The following are the outputs of the captioning taken during an IGF intervention. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid, but should not be treated as an authoritative record.
>> JANE ROBERTS COFFIN: Hi, everyone, can you mute if you're just joining. Thanks so much.
>> JANE ROBERTS COFFIN: This is Jane, we will get started in one or two minutes. We are just waiting for some of our panelists to join us, thank you.
Could I ask the technicians if you're going to help open up the event in the room.
, CR4, we don't see any video.
We here at the IGF 2022 for financing mechanisms for locally owned internet networks, workshop 5010. Give us about five more minutes, and we'd love to ask the host there in the Addis Ababa if you can open up the video in the room, in room CR4, thanks a lot.
>> JANE ROBERTS COFFIN: Hello to the tech assistant. Could you help us to open up the video for CR4. Just asking for help from the tech assistant there. I can see you online here with us.
Can you help us open up the room in Addis Ababa.
You can ‑‑ there we go, fabulous in the room.
Could we ask for technical assistance to make sure Adriana can open her video.
And Juan, could we just have you pop in for a second so we can see that your video works, Bravo, there's one. Adriana, can you give it one more go, let's see if we can get you up live video.
You may have to rejoin. There's Ben. Yeah!
And let's check and see, do we have you there in the room.
>> MODERATOR: Can you hear me.
>> JANE ROBERTS COFFIN: Yes, we can. Almost ready to roll. Thank you to everyone, in Addis Ababa for opening up the panel.
>> ADRIANA LABARDINI: I can't, it's not ‑‑ the settings are okay, it's the hardware problem. Sorry.
>> JANE ROBERTS COFFIN: No worries, we're happy to hear your festive voice know it's late for you in Mexico.
Okay, well, then let's get started. We have a fabulous panel for you here today, I just want to do one quick check. We have captioning, so please don't speak too fast for the captioner who is with us, her name is Patty. We have technical assistance if we need it. We have Risper in the room. We have a great panel here for you, we are very much hybrid. Welcome to the financing mechanisms for locally owned internet networks, you have a great range here today of practitioners from the field, both people building community networks, both technically, financially, from a policy and regulatory perspective. But also the people who are helped to finance networks, like Ben from Connectivity Capital. My name is Jane, I've been doing work in the internet space for quite some time. Community networks are one of my passions, I love the fact communities are building from the community out, that there are sustainable local meanwhiles for connecting people who are unconnected.
I'm not going to take too much more time, you really want to get into the meat of the report that was put together with a good team of people from Connectivity Capital, Connect Humanity, and the Internet Society, Mozilla. You have some of us here working on report, people on the field like Risper and Adriana, who helped pave the way for unbelievable change in Mexico with social purpose networks, we are here today to talk to you about a critical thing of be sustainability of any network, accessibility and access to capital. We need a new mind shift and mind set particularly among those who do finance networks, whether they're international financial institutions, small organizations like Connect Humanity, we are a connectivity fund or Connectivity Capital. We need to shift the change toward understanding why it's important to provide capital, access to capital, for these small community networks and to work with the networks to build better business planning, longer sustainability planning, really to figure out how to communicate with some of these financiers. I myself have had interesting moments trying to talk to traditional financier who is here they're volunteer networks, but they're working on building up, starting up, just like any other company.
So access to capital is different in different parts of the world. I'll stop talking and turn it over to Ben, who is first up on our agenda to give you an overview of the report and then we'll turn back into the team to have some perspective from Connect Humanity, association for progressive communications, and Adriana and move into Q&A and hear from Risper and what she's been doing and some Q&A.
Without further ado, we'll turn it over to Ben. Ben, over to you.
>> BEN: Perfect, thank you so much, Jane and thank you everyone who is joining us from literally around the world. Thank you all for ‑‑ first of all, tuning in and, this is a topic that we love and I think one of the things we love to talk about up front and want to highlight is the collective effort that this was to put together, Connectivity Capital partnered with AC, the associate for persons with communications, with Connect Humanity with ISOC and the news thing is all of us had been doing this for a long period of time, coming at it from slightly different angles, whether that was with community networks, small social enterprises, we had all seen all of these data points of success in the emerging markets we wanted to bring together to tell a story and then also create a bit of ‑‑ to demystify what the process is like. One of the highlights of the report is these case studies and case studies of community networks over time that have built up their networks with different financing mechanisms.
We often talk about crawl, walk, run, there's distinct phases of what it takes to operate and run a network. What we try to do in the report, highlight the different financing mechanisms from when you're starting out and growing and expanding, from when you reach resource maturity phase and what those look over time and how the transitions happen.
So with that, let me jump to a few ‑‑ Jane, do I have the ability to pull up slides or should I.
>> JANE ROBERTS COFFIN: You should. We should ask the technical expert with us, can we help Ben show some slides, he needs to share his screen.
Can you do that, Ben.
>> BEN: Yes, I can.
>> JANE ROBERTS COFFIN: Excellent.
>> BEN: Perfect.
I think it's really important, first of all, we talk about what we were trying to accomplish with the report. One of the first things we were trying to do is demystify and empower, there's so many different people building different networks of different sizes and geographies. We wanted to level set with a common set of terms and knowledge around what it means to be financially sustainable, what it means ‑‑ what are the costs associated with running a network and the baseline understandings that everyone should be able to understand and create that common set of language.
Our hope is people go on offense. What we mean by that, I think a lot of times there's a translation difference between those that are owners, those that are operators, those that are financiers and users. Everyone can be on the same page and then community connectivity partners can go on offense, be proactive what they're saying and go and be proactive about what is understanding the value proposition, how do we make money, what's the impact we have being able to be forceful and talk about that in a common set of language.
So with that, I did want to highlight first the 11 case studies. We tried to have a global perspective in what we were doing, these are networks from every continent, from all over the world, from a combination of the global north, global south. Different technologies, whether it's fiber, fixed wireless access, a whole variety of different ones, straight municipal networks, you know, anything that you can think of. Hopefully encapsulated here in each of the different phases.
Wanted to stick and highlight with that.
Then I wanted to immediately jump to what exactly is a community connectivity partner. Specifically, you know, we like what we call the big tent approach. Here we go. We like what we call the big tent approach. There are so many different operators with slightly different legal forms, whether you're a social purpose organization, whether you're an NGO, a government. But you're all somewhat achieving the same pend.
What we did, we created the big tent approach, what we call community connectivity providers, encompasses what we traditionally referred to as community networks, CN's own body I the local community which are the users, any of those returns are reinvested back into the community. A variety of different legal forms, sometimes those take the form of a nonprofit. But also often they take the form of a cooperative. But the idea really is it is owned by the community itself.
Municipal networks slightly different. It has that government ownership at the end of the day, it's within a defined geographically jurisdiction. One of the things that we found in the examples that is quite powerful is when you have an outer bound of the network, a political boundary of the area that you're trying to build, it can be really cost efficient to build. You know exactly where you're going to, have the convening authority of the government, it can ‑‑ you know, especially when you want to create longer duration assets like fiber, you can really push the cost down when you're able to have those kind of defined scope right off the bat.
The last one we talked about was social enterprises, these are what would be referred to as double bottom line businesses that seek both financial and social return, they often have an explicit social purpose, the United States we have something called the big corp law, benefit corporation where you're taking account not only shareholder returns but stakeholder returns, it's an explicit structure that takes ‑‑ takes those benefits into account.
The key with all of these is an element of local ownership, and what the local ownership comes reinvestment. The idea is that you want these entities to be sustainable, but with the sustainable proceeds, those are then reinvested back often into new expansion and upgrades. So if you can think about a fixed wireless access network, you're putting up a main point of presence, you're connecting the immediate surroundings, but as soon as the network is achieving sustainability, you begin to think about the adjacent communities you can also connect with, thinking about upgrading capacity, you're thinking about cross‑subsidy models, whether that's an anchor institution, say at a university and cross‑subsidize with smaller schools, but you're thinking about holistically reinvesting all of the proceeds from that back into the community.
Jump right ahead, this is another key concept that we think is incredibly powerful, which is the idea of stages of network development. The stage that the network is of operating determines the financing mechanisms that are available. Often in the early years it's the combination of grants, subsidies from government, it is sweat equity from the owners, from the local community itself, but it is a lot of that boot strapping early, you know, just get out and get a network live and up and running and innovate from there.
As you move further on, you have kind of elements, traditional debt equity, et cetera, but as you kind of grow subscriber, get into sustaining, growing and maturing phase, different financing options open up.
One thing that's really critical that we wanted to focus on in this report is financial sustainability. One thing I think that is critical to highlight, there is amazing resources out there when it comes to community networks, certainly the work of ISOC over the years, the work of APC, Connect Humanity, they have put a ton of work into understanding why is the network meeting, how to do stakeholder engagement. How to have shared governance models, et cetera.
All of that is amazing resources that we reference to, but we tried to keep us tight bound here specifically on financial sustainability, knowing that there are other resources there that are often a prerequisite, and those are a series of activities often done before you kind of get to that financing question of how do we actually grow, sustain, produce cash flow, reinvestment that back into the network.
The slide ‑‑ by the way, this is all available online, we purposely publish this in a deck format. We want it to be digestible, whether in small pieces, a book form. The idea is people can take it and explain to others. So whether that is a tribal community coming together, explaining to various users, you know, whether that is a local government being able to explain it to their citizens, whether that's just a social enterprise putting together a pitch deck to explain to a local financier, we wanted it to be bite size. All of this is available, please feel free to download, it's under creative common license, so we want people to use it, want people to replicate it, and nothing would make us happier to see it in someone else's pitch deck and see it available.
Let me then jump to specifically kind of sources of financing. Oftentimes, these are some of the names that folks will understand. The early access you get whether it's through universal service funds or impact first investors, different times of donor agencies. We tried to bucket what would be the predominant sources for that type of network that are available. Certainly now in a current situation, then also in the future as well.
The last point I wanted to touch on, and then we can throw it back open to questions, is this concept of different types of financing. I think oftentimes when people talk about financing, we all kind of come to them table with our own preset of notions, it could be that banker that sits behind the big wooden desk, and it could be somewhat intimidating to kind of more grant supported sources. What we tried to really hit home in this report is the spectrum of capital that's available and oftentimes, if you are either an investor or a community connectivity partner, it's understanding what bucket these various investors operate in, right? We divided them between commercial, subcommercial and grant supported.
Understanding that not all capital is equal, capital has costs, whether that's a reporting cost, whether that's a compliance cost, traditionally with a grant, being able to report back to the grant‑maker, whether that's a cost in terms of an interest rate to a local bank, whether that's an ongoing cost to an equity holder, which has both financial returns, but also governance and control rights, someone will want to sit on a board and have say over approval of budgets, of new builds, where you're going to expand to, et cetera.
Really placing those options on a contain up, understanding ‑‑ continuum, there are various costs associated with them and they all exist on this different continuum. The critical thing as well we found in all of these case studies, all of the CCP's used different mechanisms at different times of their life cycle.
It's a very critical point, because I think a lot of times, you know, any ‑‑ especially for the early stage operators that are getting up and running, they'll look at an entity that's been around for ten‑plus years and say we want to use a mechanism just like that. Oftentimes, there are ‑‑ you know, it's not always the best fit, it could be they're raising a commercial loan that they have a whole lot of requirements around it, going through a commercial bank, et cetera, you know, you eventually can grow into that, but oftentimes started with a more stage appropriate investment is a better way to go to get up and running as fast as possible.
So with that, let me pause there, all of this information is available online and please do feel free to reach out to us, to any of our organizations, I know this is something we all love talking about. If there's folks out there that have questions that are practitioners and implementing this, please feel free to reach out.
>> JANE ROBERTS COFFIN: Thank you, Ben, and for others that are ‑‑ have joined, we just popped the link to the report in the chat, and those of us here on the panel can also answer some of your questions and car lows Rey‑Moreno, is our remote Rapporteur. Carlos is helping us keep track of questions you might have and key recommendations and points you want to discuss in the chat.
So next up, we're going to talk about some of the structured piece of the report and different aspects of the report. I'm going to give about two or three minutes on why community connectivity providers are uniquely suitable for connecting underserved communities and hand it over to Adriana for 15 minutes on owner‑operator considerations and back to Ben for 15 minutes for network financing mechanisms and just ask everyone to stay on time. We are doing really well Risper will come in and talk about practical experience from a network in Kenya. So I'm going to quickly say that for those of you that don't know community connectivity partners, which might be social purpose networks, municipal networks, both for profit and not for profit, these community connectivity providers are uniquely suitable for connecting underserved communities.
Why is that? Well, if you take a look at many of the unconnected right now, you'd have to take a step back and look at the policies and regulations in countries where people have indicated over the last 30 to 40 years that universal service would help build out, the market will solve the problem.
Well, as we know, 2.9 billion people are not connected around the planet, after 40 to 50 years of regulatory policy and good minuting out there by many organizations. We still don't have people connected.
There's been a bit of a failure, not only a market failure, but a regulatory and policy ‑‑ what I would probably say we need a reboot. When you're starting to look at certain hard to reach areas, whether it's rural, remote or urban, you have to think differently about how to connect those areas because the return on investment is different.
With social purpose networks, community networks, municipal networks, they are uniquely positioned in communities that know what it's like to be unconnected, that are very practical. That know how to come together in a volunteer spirit, whether in the U.S., Kenya, Bolivia, in India, where they're all community networks. Right now, tribal communities throughout the world, indigenous communities, they have the know how to come together to build cohesive, sustainable projects and cohesive sustainable connectivity, because they know what it's like to not be connected and have practical skills that can brought in. Oftentimes the community networks have a difficult time of understanding what those access to capital mechanisms are, that Ben will talk more about in a minute. What the different owner‑operator models might be for building a community network, and how to speak to some of those entities that do the financing.
I can tell you, as someone that's worked with community networks in the field, I fully understand the spirit, know how to work with community, built lots of platforms and bring in lots of local training, because you never want to be the single point of failure and also not doing it for communities you're working with.
Communities who are building networks for their own communities.
But what can happen, an absolute lack of one to one understanding when communities are speaking their language and financing experts are speaking their language. When I've spoken to some traditional financing experts around the world, when I say yes, this is a volunteer networks, they're doing this, this, and this, the minute they hear volunteer, they panic. I often want to ask them, so you really understand risk?
This is not as risky because the community is doing this for their own community, they're invested in their communities. As people and as ‑‑ to break the cycle of unconnectedness, bringing in opportunity, help provide more emergency services to their communities, better opportunity, kids getting educated, schools working from home, and we are talking, again, urban, rural and remote. The pandemic, of course, showed us there was a lack of connectivity in places we didn't expect or not affordable connectivity or better connectivity.
So these community connectivity providers, municipal fit works and social purpose networks are uniquely positioned because they know their local communities, what it takes to start up an activity in those communities, and they know how to work with local experts.
So I'm going to turn this back over to Adriana so we can take a look at owner‑operator models from an outside perspective, but, again, I want to also posit if we are looking at different regulatory and policy mechanisms to allow community connectivity providers to licensing, easing up on that, I would posit that the financial ‑‑ the way we put financing together has to also change.
We can't use traditional model and methodologies one to one, we have to start thinking about how we can provide capital to those communities that's accessible to them, just like a regulatory process is accessible. It does take more work, but so do all of us that's been working with networks to try to help them get started so they're not intimidated by the language that they're hearing. We have our own code and talk about community networks and building connectivity, the financing world has their own code and language. So we have to find a way to bridge that gap as well.
So Adriana, I'll turn it over to you, you have about 15 minutes to give us some perspective on owner‑operator models. Over to you.
>> ADRIANA LABARDINI: Thank you so much, Jane, and thanks, Ben, for this introduction and giving the context of where this important report comes from. And thanks to the audience for your interest in this very important matter.
Yes, as mentioned before, what we have called this community connectivity providers, we have been working very closely in Rhizomatica, APC, looking at their different needs, models, efforts, finally this report unfolds with the how they organize, what are their ownership models, their operating models, it is very important for investors, for foundations, for communities interested in investing and starting a community network effort, but also for policy‑makers and regulations to understand what it takes in each of these decisions of ownership and operation.
The report, which we, again, invite you to look at that, explains very clearly the different choices of legal structure that a community decides to select depending on a number of variables and factors.
By owner type, a community network can be, well, exactly that, a community owned infrastructure and network where the community members are also the users, and they can also have other end users, like a health clinic, municipal government that's user, but the community invests and deploys the infrastructure, and then expects to have returns on the investment made and also have a triple bottom line or a social bottom line. So that would be a community ownership model.
Another model, depending on a number of local contexts, is a public network owned by governments, could be many local governments, municipal governments for a number of reasons, to bring in more competition or because the available service are not enough or not affordable or to have some municipally owned infrastructures that can better serve the community.
Finally, we also see local networks that have a double bottom line that have ‑‑ one is a financial return, but also a social impact by providing internet or other telecommunication services, but that are privately owned. Well, the choice of this legal structure depends upon many things and also impacts in the availability of capital. What is the legal framework available, is it are friendlier for a nonprofit or for a public partnership? Or for a private enterprise that would be an important factor? Or from a tax perspective, is it more efficient to set it up as, again, a nonprofit, held by the community or the licensing is easier. So those are important factors, and as we unfold them, we can better understand which of these structures would make it easier for this local effort to become sustainable.
Now, besides who owns this community connectivity provider, there can be a number of legal forms where they are incorporator, if you will, what is the legal entity behind this CCP. It can be a company with shareholders, with limited liability, a private enterprise, it could be a government owned enterprise, or, as we have seen many times in the global south, a cooperative, which is a very interesting model, the first ISP in a cooperative form was Sensaleni in South Africa, and also there are a number of nonprofits like the community networks in Mexico, in Argentina and so many other countries where they are put together by community members and most of them initially established in their early stage as a nonprofit so they can receive grants and a social purpose license.
Whenever there's a legal regime that favors noncommercial efforts to connect the unconnected, then some communities opt for a nonprofit legal entity.
So there are ‑‑ depending on the legal context and also the mic context of the different communities, if they are rural or remote, we can see how this different ownership model and legal entities are important choices. I mean, as they mature, they can opt for a combined form, like Sensaleni again, for instance, which I love, by the way, the meaning, Sensaleni, means do it yourself. They combine all these cooperatives, which are the different ISPs in different communities, but they are also assisted in other ways by a nonprofit umbrella company that provides some services, capacity‑building, legal advice to the cooperatives.
So that's what is really important for this community, is that they understand what would be the impact of choosing one model over the other, and how can they mitigate the risks, how can they have a better control or a better way to manage the infrastructure, and the services, or how or under which of these entities it would be easier to do fundraising or to have a less ‑‑ a lesser tax impact. So sometimes the decisions are not made consciously until after they start facing the different challenges of each of the legal entities they chose or the ownership model. It is important in this ‑‑ and this report allows investors and grant makers for communities interested in deploying their own infrastructures, to have information as to how these choices would impact their sustainability.
Also, it's not ‑‑ the decision, for instance, is to start a municipal network, well, then maybe this is in a more urban setting or suburban setting where a municipality has the resources, is willing to organize and collaborate with the community members and how they can lower their costs and prices and boost local economic development, that would be the case for a municipal network.
The study has this incredible and really valuable case studies of these three different ownership models that I encourage you to see, both in Africa, in the U.S., in Mexico, in Indonesia, Thailand, South Africa, and in the rural north of the United Kingdom.
So it is ‑‑ and that's why we cannot easily talk about replicating what worked in South Africa may be different than what worked in rural Mexico and so on.
Now, as to operating models, once these decisions about ownership and legal entity have been made, it's important also that the community understands and, of course, the investors, the value chain of communications networks. Telecommunications network has a passive infrastructure, an active infrastructure, the transmission infrastructure, the spectrum behind it, but also needs a number of passive infrastructure. Towers, rights of way, et cetera.
And finally, it can also be a service provider using someone else's infrastructure, and that changes the equation of availability of financing very importantly.
So, for instance, we have in rural Mexico, and in the context of a number of ‑‑ from indigenous communities, we saw this year the creation of a new indigenous virtual mobile operator launched just a few months ago, which is a reseller. So using the very powerful wireless network, an LT network of a huge consortium, the indigenous community is acting as a virtual operator, as a reseller, offering some intranet content and other ‑‑ other value for its community, which is one of the great benefits. Communities really know what they need, what they want, know the culture, the values, and what kind of local content they could add up to this infrastructures.
So that would be a model of a community network offering services but using someone else's infrastructure.
But then there's an integrated operator which wants o own everything, all the access network, the transport or back home network and offer directly the services. In the case of, for instance, the rural north and TIC in Mexico, which is the 2g and 4g wireless network that has most of the layers in the network architecture.
A hybrid one would be, for instance, an operator that offers wholesale services through a not open access network. To someone else who can then offer it on a retail basis. It is important, given the geography, the availability of back haul networks nearby, in cases of rural and remote areas, what is the best model? It is true that behind the philosophy of community networks, there is a will to manage, to be able to be in control of the services, quality, pricing, et cetera, also to be able to offer content that is relevant and meaningful to the local members.
But it is important to see how this decision would impact the availability of funding.
And finally, because I'm running out of time, the report explains very well how in the different stages of these community providers, they also evolve and what used to be a very local infrastructure, for instance, Wi‑Fi mesh, then can become a promoter of clusters of community networks and become a mezzo organization, which knows very well a given area, a given country, but supports community networks, providing them technical capacity building, legal advice, providing an effort how to build and create local content, and how to access funding. So that's a mezzo organization in the community network model, it's a very helpful, and we see them in Rhizomatica, Sensaleni, and like the link between the community, local network and the investors.
So I think I'll leave it there and just we can later come back to see how these different operating models and layers of the network can be managed to reduce risk and to make sustainable financing more likely. Thank you so much.
>> JANE ROBERTS COFFIN: Thank you so much, Adriana, that was fabulous. For those of you joining us, that was a nice overview of dinner owner‑operator models and some of the regulatory policy, other considerations and legal for those of you that don't know Adriana, she was a regulatory with the Mexico regulatory body and a has been a big supporter of community networks and much more.
Up next is Ben Matranga from connectivity capital, one of the key authors of the report. He'll talk about network financing mechanism, you're up and have 15 minutes.
>> BEN MATRANGA: Thank you for laying the groundwork and understanding what the variety of owner operator models out there. What I'll do is jump into financing, talking about how networks generate capital, and then hopefully demystify a little bit about how they are able to raise capital, what are the sources of capital, what are the tradeoffs of those various sources.
So with that, I'm going to share some slides and jump right in.
>> JANE ROBERTS COFFIN: One perspective for you too, evidently in the room, the slides are very small. So if you can describe the pieces of the slides as you're walking through them, it's hard for, I guess, the people on the ground there to see all the words.
>> BEN MATRANGA: Thank you all for letting us know that. We will also place, once again, in the chat the link to the full report. For those of you in the audience, please, by all means, look this up after, reach out with any questions with anything we describe piques your interest and you want to go deeper on the given topic itself.
With that, I wanted to start out with a concept that we went into in detail in the report, but I think is really foundational, this concept of blended capital and why it's needed.
Blended capital really is ‑‑ it's what we call the capital stack approach. Often you're using a combination, traditional tools which people will understand, which is equity and debt, but then also in grants. By and large, every telecommunications network in the world, whether it's a community connectivity participate, whether it's a community network, a big mobile network operator, has some degree of subsidy in it, it's one thing often missing and important to call out. Often big legacy companies have received quite a bit of government assistance over the years, so, you know, oftentimes when new operators are starting out, especially new social enterprises, new private operators, they say well, do I have to finance it all myself and build it all myself? At times, there will be moments where you will have to find personal sources of capital.
By and large, there is kind of an expectation and a norming in the sector and certainly with all of the case studies we covered, there is access to are what we broadly defined as a subsidy. I'll go into individually some of those specific mechanisms of what a subsidy is.
I wanted to start here and really explain this idea of blended finance. Ultimately, the more blending you have, it lowers your weighted cost of capital. So equity being the typically the most expensive, it's kind of that target return, also the highest risk, then debt, and then ultimately grants. This is overlaid with a variety of de‑risking strategies, credit guarantees, tapping into government resources, universal service funds to decrease that cost of capital.
This next concept I want to go into that I think is incredibly important is how that capital stack changes over each stage in the life cycle of a community connectivity partner. It's a very critical point because I think oftentimes when we have the luxury at connectivity capital, we have financed over a dozen different ISPs in 15 markets, mostly in sub‑Saharan Africa, and a lot of times you'll meet an operator who feels stuck, they have grown business to a certain size, they know they have ambition, opportunity, certainly a need to grow to, you know, another town, city, community over, but they don't quite know what are the resources available. What we tried to do in this report is describe what are those various tools, and then give some guardrails about how that changes over time.
So one of the things we talk about here are four distinct stages of a community connectivity provider. The first one being started, then sustaining, then expanding, then maturing.
The idea being that what is the focus at what time of the life cycle of the company will change. So in the early years, they're often grant supported entities, those could be grants from government to get started, those could be actual pre‑funded from members of the community.
One of the examples we highlighted was Barn broadband for the rural north in northern England. One of the ways they started, they sold interest in the cooperative to users at the beginning, right, so people would put up a bit of money, they would also then trench some of the initial actual civil works to lay the fiber but put in the initial capital. It would then guarantee them a connection once the initial network got built.
It kind of gets over the first kind of hump, oftentimes people will talk about the chicken and egg, which comes first, this was one of the innovative strategy we saw around your users become your investors and having synergy in that. That's one way of doing it we thought was quite unique we went into detail.
In that first starting phase, there is the initial capital expenditure cost. Over time as you move toward sustaining that changes, you're talk about core and core cap ex. Now you're talking about what are your sources of back haul, how are you optimizing the cost. How are you building out the human capital side of the business to able to sustain the supporting. Oftentimes we find in the early days ‑‑ in the early days of operating a CCP, everyone is wearing multiple hats, so the CTO, network engineer can oftentimes be the installer, also the help desk, is kind of a variety of roles.
One of the amazing things that we always see is kind of how all of those people evolve their role over time, and, you know, rely on users and community members that have the skill sets and able to adapt.
One of the things we also tried to unpack a little bit was a little bit of a train the trainers model. You know, oftentimes, there is one technical lead at a CCP when it gets up and running, that individual can't be the installer on every new customer that comes on network, they've developed systems around training about how to do the more basic knowledge traffic, as an organization evolves, you get specialization of skill and role. You have kind ‑‑ what you would perceive as kind of the traditional kind of telco model where you have the installer, network engineer, the help desk, et cetera.
Right there at stage 2, sustaining, then on to stage 3, which is expanding. This gets into the more market rate commercial sources of capital, both combination of debt and equity, oftentimes enterprises that have CCP that have high social purpose that are going into communities will still use a bit of grant funding at this stage.
Certainly one of the things we encourage every CCP to do is to be able to benchmark the cost of their service against alternatives into the market and begin to quantify the social benefit. It's incredibly powerful, we see it all of the time, all of these amazing CCP that kind of just do the work, right? They provide these amazing services at below cost because that's what the community can afford.
They're so focused on just getting the connection live, getting the school connected, they don't always collect all of the information to say, here's the value we provided that community. That value was funded by something, it was funded whether it was cross‑subsidy from an anchor tenant, whether it was actual members of that community agreeing to subsidize the local school, et cetera, it's really important as CCPs grow to quantify that and then when we talked about earlier being proactive, being able to tell people that story.
We executed x number of schools, residents, low income residents, you know, at this cost, we subsidized this number of connections. It builds that case that this is not just a regular kind of for‑profit provider looking to kind of grow at all cost, it's a quantifiable measure of impact. This last phase is the maturing phase. You tent to get into what would be 25,000 plus subscribers. The financial markets, by and large, begin to function a lot better at this phase. You can get traditional sources of capital. It's still kind of always tough, in general, there's investing to internet service providers and mobile operators, et cetera, bit of a specialized field. There is still challenges here, but the investment risk is vastly decreased.
What we like to explain to most CCP is, you know, your goal should be to take the go to zero risk off the table as soon as you can. Right? Once you're at a network of sustainable size, 1,000 subscribers or so, you're not going to just kind of completely go kaput. Usually it's a matter of the rate at which you scale, the rate at which you're able to bring more capacity online and the rate at which you can connect more customers, but you are a business that's going forward.
We like to call that the calisthenics part of growing a CCP, it's kind of basic muscle training and every day you got to get up and run five miles and hopefully after a year or two years, three years of operations, you kind of put your head up and see, wow, we have 25,000 customers on network, we are covering all of these different areas and that's really where the social mission begins to shine, you can kind of see all of the digital transformation that has taken place because of that.
Let me then jump to this next slide. This is something I talked about a little bit earlier in the initial introduction, I want to go a little bit deeper. This is the difference between a grant supported capital subcommercial commercial and some of the de‑risking strategies.
One of the things that is critically important to understand, the typical financing pathway for CCPs, depends upon the financial sustainability of an operator. We went into some basic ‑‑ for those of you that took microeconomics, you'll see familiarity in the charts, we tried to describe kind of revenue and returns to revenue and different points along that revenue curve at which sustainability occurs.
And I think what's so critical there for any operator is to, a, benchmark where you're at today and directionally understand where you want to go and what are some of the ways to get there. And it's a combination of user growth, decreasing costs, et cetera, but ultimately, hopefully it gives you a directional sense of where you are today and what are some of the most immediate steps you can to get to that next level. Specifically under these four broad buckets grant supported, these are traditional mechanisms that many of you have heard of, certainly tax exempt donations, in‑kind infrastructure, what we like to call vertical assets. The school that got a subsidized connection, also let you put a tower on top of it. That's a vertical ‑‑ that is a vertical asset. Often a cost to that.
That's where it kind ‑‑ where the buy‑in from the community and connectedness make it possible, because it is a ‑‑ you know, it's a collective effort. People see we need to grow this network, need so many high sides, this building, this municipal building, this school, this library, this health clinic is able ‑‑ it has that asset as ‑‑ it is on the grid, it's connected to power, et cetera, it allows you to cross subsidize that in a different way by providing a vertical asset and trading it for the connectivity.
Some of the other mechanisms to go through quickly, combination of tax credits, impact incentives, certainly universal service funds, startup subsidies and broadband vouchers was another example we went into as well.
One of the things that I think is really important to come out, which is obvious, but I don't think it gets enough attention, is when you look at the ‑‑ when you look at the large scale CCPs that have grown in the rural north, they often required a degree of subsidy from government that, by and large, does not exist in more developing countries, you know, one of the challenges with operating a network is you are competing against the social pressures of a government to provide multiple other things. So a subsidy that goes toward connectivity is competing to a subsidy to other sectors. The minuting ability of government to be ‑‑ the financing ability of government to fund those voucher schemes comes into play, who provides that, how does it come to bear, I think it's an important thing to call out and an important realization for a CCP to understand, with whether they're going directly to their government or an international NGO, et cetera, to be able to provide that.
The next category, I'll move quicker because I want to make sure we have time for questions at the end, subcommercial capital. Subcommercial capital, this is what we would call patient equity, recoverable grants, quasi‑equity, revenue based financing, convertible loans in the municipal sense, it's the bonding capacity of the local government, it's concessionary loans, government equity and different instances, but it is often subcommercial capital.
What we like to think about is take the risk free rate in any given market, it is a general obligation bond, priced by any government that usually becomes the risk‑free rate and move down from there. Take a GO bond in Kenya right now, priced in the 10 percent range, so we would be just blow that, then you get a sense that is what subcommercial capital looks like in that market.
The last one is commercial sources of capital. Why I'll leave less time for this, it's something broadly folks are aware of, but it is bank loans, commercial credit, vendor financing, everything from private equity venture capital in the much later stages, there's the equity markets that are working. But by and large, the big piece of this is the banking system, and being able to get access to bank loans.
On the bottom of this chart, one thing I do want to talk about is de‑risking strategies, the de‑risking strategies broadly overlay all of the different financing mechanisms, but there's some very critical ones, we tried to go deeper on the ones that we saw were most prevalent in markets. Two I want to highlight, one is demand aggregation, it's kind of the wholesale, wholesale at scale. As you're buying more, you get a better price. So a lot of times when a community connectivity partner is aggregating demands, aggregating demands for back haul service, for example, they can get better pricing. You just have more pricing power, able to bid that out at a much more cost effective price and pass that savings on to advance further Thursday social mission.
The next one we think is very the critical, the idea of pre‑sale and down appointments, this is in the Barn example I gave earlier, it's letting users become the financiers and frankly the biggest kind of proponents of the network. One of the examples we thought was so powerful was from Thailand, where they had users put down 3 to $10 deposit, depending on the size of connection they needed, relatively low dollar but meant a lot of for those folks and showed the buy‑in and commitment and kind of the demonstrated need that those people were willing to do because they saw the value in the service and getting that kind of reliability and affordability of connectivity.
The last thing I'll mention here is this idea of anchor tenants. A lot of times, one of the common themes we saw across all of these networks is being able to have an anchor tenant relationship in the very early days of running a CCP, an anchor tenant is usually a large capacity consumer on the network. So for a long time, many of you might be familiar with the Enrin university networks, et cetera, but those are the high capacity users which become the anchor customer, the base load if you will of the community connectivity partner. They enable getting up to the minimum viability scale. Rule of thumb we see, somewhere around 20 to 40 percent. If you're a CCP and starting out, cluster together anchor tenants around 20 to 40 percent of your total capital outlay. It really does begin to de‑risk your investment.
Just actually put a number on that, if you're doing, say, $100,000 build, you can secure contracts over, say, two to three‑year period in that 20 to $30,000 range, that becomes great baseline revenue that you're then able to invest into ‑‑ begins to get the motion running of other folks to buy in and gives you more confidence going forward with that build.
Let me do this last slide and I will stop here and take questions. This is what I think is one of the more powerful slides, it is this idea of different types of financing at different moments, and this was really written from the point of view of the community connectivity partner, if you literally look at your financial statements, you're able to calculate operating break‑even, financial break‑even, we map that again different sources of capital. By and large, if you figure out where you are at that phase and then move over to the right hand side of this, you're able to see what are those grant supported sources of capital, whether it's philanthropy, impact driven, ESG, environmental, social and government led type investors, and then traditional sources of capital as well.
So with that, let me send it back over to Jane and encourage anyone that has questions to please feel free to put those in the chat and ask away.
>> JANE ROBERTS COFFIN: Thank you, Ben, this was great, thank you for that excellent overview.
We are now going to turn to a practitioner in the field of a different type. Someone who is actually working on a community network in Kenya. We have the pleasure of Risper Akenya with us today. tuponda. We'll turn it over to you for about 15 minutes. We are running a little bit behind, but 15 minutes, 20 minutes to talk about an overview of what Tunaponda is and explain why access to capital is key for your community network, and other items related to kick starting operations and kick starting other phases of your business model at Tunaponda or any other observations about access to capital and advice for other community networks and folks working with community networks. So Risper there on the ground, we'll turn it over to you, I got a flag that folks can't read the link from the chat, evidently. I'm going to pop another link in the chat, and read it over after Risper speaks, so that you all can download the report, evidently I popped in a link for a PowerPoint presentation, my apologies. What I'll do is sent you a PDF. Risper, over to you to hear more about Tunaponda and financing.
>> RISPER: Thank you so much, Jane coffin, it's great to have this composition at this time when community networks is becoming ‑‑ gaining popularities and communities are really getting to understand the importance of having and starting their own networks that serve their needs and their problems.
Just to also really body on what Jane, you mentioned, communities will always organize their own problems. So, for example in Kenya and where Tunaponda Network, where our community network is located, we have seen, first of all, it's in the informal setting, Nairobi, Kenya, and we have seen how communities have always organized to solve their problems. For example, something called Charma, where we have come together and decided to have a way of banking in the local setting and having a way to just finance themselves.
And also, we have also seen the community really organizing to have affordable even electricity that served their needs. With such innovations, we ‑‑ there are a couple of things that really investment would really take care of. For example, the quality ‑‑ the quality of the services that our ‑‑ that come across when community organizations themselves, for example, electricity that is coordinated by themselves, we are seeing a lot of ‑‑ we have seen a couple of dangers we have had, and also just the safety around it is not well. Even the impact, as much as it is well, the intentions are well, but because of the lack of financing, the lack of support, then you find that the quality is very low and can even cause issues, dire consequences to the members of the community.
That is why, for internet, it's very important to support members who want to start connectivity for their community. So that the connectivity is very affordable in the sense, and also very safe for the community looking at when it's financed, then the people who are running the internet, the community itself, feels very secure because it is well defined and well structured.
Also, this really affects the affordability of the internet. Much as community networks are ‑‑ exist to provide affordable internet for the community, this could potentially affect that, but then if the whole initiative is well financed, then that really caters and reduces the price of internet connectivity for the community.
Just to talk a little bit about Tunaponda net, we are a local community network based as a mission in the Nairobi, Kenya, our goal is basically to provide internet access that is really ‑‑ that really take into consideration or reflects the realities of the community.
We aim to build digital ecosystem in education, health, business around Tibura where we are located and do this just to enable that even as people are connecting in the online space, it really speaks to the social economic advancement.
Our focus areas, we have three focus areas, that is community connectivity, so we actually connect the centers with internet. We also focus on digital inclusion, that is the access, how the internet is beneficial to the community. We do a lot of digital literacy just to help members of the community to understand what ‑‑ to understand how to really interact in the online space, to make their work visible, and also to just support them in the work ‑‑ in the efforts they're really doing in the community.
Lastly, we are also an organization, and we support health community networks that are existing in Kenya, just to understand what it takes to start a community network, what it takes to operate a community network, as well as what it takes to sustain a community network. And part of our what we do with the national school is capacity building, and we have different areas that we really focus on. That is the network and infrastructure, just to talk on the deployment of ‑‑ deployment of the network. Also look at what now it takes to sustain the network.
You are lucky for this year, to also have an expert from APC who just talked a little bit about the financing mechanism for the paper that has just been presented. Now, some of the challenges that we have seen, especially with our work on the ground with other community networks, when we started, we were working with several community networks, three of which were already existing and four were just imagining, and there was interest to really take connectivity to their communities.
Part of that was the ‑‑ people ‑‑ the refugee community, and we trained ‑‑ we took them through training on the three areas that are mentioned, just to really make them understand what it really means to start and operate a community network. But then, even in the first phase, for the imagined community networks, we encouraged a lot of peer to peer learning where the existing community networks would share with the networks and what their efforts and what they're finding on the ground.
Some of the conversations that were coming up was with regards to equipment and how expensive it is to actually deploy the network. Part of the conversations that we have been having is once we had the capacity building for this community networks, how can we then support them to actually deploy networks and to have practical ‑‑ to have connectivity for their communities without really struggling in terms of the equipment that they would use to make these connections.
Also, another thing is ‑‑ so for the first iteration of the national school of community networks, we had several community networks, this was, of course, a funded project, thanks to Locknet, who supported the movement in terms of financing the training, the capacity building in Kenya and even in other countries within Africa and within the globe.
Now, we were to work with seven community networks, but then going ‑‑ when we started this conversation, we found out they are already existing organizations that were looking to provide connectivity for their communities, and they really wanted to be part of this capacity building and that are really ‑‑ we had to extend our open ‑‑ open the capacity building to more community networks, and just concluded school, we trained 11 community networks, but then even with that, we were not able to train all of the people who ‑‑ the communities that wanted to be part of this school.
So this need for the school, this need for their communities that will are coming up and saying we want to start connectivity for our community, for different reason, to amplify the work that their communities are really doing, to help with education in the different communities, to help with ‑‑ to assist with ‑‑ in the refugee to assist the refugees to be able to connect and to communicate with their families in different countries, but then we need more ‑‑ there's need for finance ‑‑ financing to really assist in having more and better capacity building that accommodates everyone and anyone who would want to really learn and understand what ‑‑ how to sort, how to operate and how to sustain a community network.
There's also ‑‑ one of the areas that we really focused on while we were training other community networks was local content creation. This is just to encourage even as the community networks are providing connectivity, how do they focus on after access for their communities. So just really looking into various ways that the community networks can really create local content that speaks to their realities, content that are very relatable. For example, in the just concluded school, there was a community network that really was very much interested and has ‑‑ had expertise to create animations that really speaks to their community. Animations to just highlight the culture, to highlight the heritage of the specific community.
And this needs ‑‑ one of the support in terms of equipment and tools that will help them to create such creations that would be ‑‑ that would speak to their community, and that not only is animation, tools around broadcasting, tools around just creating local content, that is ‑‑ that focuses on what the community is all about. And that promotes the cultures and promotes the work that the community is doing. And then another challenge that we saw when we were doing the national school of community networks was a lot of the community networks work with volunteers from the community. So it's very ‑‑ they have another job that really sustains their living, but then they volunteer their ‑‑ some part of their time to work on providing internet to their community. Now, this is divided attention, and as much as they would want to support their communities, they say they also want to sustain themselves beyond ‑‑ to sustain themselves and their families. This really is a problem because when there's a creative opportunity, then they shift in focus, and that really affects the quality of engagement with the community, even as these efforts to engage them in the online and provide internet that will allow them to engage online. So just to say that there is ‑‑ there is definitely a need to really look through the different ways that community networks can be able to sustain itself.
Part of the conversations we have been having is really drilling into the community ownership because there's the in‑kind support that comes ‑‑ from the community when the community network really speaks to the needs of the community. So I really encourage the different community networks to understand the values, to understand the trends of the community even as they deploy the network and also that there should be investment going towards community networks, being that they are really helping efforts that the big ISPs are doing in connectivity, and helping efforts that also really bring about interaction and bring about the last mile population to ‑‑ the last mile population to the composition that is already happening online and just to help to connect, which is the connecting the unconnected.
So yeah, I think I will end with that, and back to you, Jane.
>> JANE ROBERTS COFFIN: Thank you so much, Risper, that was an amazing perspective. We want to give a callout to you and the team at Tunaponda community networks for focusing also on the community itself and what community networks can do to sustain people for businesses and growth inside the network itself. The community networks. I'll stop talking and turn it over to Juan Peirano from the Internet Society and give us some of the recommendations from the report and ask our panelists for a quick Q&A, and we'll probably do that in speed round fashion. Over to you, Juan.
>> JUAN PEIRANO: Thank you very much, Jane, speedy indeed. Just today, the Internet Society, we are very happy and very excited about this report because this gives us another tool in our toolbox for us, as an organization, but also for our community, and especially in the context of the sustainability of connectivity to providers. This is a great way of us bringing more to the room. We are really excited about this.
Just to go over very, very quickly, over the recommendations, Ben, Adriana, Jane already mentioned many of this, so I will not go over their recommendations in detail, just to highlight that in the framework of this report, we have three main stakeholders, the CCPs, the community internet providers, governments and policy‑makers and funders.
Within those three categories, the report highlights some key recommendations. In the case of governance and policy‑makers, something the Internet Society have been doing for a while now, for many years, actually. Advocating for CCPs to be within the connectivity framework of the country and the legal framework and licensing frameworks. For them to be able to access spectrum and to be able to access government funding or subsidies like other have.
And also I think that's one of the main recommendations for policy‑makers and governments, to be able to recognize this is a solution ‑‑ that community are a valuable and sustainable solution to the unconnected in those places where they are the hardest to reach and where traditional business models don't fully fit in those conditions.
In the case of funders, like the Internet Society, we are a main stakeholder in this report, in the sense that we are a grant‑giving organization, so we are in the early stages of the deployment and developing ‑‑ development of connectivity provider, community network or municipal network, whatever shape or form it takes, and I think for us, as a funder, the ‑‑ this framework of stages is key, and being able to focus on those ‑‑ on these stages and recognize our place as funders in the different stages of the ‑‑ of the time line or the growth of the connectivity is key, so we know where to step in, where to step out and help to get to the next stage. So as grant‑givers, we are really keen to make sure that community connectivity providers can evolve and become sustainable as quickly as possible, but also to make sure that we can provide that support to get to the next stage.
And finally, to I think it was mentioned before, make sure that you know where you stand, make sure that you can tell your story, and make sure that in the context of sustainability and financial sustainability, to make sure that you can tell your financial story, that you know what you have, the equity, you can recognize the value that you have as a community and as a community provider, so you can tell that story ‑‑ when you go down that line of stages and be able to unlock different streams of fundings.
I think with that, I will encourage everyone to look at the report, this is a great report, we have learned so much, building this report, we had a lot of fun and we can talk about this for hours, but what I would like to do now is just to invite, again, our great panelists, and maybe we can start with Risper, in just 30 seconds, what would be your message to our audience the support or about any of your expertise about how to get to sustainability and unlock financing mechanisms. Risper.
>> RISPER: Okay. Thank you. For me, just to say that great work with the report, and of course, really outlines the different ways a community network can leverage to be able to finance themselves. Maybe just to also encourage you to simplify that report, just for intake on the ground because even when it was presented, there was still a lot of questions and a lot of room to ‑‑ for ‑‑ to really understand the different ways they can use the report to leverage and really support the work. So thank you.
>> JUAN PEIRANO: Thank you very much, Risper. Maybe Adriana, 30 seconds, highlight, I anything you want to say. To close this.
>> ADRIANA LABARDINI: Thank you, Juan. Well, because these recommendations are both for funders, for policy‑makers and for the CCPs, I think, given the wonderful work that APC, Rhizomatica and all their partners and peers have done in supporting capacity building and supporting the movement, and supporting the infrastructures, the cap‑ex. It is important for us to convey to the communities that from the very early stage of a community network, they have to align their vision with financial sustainability, the support we have been giving them through grants, I think, has been extremely valuable, but from the very beginning, they have to work towards sustainability, in any of the models we talked about. And the other message as a former regulator, we have to keep insisting that the international and national level, that regulations should never be a barrier, that the digital transformation we talk about globally needs not to be exclusive. We need digital inclusion, we need bottom up connectivity models, and eliminate barriers to access the spectrum licensing and affordable back haul. The communities are doing a great job to manage their own destiny, but they need enabling policies. Thank you.
>> JUAN PEIRANO: Thank you very much, Adriana. Now Ben, your ‑‑ closing remarks and recommendations for everyone.
>> BEN: I knew I was going to get one mute error before the end of it. Thank you everyone for joining us. The one point that I think is absolutely critical that folks walk away with is just the diversity of approaches that all of these community connectivity providers take, and if there's one thing I hope people dive into, it's the case studies at the end. There's 11 different approaches that we tried to highlight of all different types of sizes, different geographical locations, different technologies, fiber, fixed wireless, et cetera, and use those case studies as inspiration and to give you some guidance on what is possible.
One of the statistics I always like to point to, which is ‑‑ seems obvious, but gives people a sense of what I mean by that diversity of approaches, if you look at autonomous system numbers, ASN's, there's a thousand mobile network operators in the world, two to four in any given country, but 100,000 what we would call fixed line networks, these are internet service providers of a variety of different sizes, and that just shows all just the diversity of approaches. So there are sector specific, geographic specific, different markets, not every one size fits all approach, and our hope with this report is that this provide you a set of the tools, some of those guardrails of success, but not necessarily gives you the direct answer. It is a process, what you will look like in year one, versus year ten is going to be different. So hopefully this gives you a little bit of inspiration, gives you baseline knowledge, but ultimately, it is working with your community to get that better answer to provide the solution that ultimately works for you, thank you all, please do feel free to reach out with any questions.
>> JUAN PEIRANO: Thank you very much. This is certainly highlight. This report is based on reality, these things are happening right now on the ground. So you've seen it with Tunaponda, this is happening, governments are changing their policies, CCPs are building networks, funders are funding these networks. You can reach out to any of us and to any of the people involved in this report. And this has been great, we can talk about this for hours and hours, but Jane, please. If you want to close out this session.
>> JANE ROBERTS COFFIN: We are a little over time, we thank everybody in the room, all the panelists, we really, really appreciate your attention to this matter, thank you to all of the speakers and in particular to Tunaponda to the local on the ground perspective. Adriana and Juan and Carlos, of course, who is here, helping with the recording and we'll be putting a report together, and we really appreciate your time and energy. So please do take a look at the report, it's on the Internet Society's website and the connect humanity's website. Thank you again, this is a really important issue, we'll find ways to finance and make our networks more sustainable at the community level. Everyone, have a good day and enjoy the rest of your time in Addis Ababa.