Wiring Rwanda to the World
August 22, 2006
In the panoply of nations, Rwanda stands out as one nation which has suffered through a number of calamities including civil war and genocide. Characterized by a treacherous, if beautiful, terrain, Rwanda is one of the most disconnected nations on earth. In fact, by most measures, Rwanda is an underdeveloped, if not failing, state. That makes Rwanda a good candidate for the Development-in-a-Box (DIB) approach, which is the reason I was drawn to an article about Rwanda in the Wall Street Journal [“An Entrepreneur Has Quixotic Goal of Wiring Rwanda,” by Christopher Rhoads, 17 August 2006]. Tom Barnett also was fascinated by the article and wrote about it in his 17 August blog. The article is about Greg Wyler, a 36-year-old American tech entrepreneur who has big dreams about connecting Rwanda to the rest of the world. Among the challenges Wyler faces is rebuilding a battered communications tower atop a volcanic peak named Mount Karisimbi, which is nearly 15,000 feet above sea level – too high for helicopters to operate effectively in helping bring the several tons of material required to affect the repair.
In a scene that must have been reminiscent of colonial safaris, Wyler and a group of 20 Rwandans hauled a 1,300-pound transformer into position on the mountain having to traverse muddy trails and steep inclines. This mixture of human exertion and advanced technology demonstrates the kind of paradoxes that must be confronted by anyone who wants to help jump start the economies of failed states. The communications tower is critical to Wyler’s dream of beaming Internet service, cellphone coverage, and television throughout the country. Wyler’s dream is a grand experiment. As Albert Butare, Rwanda’s telecom minister, notes, “We’ve had to rebuild everything from nothing. So when people need shelter, water and energy, they ask, ‘Do I really need a computer?”
Wyler is betting that the answer to that question is “yes.” And it’s a big bet. His company, Terracom, plans on selling Internet access to Rwandans for $80 a month. That would be expensive in America, but it’s an astonishing amount for a country where the average annual income is around $200. Compared to the $1000 a month for broadband connections that Wyler found when he arrived, however, $80 per month looks like a bargain. One of Wyler’s schemes is getting local entrepreneurs to establish a series of Internet cafes that would be the training grounds for the currently tech illiterate local populace. Such an arrangement is good business. It reduces costs (because Terracom doesn’t have to underwrite independently owned cafés), it increases customers (since every café visitor is a potential new client), it spreads the risk (because the failure of one café does not necessarily impact the success of others), and, it introduces technology in an affordable way (since the $80 per month cost is shared by hundreds of users – users in Terracom Internet cafés pay about 20 cents for 15 minutes of connection time). Just as importantly for our purposes is the fact that, if successful, this business strategy generates a new entrepreneurial middle class on which Rwanda’s economy can successfully build.
The article details how Wyler made the fortune he is investing in Terracom and how he came to be in Rwanda. The brief version is that Wyler met the chief-of-staff for Rwanda’s president, Paul Kagame, at a wedding and the chief-of-staff invited him to visit his country. Wyler accepted the invitation and once in Rwanda met with Kagame. President Kagame, knowing that Wyler had made his fortune in the tech sector, asked him for his opinion about a $50-million project to bring Internet service to Rwandan schools via satellite. Wyler’s advice: Don’t do it. Satellite service is costly, slow, and unreliable. “I told him,” Wyler recalls, “if he wanted real infrastructure, he needed fiber.”
Kagame scuttled the satellite plan and urged to Wyler to take on the project of wiring the schools with fiber. Wyler accepted. Kagame, who came into power as the head of a Tutsi rebel group that seized power after the Hutu genocide, has big dreams of his own. According to the article, Kagame wants to turn Rwanda into “the Singapore-like hub for business and investment in east Africa.” He has managed to lure back to their homeland thousands of expatriates who possess western skills and education to help him achieve this dream. Whether Kagame proves himself the equal of Lee Kuan Yew is yet to be seen, but his dreams are just as big.
As I have noted in a previous blog, most analysts believed that Africa wasn’t interested in telephone service because so little progress had been made installing the infrastructure for landlines. Introduction of the cellphone, however, proved the pundits wrong. Africa is now the fastest growing cellphone region in the world. That doesn’t mean that challenges don’t exist. The article notes:
Government-owned phone monopolies throughout Africa have stifled competition, keeping innovation limited and prices high. Western companies and carriers have mostly shunned Africa, with its poverty, disease and instability. Recently, both France Telecom and Vivendi SA have scaled back their ambitions in the area.
I have consistently noted that one of the benefits of the Development-in-a-Box approach is that it is holistic. It is intended to address things like poverty, disease, and instability at the same time it attempts to jumpstart a country’s economy by introducing a standards-based approach to developing a country’s critical infrastructure. Wyler went where larger companies feared to tread because he was an entrepreneur. Since most of his initial $15 million investment in Rwanda came from his and one other investor’s funds, Wyler’s framework for cost/benefit analysis was different than that of major established telecom companies. As a result:
Mr. Wyler glimpsed an opportunity. Most of the recent growth in Internet users has come from developing nations. The world-wide number has more than doubled in the past five years to one billion.
Wyler has used a DIB-like approach. The article notes that Wyler “began building a fiber network using the same technology that forms the U.S.’s Internet and data backbone.”
Mr. Wyler says he is focusing on access first, profits later. He’s starting with schools, institutions, and small businesses such as coffee cooperatives hoping to sell to U.S. coffee houses. Eventually, he’ll get to individual consumers.
With 45 full-time and around 1,000 part time employees, Wyler has laid a 100-mile stretch of fiber between the capital, Kigali, and Butare, home of the country’s largest university and another 120 miles of fiber to other areas. He wants to install another 700 miles of fiber over the next two years. As noted at the beginning of this post, Wyler is also setting up a wireless system to compliment his fiber network. Costs for wireless broadband (which is available in areas that also offer his cellphone service) is $20 per month cheaper than a fiber connection and can now reach about 60 percent of Rwanda’s population.
Frustrated dealing with the government-controlled telecom monopoly (Rwandatel), he bought it with a $20 million bid. The monopoly came with an antiquated landline system, 25,000 customers, and a bloated workforce of 530 employees who have no idea of how to compete, offer customer service, little technical expertise and a full-time soccer team. Part of the flexible framework I promote addresses the need for training and education. That is the only way to make non-profitable employees profitable. Investments in people generally pay off as well as investments in infrastructure.
As a result of his hard work, Wyler made Terracom a sustainable business and in July 2006 it merged with GV Telecom. “The new company plans to extend Terracom’s model of low-cost high tech throughout Nigeria, Kenya, and Congo.
Terracom’s success underscores some of the principles I’ve been trying to promote with the Development-in-a-Box approach. They are principles I believe are widely applicable in addressing the needs of failed and failing states:
- Start with security. When Kagame seized control of Rwanda, he tried to establish a coalition Tutsi/Hutu government that would make all citizens feel more secure. Were a civil war still raging in Rwanda, Wyler’s venture would never have gotten off the ground.
- Use accepted standards and best practices when establishing infrastructure. Wyler transplanted technologies and standards used in the U.S. to ensure that once his system was in place it would work properly.
- Create a customer base. Wyler tries to make every customer a sales person for his services. By selling cheap Internet access in small increments, Terracom has hundreds of thousands (if not millions) of potential customers. Wyler also showed others how they could be entrepreneurs themselves by selling Terracom products.
- Establish a community of practice. By starting with schools, institutions, and small businesses as well as working with the government, Wyler concentrated on building a community of practice that could help him succeed in his venture. They became virtual owners of the project, because their future success in some measure would be determined by Wyler’s success.
- Seek alignment among all players. When Wyler found it difficult dealing with the government-owned monopoly, he bought it. When that avenue is unavailable (which it rarely is), a way must be found to align government and business policies so that unnecessary conflicts don’t stymie progress. Wyler didn’t enter the Rwanda market out of altruism. He expects to make money. The government understands that profitable companies pay better wages, pay more taxes, invest more in their infrastructure, etc. The goals of one enterprise (though different than the goals of the other) are different but complementary. Complementary strategies among players can generally be found and they should be a priority.
President Kagame and Greg Wyler share a dream – connecting Rwanda to the rest of the world so that its people can enjoy the benefits of globalization. Although the story is just beginning, it has better chances of having a happy ending than most development stories because it involves foreign direct investment rather than official development (i.e., foreign) aid. It will be an interesting story to watch.