Can Bodegas Solve the Philippines’ Internet Problem?

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A new program promises 30 minutes of fast Wi-Fi to consumers at the country’s sari-sari stores.

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A sari-sari in the Philippines. (Photo: beegee49/Flickr)

All other things equal, a graph tracking Internet accessibility on the y-axis and disposable income on the x-axis should include a straight 45-degree line. As any area gets richer, it can more readily afford the infrastructure build-outs required to bring broadband Internet to the region. It’s a relatively simple equation, which makes the Internet conundrum of the Philippines so strange.

Despite a gross domestic product that sits within the top 40 countries in the world, the Philippines has some of the worst Internet on the planet. Penetration isn’t the problem as much as the speed: It hovers at an average of 2.8 Mbps, which is the third slowest in Asia. The average speed in the United States is around 12 Mbps, while the global average is 6.3 Mbps. Internet in the Philippines is not only slow, but also expensive, costing an average of $57 a month, according to Forbes, compared to $31 a month for broadband in the U.S.

In the Philippines, there are roughly 114 million active phone subscriptions. Ninety-five percent of those subscriptions are prepaid without data plans, meaning the devices can only get online when they’re in an area with Wi-Fi.

The current state is a function of logistics (hooking up the 7,100 islands that make up the Philippines is a difficult, and therefore expensive, proposition) and government restrictions (permits to build networks are issued one at a time by local governments, which create enough bureaucratic paperwork to turn off most potential start-ups). It’s a complicated problem that no one seems to be able to solve quickly. But one innovative attempt is taking place at the country’s mom-and-pop convenience stores.

Called sari-saris in Tagalog, the convenience stores are found on nearly every block, owned and operated by neighborhood families. They’re community centers in a way, where customers can get canned goods, drinks, water, beer, cigarettes, prepaid phone credits, and other basic goods that any bodega or 7/11 has. But soon, they’ll be offering one extra item to their customers: Wi-Fi.

A Philippines-based start-up called Wi-Fi Interactive Network (WIN) has decided to forgo efforts to physically build out broadband lines and try to combat the country’s digital divide in a more piecemeal fashion. Over the last few months, WIN — in partnership with Microsoft, which awarded a $150,000 grant as part of their Affordable Access Initiative — has rolled out the first 100 hotspots across the country.

The hotspots take advantage of the “TV white space spectrum,” bands previously reserved for buffering zones between broadcast stations to avoid interference. Today, with fewer analog channels, interference isn’t a problem, and these white spaces are mostly unused. When Wi-Fi transmitters broadcast on these bands, the signal becomes more powerful, meaning customers using these hotspots get faster access than they normally do.

In the Philippines, there are roughly 114 million active phone subscriptions, compared to about 100 million people. Ninety-five percent of those subscriptions are prepaid without data plans, meaning the devices can only get online when they’re in an area with Wi-Fi. WIN’s plan will allow the Internet functionality of these phones to be used more often.

There’s a not-so-tiny catch, however.

To get access, customers must first purchase items. Once they do, they register their phone at the sari-sari. Upon completion of the transaction, they’ll get a passcode to use for their “free” Internet access, generally 30 minutes at a time. It’s not unlike going to the coffee shop and buying a latte for Internet, but more strictly regulated. Critics might say these payments defeat the purpose of bringing access to those who can’t afford it. WIN doesn’t see it that way.

“We are not asking consumers to spend any more than they already are in buying products they need anyway,” writes Philip Zulueta, founder and president of WIN, in an email. “If spending capacity is limited, what we are saying is, save some of your hard-earned cash since we are bundling Internet access with products that you need and buy already.”

“If spending capacity is limited, what we are saying is, save some of your hard-earned cash since we are bundling Internet access with products that you need and buy already.”

The product choices are not considered “premium” items: soap, shampoo, toothpaste, laundry detergents, milk, snacks, drinks. For customers, the Wi-Fi is an added bonus. For the product brands, it’s a way to get more exposure.

“Brands have very little visibility when it comes to these mom and pop stores,” Zulueta writes. “[T]hrough our model, brands can get a better understanding of purchase behavior, demographic data, and brand preferences. This is on top of the fact that they generate sales and therefore makes our model sustainable.” Sustainable, since a portion of those sales go back into funding the hotspots. “The revenues generated continue to pay for the cost of maintaining Wi-Fi at the store,” Zulueta writes.

Currently, Zulueta projects the 30 minutes of Internet will cost customers the equivalent of 42 cents. (That is, for 42 cents, they’re getting the product and the 30 Internet minutes.) But as the project expands — the plan calls for 10,000 hotspots over the next three years — and more brands sign on, Zulueta hopes to get the price down to about 21 cents an hour.

How will the stores accommodate an influx of foot traffic? “Mom and pops welcome the additional traffic and sales they generate,” Zulueta writes. “Customers don’t have to crowd around the store entrance since the signal goes 150 feet from the counter.”

Is this program a quick fix for all the Internet woes of the Philippines? Not at all. Being forced to rush while navigating from a phone is an entirely different prospect than having reliable access at home.

But the WIN plan is a good Band-Aid. At the least, it’s better than what preceded it. At the most, it will give some residents of the Philippines a taste of what they’ve been missing, which may plant the seed for more substantial change in the future.

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