Thursday, March 17, 2011

Closing the IT Infrastructure Gap, Opening Doors to Rural Markets

Rural areas in China, which have fallen further behind major cities during the country's long economic boom, are set to receive a major upgrade to their information technology infrastructure. The Ministry of Commerce, the Agricultural Bank of China and China Mobile recently announced a cooperation agreement to install and develop new platforms to help modernize rural areas by increasing businesses' and residents' access to information networks and boosting the appeal of these areas for outside investment.  The news comes as other developing country governments announce initiatives aimed at helping rural areas close the economic and infrastructure gap with their urban counterparts. For instance, India's budget for 2011-2012 included a $12.8 billion allocation to improve telecommunications and broadband in rural areas. South Africa has earmarked $65 million to expand rural broadband infrastructure and services. 

These investments underscore governments' realization that their large rural populations have been economically underdeveloped and socially disadvantaged by their lack of information technology infrastructure. Roughly half of the global population lives in rural areas, including 56% of China's population and 70% of India's population. Telecommunications investment has been overwhelmingly concentrated in urban areas due to their high levels of wealth and inhabitants, while rural areas have been left behind. This focus has constrained companies' access to rural markets, in addition to reducing access to products and services for people who live there. In Nigeria, even with significant foreign direct investment in the telecommunications sector, data access penetration has remained low, and the Nigerian government is being blamed for the lack of investment in broadband. Ultimately, national governments will have to take the lead in investing in and creating policies to support the expansion of broadband and other IT infrastructure to rural areas.

Companies looking to break into untapped rural markets would do well to pay attention to these governmental infrastructure investments, and the grant making trends of the regional development banks that often fund them. By understanding where and when they will be completed, they can position themselves to enter rural markets on the heels of these projects. In many cases, new rural infrastructure is built using the latest technology, providing opportunities to create next generation products specifically to meet the needs of rural consumers instead of recycling technology previously developed for urban markets. The rise of rural technology investment allows companies a unique opportunity to not only reach rural markets, but also leapfrog existing technology to develop innovative products for them.