LMI Mongolia: Building a Sustainable Business Model for Rural Telcos

USAID’s Last Mile Initiative (LMI) in Mongolia supports the efforts of private telcom operators to bridge the gap in local access to communications in primarily rural, underserved areas of the country. Ultimately, the goal of the Last Mile Initiative is to achieve a sustainable approach – both technically and commercially – to providing rural communications in Mongolia and elsewhere.

Mongolia's Landscape
As a Last Mile Initiative country, Mongolia presents a number of interesting challenges. With a population of only 2.83 million people living in a country with an area of 1.56 million square kilometers, the population density is only 1.8 persons per square kilometer. However, nearly one million people live in the capital city of Ulaanbaatar and the population density in rural areas is barely 1 person per square kilometer. The majority of the rural population lives a nomadic lifestyle on the Mongolian steppe, herding animals, far away from telephones and electricity.

Testing and Refining Models in Four Pilot Locations
LMI pilots have been launched in 2 locations to date and two additional locations are being established through a competitive tender process. Over the summer of 2006, dot-ORG partner I-LINX conducted an assessment of the sites and subsequently conducted a business planning workshop for the bidders. The workshop was designed to assist the bidders in strengthening their proposals to include viable business plans, projecting profit and loss, as well as articulating an operational plan for running the business once the technical solution had been implemented.

An Evolving Business Model Based on Shared Infrastructure
The research done by I-LINX to date indicates that the ideal business model will be based on the concept of shared infrastructure where costs are distributed across the custormer base in multiple Soums, rather than just one. In IT terms, this concept could be described as a client-server application. The ‘server’ (host of the common infrastructure) would supply all of the ‘content’ for the clients in the Soums. The ‘server’ would comprise all interconnection agreements with other operators, a soft-switch, a numbering block and a billing system.

The ‘client’ (local infrastructure in each Soum) would consist of a wireless access point and a SIP server to identify local users and switch their local ‘on-net’ calls – those that are delivered to other customers on the same network. The ‘client’ would be connected to the central infrastructure ‘server’ through a fixed satellite connection. The primary benefit of this configuration is that capital investment for this common infrastructure would be distributed across a broad user base in Mongolia. Given the small and dispersed population, this model will provide the most cost-effective solution for service provision even in the least populated areas, while ensuring the sustainability of the service in the long-term.

Coordination with Other Related Initiatives
This model is also intended to support a range of initiatives in coordination with other donor agencies or lending institutions. One such initiative is the World Bank supported Universal Service Obligation Fund (USOF). LMI Mongolia is working closely with the World Bank to ensure compatibility of programming and avoid potential redundancy. The business models being developed as a result of the LMI pilots will assist the operators implementing new services under the World Bank program to do so more effectively, without the need for further testing and experimentation. The World Bank initiative will benefit from a viable and sustainable model which is field tested and can supply a solid foundation for additional locations.

At the end of the project in Mongolia, at least four solutions will have been tested and refined, all in an effort to define the ideal, sustainable model for the long-term success of rural telecommunications in Mongolia. The lessons learned in Mongolia will also have implications for comparable markets worldwide.

For More Information, Contact:
Steven Rynecki
Senior Program Officer, Academy for Educational Development
Tel: 202-884-8948

Joel Schroeder
Vice President, Business Development, I-LINX, LLC

Related DOT-COM Activity
Mongolia Last Mile Initiative
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