Expanding the Market for ICT Services Through Competitive Tendering and Subsidies

Lesson Statement
A good project design must include plans for long-term sustainability. For ICT projects, in particular where the private sector is involved, sustainability usually requires the right mix of competitive tendering and subsidies to ensure that 1) the incentives exist for the private sector to extend ICT services where it would otherwise not provide services; and 2) end-users are encouraged to test those services and acquire the skills needed to use those services effectively.

Competitive Tendering for Local Contracts
Competitive tendering of contracts is important to ensure that resources are allocated in the most effective ways, using most qualified local entrepreneurs to deliver services. It involves three steps:
  • Development of the Request for Proposals (RFP), including establishment of criteria for eligibility and for submitting an application; RFPs must spell out clear goals and be very specific about the "incentives" to be provided to the winning firms. RFPs need to be disseminated to target firms with high quality potential;
  • A qualified selection committee must be established to review and rank the applications based on pre-determined criteria;
  • Awarding of the contract to the winning proposal.
Subsidies can take different forms and must be designed to 1) carefully target those who need them most; and 2) avoid the emergence of new forms of dependencies.

When a telecenter is providing ICT training services at subsidized costs, or even free of charge, it is not only providing a service to the community, it is also ensuring that there is a growing market for its computer-based services. It is not unusual for businesses to provide some services below cost or free, in order to attract customers and then to switch to a fee-for-service approach when they have a critical mass of customers.

Some subsidized products or services should be scrutinized carefully by consumers however. A free or "almost free" printer isn't free because you cannot use it without purchasing the expensive, often manufacturer specific ink, and you can end up locked in with a technology that is more expansive in the long run. The "free" cell phone isn't such a good deal when the only calls you can make on it are twice as expensive as the alternative, more expensive cell phone.

A subsidy can be given to a private sector partner to encourage that partner to provide services in underserved areas that have not yet been perceived as profitable. A subsidy can take the form of start-up capital to enable an entrepreneur to purchase and install all the ICT equipment necessary to start operations (See Rwanda's CICs). A subsidy can be given to end-users in the form of vouchers or micro-stipends 1) to encourage end-users to try new ICT services; 2) to allow end-users to acquire the skills needed to use new ICT services; and 3) to allow end-users to purchase ICT services that would otherwise not be affordable (see Mali CLICs and eCenters in Kyrgyzstan).

Project Specific Examples
  • Macedonia Connects

    In Macedonia, dot-ORG has facilitated the arrival of full national coverage of broadband Internet access. It used a single RFP contract for the subscription fees of all the schools as a lever to get a private sector firm to build a nationwide wireless network that now provides affordable Internet access to all. The schools also received a subsidy that will end in December 2007, at which point connectivity costs will become the responsibility of the Macedonian Government.
    Read more about Macedonia Connects.

  • Mali's Community Learning and Information Centers (CLICs)

    Ms. Kayo (photo to the left), a student at the local high schools, came to the CLIC in Bougouni with a voucher to ask for basic computer training. Vouchers had been distributed to community members as a way of promoting the CLIC's services. The high school principal received a voucher to reward the best student with free computer training at the CLIC. Ms. Kayo was nominated as the best student. After receiving this initial training free of charge, Ms. Kayo became a regular visitor to the CLIC.
    Read more about the Mali CLIC project.

  • Kyrgyzstan eCenters

    In Kyrgyzstan, dot-ORG helped to establish five eCenters in rural communities. These eCenters were created with existing private enterprises. Fifty communities competed in the initial round of competition to select the first four eCenters. One location was selected by USAID outside of the competitive tender process. To encourage individuals to use the services of the eCenters, microstipends (or pre-paid vouchers) were distributed to students and local entrepreneurs.
    Read more about the eCenters project.

  • Rwanda's Community Internet Centers

    In Rwanda, dot-ORG helped local entrepreneurs to establish Community Internet Centers (CICs) in four rural communities. These local entrepreneurs were selected as a result of a competitive tender process.
    Read more about the Rwanda CIC project.

For More Information, Contact:
Michael Tetelman
Director, dot-ORG, Academy for Educational Development
Tel: (202) 884-8856

Related DOT-COM Activity
Kyrgyzstan eCenter Project

Macedonia Connects

Mali CLICs- Establishing Community Learning & Information Centers in Underserved Malian Communities

Rwanda - ICTs for Elections and Community Access
Related DOT-COMments Newsletter Articles
Click on USAID's logo to visit USAID
Click on Internews Network logo, to visit Internews
Click on Academy for Educational Development (AED) logo to visit AED
Click on Educational Development Center (EDC) logo to visit EDC
Core funding for the DOT-COM Alliance is provided by the United States Agency for International Development (USAID), Bureau for Economic Growth, Agriculture & Trade, Office of Infrastructure and Engineering (EGAT/OI&E), Office of Education (EGAT/ED), and Office of Women in Development (EGAT/WID), under the terms of Award numbers: GDG-A-00-01-00009-00, dot-GOV; GDG-A-00-01-00014-00, dot-ORG; GDG-A-00-01-00011-00, dot-EDU.
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