data communications infrastructure in developing nations is the Internet. Although Internet growth in developing countries has not been nearly as tremendous as it has been in developed countries, it has nevertheless been impressive. In Africa, the number of Internet hosts grew from almost nothing in the early 1990s to some 140,000 Internet hosts in 1997 (Fig. 1). During 1998, the last remaining "unconnected" countries established a link to the Internet, thereby joining the global transformation into a truly information-based society.

Figure 1. Internet diffusion in Africa
Source: World Telecommunication Development Report, 1997, International Telecommunication Union (ITU)

Beyond the many conveniences that have made the Internet popular in Western nations, the Internet presents a unique opportunity as well as a unique challenge for poorer regions. The opportunity derives from new applications of the Internet that would be valued more highly in developing countries than they would in developed ones. Remote regions that have never been able to afford adequate educational and health facilities or to attract competent teachers, doctors, agricultural extension officers, and other professionals now have an alternative medium by which they can benefit from the services of such professionals -- that is, interactive multimedia. Schools that cannot regularly purchase new editions of textbooks or update their curriculum to keep pace with an ever more dynamic world (sadly, this is a common phenomenon in many parts of Africa and Asia) can now exploit the huge databases available on the World Wide Web. Figure 2, below, illustrates the some of the cost reductions brought about through use of the Internet.

Figure 2. Document mailing cost comparisons
Source: Challenges97, Internet for Development, 1997, International Telecommunications Union

The challenge arises from the incontrovertible fact that an information-based globe means that a constantly increasing proportion of international transactions -- as well as domestic ones in developed countries and major cities throughout the world -- will be conducted over the Internet in real time. Business people worldwide -- including those in Africa, Asia, and Latin America -- will have to be extra quick in terminating deals in the computer age. Furthermore, consumers will have the opportunity to make more deliberate choices over the Internet, will be more discriminating, and will demand to be better appraised of whatever goods or services will be peddled to them. Almost certainly, this will mean that any provider of goods or services who hopes to compete on an international scale will need to be present on the Web.

These challenges, however, carry with them a silver lining for business people from poorer countries. Certainly, even before the information age set in, there was hardly any equity between business people from the South and those from the North. A variety of factors, including lack of resources, skills, and economies of scale, rendered developed world business extremely disadvantaged. With the Internet, however, small-scale farmers, traders, and so forth, have been afforded such media as Web sites through which to cheaply advertise their products and services. Moreover, the Internet may mitigate the need for a middleman, who deducts huge commissions.

To be sure, the Internet is no panacea for problems in developed countries. Whichever way one looks at it -- whether as an opportunity or as a challenge -- the natural conclusion is that measures to ease its adoption in developing regions must be undertaken. Consequently, the deployment of data communications infrastructure should be regarded as a high priority.

Access costs

Figure 3: End user costs in absolute and relative terms
Source: Petrazzini, Kibati, and Internet in developing countries, CACM, June 1999

Access costs to end users in the least developed nations are prohibitively high. A large part of the reason is the major operating costs that arise as a result of inadequate and poorly maintained telecommunications infrastructure in developing countries. To begin with, the price paid by users for Internet services -- in absolute terms -- is substantially higher in less developed countries than in more developed ones (Fig. 2, left). More striking, however, is that the prices are very high relative to the purchasing power of most people in less developed nations. In Armenia and Kenya, for instance, the absolute price for an Internet connection stands at the very high figures of US$ 121 and US$ 100, respectively, but after adjustment is made for the gross domestic product per capita, Internet users in Armenia and Kenya pay an incredible 485 and 413 times more than users in Finland, for more inferior services (Fig. 2, right).

Clearly, wireless data communications would mean not only lower deployment costs than those of a traditional plant but also a reduced need for maintenance. The resulting drop in installation as well as in operating costs would afford Internet service providers (ISPs) the opportunity to offer services to their clients at more user-friendly prices. This would enhance adoption because a larger portion of the population would find that it is able to afford Internet services. Scale economies for the ISPs would in turn grow, causing further price drops and leading the cycle to a less pricey equilibrium point. In addition, the reduced operating costs would allow ISPs to have greater latitude for outreach programs and for the setting up of such amenities as telecenters.

The wireless solution

In most developing nations, Internet services have rarely spread beyond the capital and a few selected large urban centers. In Kenya, for instance, more than 85% of the users are concentrated in the capital city of Nairobi; similarly, Moscow and Buenos Aires account for 64% and 60% of all Russian and Argentine users, respectively. Major factors leading to this skewed profile of users are that ISP presence in the interior of most developing nations is scarce and that ISPs established in the capital do not have Internet points of presence in the interior. In Cameroon, dial-up services at local call rates are available only in Yaoundé and Douala. Elsewhere, it is necessary to make expensive long-distance calls to dial up the ISPs in the two major cities. In the few instances, however, in which services have been established in the interior, local users have to pay higher prices than their counterparts do for comparable services in the capital cities. Starcom in Uganda, for example, charges US$ 30 for e-mail-only services in Kampala (the capital), and US$ 50 in Jinja and Mbale (two cities in the interior). One of the quickest and least expensive ways in which to bring about the establishment of more points of presence in the hinterlands of Africa and Asia is through the deployment of wireless networks that would be equipped with data-handling capabilities.

Telecommunications and Internet industry overview

Throughout the developing world, deregulation of public telephone operators, who have operated for decades as state-controlled monopolies, is either under way or envisaged. Increased privatization and liberalization are beginning to allow the licensing of alternative telecommunication service providers, many of which have been wireless mobile cellular companies. Furthermore, with few exceptions, most developing countries have allowed ISPs to flourish with minimal encumbrances from the governments. Thus, many nations have more than one ISP in active competition with each other. The situation in Kenya is typical of many developing world nations.

The Kenya Post and Telecommunications Corporation (KPTC) is the public telephone operator in Kenya, acting legally as the sole operator as well as regulator of telecommunications services. With the exception of Internet services (for which it has been the sole provider of telephone lines) and the manufacture and sale of customer premises equipment, the KPTC literally monopolizes every aspect of the Kenyan telecommunications market. However, even while the telecommunications monopoly persisted, the number of ISPs mushroomed in the country, growing to more than 10 in a rapidly expanding market.

In 1998, the Kenyan parliament mandated the restructuring of the KPTC into three separate entities -- a telecommunications company (TELKOM KENYA), a postal corporation (POSTA), and a regulatory authority (Communications Commission of Kenya or CCK). Initially, TELKOM will be wholly owned by the government. Eventually, through a series of intermediate evolutionary and incremental steps, TELKOM is expected to go public on the Nairobi Stock Exchange, after which the telecommunications provision market will be open to all -- albeit, with a few provisos such as assistance in the fulfillment universal service obligations. Already, a tender has been announced for a private mobile cellular company. But the disproportionate focus on voice is still very much alive. An insidious side effect to the multiplicity of issues facing nations like Kenya -- low levels of infrastructure, poor economy, and low literacy rates -- has been the continued neglect of data requirements. The natural impetus has been simply to work toward installing voice networks, because the need for them seems more immediate than the need for data services and because installation of voice networks is the focus of Kenya's overriding policy objective -- the attainment of universal access.

Much like Africa, many governments in Asian and Latin American countries have committed to liberalizing the industry by granting numerous concessions to attract multinational telecommunications companies, which bring with them cutting edge technologies and higher qualities of service. Thailand, for instance, has consistently placed great emphasis on industrial and economic development in an endeavor to migrate to the status of newly industrialized country." This has resulted in some relaxation of the government's control over telecommunications to boost infrastructure growth to support economic development.

Wireless local access technologies

In the wireless local access arena in developing countries, mobile cellular networks have thus far been the most prolifically deployed telecommunications systems. Whereas there have been several wireless local loop (WLL) deployments in Asia, there have been relatively few in Africa, where their deployment would appear intuitively to be of greater need. WLL is a system that connects subscribers to the public switched telephone network using radio signals as a substitute for copper for all or part of the connection between the subscriber and the switch. It may be based on mobile cellular, cordless, or proprietary technologies. All digital WLL networks are based on either Time Division Multiple Access (TDMA) or Code Division Multiple Access (CDMA) technologies. Unlike mobile cellular, WLL is a relatively new technology. Part of the reason for this is that in developed regions, wired local access has been more than adequate, rendering wireless networks commercially useful only for mobility purposes. Only with recent deregulation has WLL gained popularity as a viable competitor for the local loop with copper-based incumbent operators. In developing regions where wired infrastructure is scarce, WLL promises to be a viable alternative.

The third-generation wireless battle

International Mobile Telecommunications 2000 (IMT-2000) is an initiative directed by the International Telecommunication Union (ITU) to achieve the adoption of common worldwide standards (convergence) for the next (third) generation of wireless systems as we enter the twenty-first century. This new generation of wireless systems is expected to be able to attain speeds of up to 2 megabits per second. Already, several proposals of radio transmission technologies have been submitted by various vendors (assorted on a regional basis) for consideration by the ITU. Both TDMA- and CDMA-based proposals have been submitted, and at the time of this writing, the IMT-2000 group is preparing a meeting to adopt a common radio interface standard.

By far the most promising, yet most contentious, standards have been those based on CDMA technology. In particular, the Global System for Mobile Communications (GSM) camp is lobbying via the European Telecommunications Standards Institute for the adoption of wideband-CDMA (WCDMA), and the CDMAONE camp is pushing hard for the adoption of CDMA2000 (formerly narrowband-CDMA). A recent dispute over intellectual property rights, in which the pro-CDMA2000 U.S. firm Qualcomm has threatened not to license its CDMA technology to the WCDMA vendors unless its version of CDMA technology is adopted by IMT-2000, has resulted in the ITU's threatening to preclude consideration of CDMA standards altogether. At issue are the chip rates to be adopted in the new generation of systems. CDMA2000 proposes a chip rate of 3.6864 Mcps, which is a direct multiple of the existing CDMAONE chip rate of 1.23 Mcps (which would ease the shift from CDMAONE to CDMA2000). The WCDMA camp, on the other hand, proposes a chip rate of 3.84 Mcps (recently amended from 4.096 Mcps), a move that has caused the CDMA2000 camp to allege that the WCDMA camp is deliberating trying deny it an obvious competitive advantage for no apparent valid technological reason.

The debate as to which will be the easiest transition -- GSM to WCDMA or CDMAONE to CDMA2000 -- continues to rage in other aspects as well. For instance, while CDMA2000 will have backward compatibility with CDMAONE because they share the same air interface, the same will not be true for GSM and WCDMA. It will be necessary to replace all base station equipment when the shift from GSM to WCDMA occurs. The counterargument advanced by the WCDMA camp is that subscriber handsets will be dual-mode and that compatibility will therefore not be an issue. Dual-mode handsets will necessarily be more complex and, consequently, will be more expensive to construct and maintain. While the jury is still out on the issue, the switch to IMT-2000 appears less certain for GSM than for CDMA. In any case, it is instructive that the TDMA-based GSM group has chosen to adopt a CDMA standard for its next generation of networks.

Wireless networks in Kenya

In Kenya, there are two mobile cellular systems in service in the major cities of Nairobi and Mombasa -- the analog-based Enhanced Total Access Communications System (ETACS) and the digital-based GSM. Cordless and cellular-based WLL networks have recently been introduced on a trial basis and are not yet commercially available. All of these systems -- mobile as well as fixed -- are at the moment under the auspices of KPTC. As in other parts of Africa, cellular systems in Kenya inherited the supplemental mobility priorities of the developed world, and not until recently has KPTC begun to consider WLL deployment as a substitute for wired plant systems.

Table 2. Cellular and WLL networks in Kenya
ETACS (Analog Cellular) Nairobi and Mombasa (largest and second-largest cities)
GSM (digital cellular) Nairobi and Mombasa
DECT (WLL trial) Nairobi and Mombasa
PHS (WLL trial) Malindi (small town on the coast)
CTS (WLL trial) Mombasa
D-AMPS (WLL trial) Nairobi

Source: Ministry of Transport and Communications, Kenya

The scenarios for the cost models

The objective was to investigate the best routes toward the installation of networks that in the future would be able to meet both data and voice requirements. As indicated earlier, although voice services are the current drivers of technology, our models anticipated a future in which data services such as full Internet access would be a crucial component of communications. The models were based on the following facts: (1) Voice-only networks are in place in urban parts of Kenya. (2) No networks are in place, but plans to construct voice-only networks are under way, in rural parts of Kenya.

The central issue facing Kenya is whether (A) to continue upgrading the existing voice-centric networks (or in the case of rural Kenya, to build new ones from Greenfield sites), which may not meet future demand for high-speed data without costly upgrades; or (B) to immediately deploy multiservice (data-compatible with voice and full Internet access) installations.

Accordingly, the following cost models were developed:

GSM mobile networks were modeled to represent scenario A because they are the most commonly deployed digital networks. Advanced Mobile Phone Service (AMPS) and GSM are the most widespread cellular communications systems in developing nations, including Kenya. Close to 89% of digital cellular networks in Africa are GSM. While GSM systems can ideally support data applications up to 14.4 kilobits per second (kbps), this speed is rarely ever achieved. Clearly, in today's environment and certainly in tomorrow's, 14.4 kbps would be the bare minimum for the required data speed needed to send and receive e-mail without large attachments or graphics. However, to exchange major information (which would include large amounts of information, graphics, charts, etc.), or to browse the World Wide Web, faster data speeds are becoming essential.

In scenario B, different technologies were modeled for different geographic and demographic regions. For urban Kenya, the deployment of a proprietary technology (using DSC Airspan) undergoing tests in Botswana was proposed as an example. DSC Airspan is a CDMA-based technology that is capable of handling data speeds of up to 128 kbps. For rural Kenya, a fixed CDMA (IS-95B standard) cellular system was modeled.

Table 3. Characteristics of the modeled networks
GSM Mobile CDMA Mobile CDMA Fixed DSC Airspan
Data speed 14.4 kbps 13 kbps More than 13 kbps 128 kbps
Range (radius) 30 km/ 19 miles 30 km/ 19 miles 30 km/ 19 miles 5 km/ 3 miles
Mobility Yes Yes None None

Source: Webb, William, Introduction to Wireless Local Loop, Artech House, 1998

In selecting the technologies to model, consideration was given not only to the data capabilities and ranges of the networks (Table 3) but also to the likely costs of a transition to IMT-2000 standards. Although the models considered only equipment installation and maintenance costs, the technical suitability to various population densities and desired penetration levels (teledensity) were also taken into account. Only major network cost elements were modeled.

Results of the cost models

The primary finding was that there is no significant difference in the costs of implementing any of the modeled scenarios in a given area (Table 4). Thus, for a given set of demographic data, it is possible to base decisions on the suitability of particular wireless technologies purely on their functional capabilities.

Table 4a. Estimated costs per subscriber for urban Kenya
GSM Mobile Proprietary (e.g., DSC Airspan)
Number of cells 405 405
Initial capital costs (US$) 2929 2662
Operating costs (10 years) (US$) 893 812
Total costs (US$) 3822 3474
Data speed (ideal) 14.4 kbps 128 kbps
Range (radius) 30 km / 19 miles 5 km / 3 miles
Mobility Yes None

Source: "World Telecommunication Development Report, Universal Access World Telecommunication Indicators," ITU, 1998; Ministry of Transport and Communications, Kenya

A proprietary network (e.g., DSC Airspan) would be ideally suited to urban Kenya implementations of WLL because it would provide adequate data functionality immediately. GSM's wider range would serve no advantage because the cost driver in a high-density urban center would be cell site capacity. The only "sacrifice" made is the mobility function. However, because universal service is a goal that dominates the need for mobility, it would appear to be an acceptable trade-off in most urban parts of Kenya.

Table 4b. Estimated costs per subscriber for rural Kenya
GSM Mobile CDMA (Fixed)
Number of cells 298 250
Initial capital costs (US$) 29,598 36,900
Operating costs (10 years) (US$) 9151 11,251
Total costs (US$) 38,749 48,151
Data speed (ideal) 14.4 kbps 13 kbps/64 kbps
Range (radius) 30 km/19 miles 30 km/19 miles
Mobility Yes None

Source: "World Telecommunication Development Report, Universal Access World Telecommunication Indicators," ITU, 1998; Ministry of Transport and Communications, Kenya

At the moment, the deployment of any type of cellular network in sparsely populated areas of rural Kenya appears to be economically infeasible. Once again, however, and perhaps in more densely populated parts of rural Kenya, a CDMA cellular based WLL network would be ideal because of its higher capacity. Despite the higher costs of CDMA equipment, its higher capacity means that it can cover larger areas in low-density regions such as rural Kenya, making its costs highly competitive. At 13 kbps, CDMA has only marginal data capabilities, but it would be sufficient to meet the requirements of present-day rural Kenya while preparing for a less painful shift to broadband functionality in the future. Again, the goal of universal service overrides the need for mobility.


The consensus is that data communications is a growing component of communications worldwide; consequently, developing regions will eventually need to upgrade their infrastructure to accommodate data communications. For these poorer regions, wireless networks are a viable option to a conventional wired plant, because they are relatively inexpensive to install and maintain and are quickly deployable. The cost model demonstrates that it would be prudent to incorporate data capabilities in any new installations, and to adopt technology that can easily support the shift to the next (third) generation of wireless networks. The pace at which this shift is accomplished depends on the specific circumstances of a particular country. In developing countries, especially African countries such as Kenya, proprietary CDMA-based networks would be suitable for urban centers, whereas fixed CDMA networks would be ideal for the more heavily populated rural areas and the relatively sparsely populated urban areas (e.g., suburbs).

Thus, briefly:

The models also demonstrated that CDMA is cost competitive with TDMA. It should be noted that GSM-based vendors plan to launch two packet-based technologies: General Packet Radio Service (GPRS) and Enhanced Data rate for GSM Evolution (EDGE). GPRS is expected in late in 1999 and will provide speeds of up to 115 kbps, whereas the commercial launch of EDGE (384 kbps) is not envisaged for some time. Similarly, CDMA vendors plan to launch a 144-kbps packet-based technology sometime in 1999. Despite claims of a seamless GPRS and EDGE transition to third-generation networks, it is not yet clear how this will be accomplished, given that both are TDMA-based systems related more to GSM than to any of the proposed IMT-2000 standards. For the moment, the path to next-generation networks appears more technologically feasible from CDMA than from GSM systems. However, no conclusive evidence of the superiority of any particular technology has been produced.


This paper is based on ongoing thesis research on wireless local data access in developing countries as well as on previous work done by the author in conjunction with others. (See Challenges to the Network 1999: Internet for Development. Geneva: ITU, 1999.)


1. World Telecommunication Development Report, 1997, International Telecommunication Union

2. Gilbert Arum, Form-net; Telecommunications in Africa, "Kenya to build Internet backbone," April 1998; Rapid Net growth in Russia, <http://www.internet-magazine.co.uk/news/aug/26d.htm>; Secom, Argentina, <http://www.secom.gov.ar>

3. Ayah, Wilson Ndolo, Minister of Transport and Communications, "Postal and Telecommunications Sector policy Statement", January 1997. Now designated new chairman of Telkom Kenya

4. Thai Telecommunications Business, Telcom Journal (Bangkok, Thailand), 1997

5. African Cellular Standards, 1998, <http://www.cellular.co.za/african-standards.html>

6. Webb, William, Introduction to Wireless Local Loop, Artech House, 1998

7. Challenges to the Network 1999: Internet for Development. Geneva: ITU, 1999

8. "World Telecommunication Development Report, Universal Access World Telecommunication Indicators," ITU, 1998; Ministry of Transport and Communications, Kenya

9. Jensen, Mike, A Guide to Improving Internet Access in Africa with Wireless Technologies, IDRC, August 1996

10. Challenges97, Internet for Development, International Telecommunications Union, 1997

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