Sharing Model to Disrupt The Last Mile

Dirk-Jan (DJ for short) Koeman is a Dutch national living in Kenya since 2013. He has over 20 years of experience in the international telecommunications domain, spanning various emerging markets as well as more developed markets and both corporate as well a start up roles. He is currently the Chief Business Development Officer for poa internet.

Poa Internet connects the unconnected and the under-served.We improve people’s lives through unlimited internet access enabling them access to knowledge and opportunities for economic and social empowerment.

By pushing the innovation envelope, we have designed, built and are operating a cost effective scalable business which can be replicated across Africa and beyond.

In his spare time, he is guest lecturer at various private education institutes, mostly in marginalized communities and sits on the advisory board of a fintech startup in Kenya.

For the majority of Africans Internet access is either unaffordable or unavailable. The Internet has a huge impact on education, social inclusion, and commerce. Providing access to the unconnected communities presents a massive social and commercial opportunity. 

Africa is 65% rural. Of the 35% urban population, many live in informal settlements. The population and/or revenue density in those areas simply doesn’t justify the cost of investment in fiber and 4G networks. 

Poa Internet is disrupting this market by using low-cost WiFi based technologies to build wireless networks in marginalized communities. To empower local entrepreneurs to participate in the digital economy, we are introducing a new model that will enable a small business to become a micro Internet Service provider. This localized delivery model will drive commercial viability, reduce costs and accelerate scale. It will also create local commercial activity, employment and the development of technical skills in these communities.

In Africa, 65% of the population live in a rural setting. It has long been believed that, in rural Kenya agri-preneurship is the only viable form of entrepreneurship. 

Some of the factors which contribute to these challenges is the lack of adequate infrastructure. Digital infrastructure is such an investment which has not made much if any inroads into the rural areas hence reducing the chances that the rural population would have to get a piece of the digital economy. Laying of these infrastructure is deemed expensive due to the sparsely populated nature of rural Kenya. 

Poa internet will introduce a sharing model where people can use this avenue to venture into digital entrepreneurship. This sharing model provides a platform and tools for micro-entrepreneurs to monetize their internet connection so that they become more resilient. It is particularly suited for the informal sector or where the economy is scaled down to small packets that can be easily sold to consumers. The informal internet reseller businesses are usually run by youth, women and marginalized groups, so enabling them to scale through tools, platforms, training, access to finance will improve their livelihood. 

The sharing model is a proposition that comes on top of our current home proposition. We will provide the digital entrepreneur with an internet connection to his premise that has a higher speed/bandwidth. This internet connection will be delivered through a wireless point-to-multi-point connection via an antenna that we will install on the rooftop.

The sharing model proposition will have:

• High-speed, low cost broadband for your business or home

• Install one or more high powered WiFi hotspots to share you Internet connection with your customers, neighbors and tenants

• Generate revenues through

  • The sale of Internet access

  • Providing digitally enabled services

  • Selling smartphones

  • Mobile phone charging

• App and cloud-based platform to easily manage your hotspots, sell access and manage the service 

• Micro Financing of equipment available

• Free online training on how to set up, operate and manage your hotspots.

• Make your business more attractive to your customers and generate footfall. Create adjunct revenue opportunities e.g. selling sodas to customers using Internet

• Professional installation of equipment at your premises within 48 hours

• Training and certification as Poa hotspot operator

• 2nd line support for you and your customers

• Poa marketing materials for display in and around your business

As a consequence of rural to urban migration, most of the population left in rural areas is that of women and marginalized groups. This project's main aim is to install infrastructure in these rural areas. As such, the biggest beneficiaries will be these women and other marginalized groups. In addition, the shops in rural areas (dukas), are mostly run by youths, women and other marginalized groups, so those will be the micro-entrepreneurs we target and help to become more resilient. 

At the heart our service will be a network of micro-entrepreneurs. We will identify existing local stores, known commonly as Dukas and will empower them with digital skills training to offer a range of internet access and digital products. This will include hosting and operating public WiFi hotspots, selling micro-financed smartphones, WiFi access and home broadband, and selling digital services such as fintech and edutech products.  

Our solution will create much needed technology jobs among the youth in these communities. It will drive additional revenue opportunities and footfall to the Dukas. In addition most of the Dukas in rural areas are run by women, ensuring that we will help bridge the gender gap as well as the digital divide.

Traditionally, the people living in urban slums and rural communities are marginalized and 'left behind'. The traditional operators, mobile or fixed, don't have a justifiable business case to provide high speed broadband access. In rural areas, it is usually the woman that stays behind, running a small shop from subsistence farming. And youth, for whom there was no money to take them to college. For these groups, providing connectivity will mean democratizing internet access and as such will have tremendous impacts on gender equality and social inclusion, such as women's inclusion, maximizing the 'leaving no-one behind' agenda.

Our initial research shows that the more bandwidth you provide to a customer, the more likely this customer is to 'share'. This sharing is done for 1 of 2 purposes:

• Cost recovery: "I will share enough to get my money back but not impact my service quality"
• For profit: "I want an easy way to turn the Internet into my side hustle"

The latter can then possibly again be sub-divided into 2 categories:

• micro-ISP; focused solely on reselling internet
• the tech savvy hustler; has a shop and wants internet for the main 'hustle' and/or wants to diversify revenue streams using Internet

According to Nielsen:

• 83% of Kenyans have jobs in the informal economy leading to them having irregular and unpredictable incomes
• This has led to the rise of the Kadogo Economy (Swahili for "small") characterised by regular hand-to-mouth purchasing of small quantities of goods and services
• 70% of all FMCG purchases are for less than $0.55 The average Kenyan shops 21 times a month
• Approximately 350k dukas account for 66% of all purchases

So by providing these 'sharers' both the affordable bandwidth AND the tools, we are giving them a way to monetize and create resilience.

The founders of the business all have extensive experience in the corporate world as well as start ups, across the globe. They felt 'something was missing'. Why not create a business in an emerging market that is 'for profit' by doing something 'for good'. The two are not mutually exclusive. It is our core belief that by you can only create sustainable social impact by having a working business model, and that social impact actually can improve the business model itself!

By actively engaging with the people that live in these marginalized communities, you start to appreciate the daily struggle. Waking up every day to make something out of nothing, hustling to put food on the table. Only by using that form of human centered design, you can build a solution from the ground up, that is suited for the needs of those people.

When we launched our first public WiFi network in the Kibera slum, the local community told us that we brought them what the government had been promising them for years. And when we introduced our home internet proposition, that community said that we had given them something that was before only available for rich people!

Poa Internet is headquartered in Nairobi, Kenya. It operates in several counties in Kenya, The team is a unique mix of cultures with a variety of experience across the board.

CEO

Andy Halsall: 25 years telecom and emerging market experience Fon, Palace Ventures, Orange, McKinsey, AMS and IBM. MBA London Business School, BSc Computer Science University of Bradford.

COO

Chris Rhodes: 21 years telecom and tech company experience Talk Talk, MCI WorldCom, NTL, Level 3 and Radialpoint. MBA London Business School, BSc Electrical and Electronic Engineering University of Bradford

CBDO

DJ Koeman: 21 years telecom and emerging market experience Equitel, Airtel, Narrow Minds, Digicel, Vodafone, Orange & KPN. BHA from Hotelschool The Hague.

CTO

Mike Puchol: 15 years telecoms and wireless systems experience Fon, Whisher, Social & Beyond. BSc Aeronautical Engineering University of Salford.

All 4 co-founders are still actively involved in the business. 3 of them live in Kenya and between the 4 of them, they have over 80 years of experience in the telecommunications sector, including start up and emerging market experience. 

At Poa we really believe in what we’re doing. For most it's more than just a pay cheque -it is an opportunity to directly engage with the communities we work with and make a real difference to people’s lives.

We work together to solve issues and encourage a culture where you get to think, not just do and you're allowed to make mistakes as you learn.

When starting the business in Kenya in 2015, we had to build our own network in Kibera, the largest slum in East Africa. This came with cultural challenges. We recruited our own team from the area we were to operate in to assist bridging that cultural divide.

Although we had done extensive market research, we realized after launch that there was insufficient product/market fit for our launch proposition. We therefore pivoted within 6 months after launch to adjust product and pricing of our public WiFi AND introduce a new product, home internet. This has resulted in a much better product/market fit and commercial traction.

Most Western companies are looking for exponential growth. Getting 'eyeballs' and then later figure out a way to monetize. We have learnt that sustainable growth is a much better approach in Africa. It is in line with the African proverb: 'if you want to fast, go alone. If you want to go far, go together.'

Lastly, we have learnt the hard way that you first need to do everything yourself in order to productize and then be able to outsource. Unlike tin the West, here in Africa you don't have commoditized services throughout the value chain

I had been to the Kibera Girls Soccer Academy to assist Abdul the founder with his program to prepare the graduates for their life after school. Most of these girls don't have the opportunity to go to college, so Abdul took it upon himself to prepare them as good as possible to join the work force. It was my privilige and honour to be part of that and share some nuggets of wisdom I gained by making lots of mistakes with the graduates. Life skills, professional skills, managing expectations.

On the way back to the pick up up point where my transport was, Abdul and I bumped into a young man who called me my by name, DJ. He said that I probably didn't remember him, but he was part f the 2nd cohort of graduates from Tunapanda , technology training institute, also in Kibera slum. He attended my lecture on entrepreneurship and was so inspired that he had stared his own web site design agency. He then reached out and have me his card. When looking at Abdul, he also had watery eyes, nodded and said: 'this is what we do it all for....'

Poa is using a different technology and network stack, designed from the ground up to offer affordable internet in areas where the others don't go. Where traditional communication service providers are trying to discourage people from sharing their connection, poa internet will instead develop tools and systems to enable and support that.

Our competition:

• Mobile Network Operators; with ubiquitous coverage of 2G (voice), but less so with 3G and especially 4G. Prohibitive pricing, especially when buying the daily bundles due to hand-to-mouth behavior which is common in the informal economy, resulting in limited engagement with the Internet

• Internet Service Providers; typically focused on the mid- to high-income areas in an urban setting. Their technology is capital intensive and as such they require a certain revenue density, resulting in prohibitive pricing and selected coverage

• The informal resellers (commonly known as 'samabaza'); an entrepreneurial individual that has to some extent replicated a network topology similar to poa internet. They will typically have their own consumer Internet at home from one of the ISPs and then branch out and share it with their neighbors, resulting in poor quality at the end point

Rather than fight the latter, we want to work WITH them instead. As well as with the shop owners (commonly known as 'duka') to help both segments to monetize their Internet connection more efficiently. Creating more resilience within the community, drive Internet adoption, create employment and achieve our mission.

Poa internet Theory of Change (ToC)

The problem with Internet in Africa is that it is either not available or it is unaffordable, it is underutilized and slow. This translates into the following problems for people:
• Customer technology/equipment is costly for the individual
• Prohibitive costing creates scarcity
• Digital skills potential not yet unlocked

The latter 2 reinforce each other, either positively or negatively. 

Poa’s mission is to fix this:  Internet in every African home. This in turn will help achieve its vision to drive digital inclusion for a more equitable world.

The intervention, sometimes called ‘strategy’ or ‘activity’ is to introduce and proactively facilitate a ‘sharing model’. 
We believe that by introducing the sharing model, more people will start progressing on the internet adoption curve, whilst creating a resilient community by offering diversified revenue streams to micro-entrepreneurs, the backbone of African society.
This sharing model has different elements to it, so these are sub-interventions:
• Highspeed, low cost broadband for your business
• Digital skills training
• Free digital educational resources

The above demonstrates that the introduction of the sharing model will have a couple of outputs:
● It will allow for innovative ‘last inch’ solutions; both sharer as well as neighbour will be assisted in finding the most effective way to get internet access to the customer
● Maximized value of the Internet; sharers will have diversified revenue streams generated from the Internet. Consumers will have more access to Internet at a price point that is within reach for everyone;
● Access to digital education resources; by offering 3rd party content, digital education training as well as 3rd party services, we create an ecosystem that will benefit both sharer as well as customer.

These outputs in turn will have a couple of groundbreaking, short-term outcomes:
● Affordable high-volume, high-speed internet
● Community digital educators accelerate learning

By introducing this intervention, it will drive the medium term outcomes that are required to achieve the long-term outcome of Internet in every African home:
● Ubiquitous access
● Adequate digital education

Our current proposition, fixed wireless access to the home (home internet), has over 12,000 customers.

We intend to grow organically to double this number in the next 12 months.

In 5 years time, we anticipate to have over a million customers

By introducing this proof of concept, we believe that we can reach several hundreds of micro-entrepreneurs in a year, who in turn will each on average serve 9 customers. In addition, they will serve thousands of customers by their public WiFi offering. If successful, this intervention will help us to exponentially grow the subscriber base in a very sustainable way, deeply ingrained into the local community, making the latter more resilient. It will assist in reducing the cost to grow as well as provide innovative last inch solutions, thus reducing the prohibitive costing as a friction point for people to get online in a meaningful way. This in turn will increase the number of customers that we serve (indirectly) exponentially.

We have a home internet proposition that has gained considerable commercial traction since its inception in 2017. On top of that, due to our relentless focus on unit economics, it currently has a break even of less than 24 months on a per customer basis. The sharing model is a natural extension of this home internet proposition, providing more bandwidth to entrepreneurial people as well as tools and a platform to help them monetize their internet connection. 

Poa Internet’s vision is to provide internet access to 1 million African homes and small businesses within 5 years. 

This vision is innovative and transformative because ISPs and MNOs focus on densely populated, middle class urban areas. Our focus is on rural and low-income communities that are underserved by these existing providers. As a result we expect to connect many of our customers to the Internet for the first time facilitating all the benefits that accrue from crossing the digital divide. 

In addition, ISPs and MNOs deliver via a direct to consumer model generating little direct local commercial activity or employment in the areas where they operate. Instead of using a direct to consumer model, we enable local small businesses to resell and deliver internet access to their community. This localized delivery model will drive commercial viability, reduce costs and accelerate scale. It will empower communities to help themselves and create local commercial activity, employment and the development of technical skills among rural and poorly educated populations. 

Currently, our growth is constrained by the amount of capital deployed. As we have to both build infrastructure as well as invest in customer equipment, our growth rate is limited. This, in turn then results in customer pricing that is still prohibitive for a large part of the market. Disposable income is limited.

Besides disposable income, knowledge of the possibilities of the internet is limited, especially in a rural setting. People may think that Facebook and WhatsApp IS the internet, especially if you live in an area where 3G/4G has not yet been deployed

Availability of internet enabled devices such as smartphones, laptops. Although they have come down in price since inception, still not everyone has an internet enabled device.

We are currently using unlicensed spectrum in the 5GHz space to build out our network towards the areas that we serve. Although very cost efficient, it also has limitations, such as reach, throughput as well as line of sight/quality of service challenges

People are industrious and resourceful, but in some cases lack the tools and knowledge to fully utilize the potential of the opportunities that high speed bandwidth can give them.

One of the underlying principles of the sharing model is that we continue to deploy network infrastructure, but that the micro-entrepreneur will invest in its own hardware, the customer premise equipment. The entrepreneur will be inclined to do so, as there is a clear business case for it. The entrepreneur in turn will, assisted by the tools and training we provide, be able to resell the internet connection to neighbours, customers and the like. 

Besides tools and a platform for monetization of the Internet, we will also provide free digital training for MSMEs. Also, there will be free digital educational resources provided to educate users on the possibilities of the Internet. This will greatly help in increasing digital literacy and this driving Internet adoption, which is beneficial for end users, micro-entrepreneurs as well as poa

We will be offering micro-financed Internet enabled devices, in partnership with Micro Finance Institutions (MFIs) which will help lower the barrier to entry for the people in those marginalized communities

To maximize our addressable market we will adopt a multi-technology approach that will use the most suitable approach delivery depending on where the customer lives:

• mmWave for dense urban

• fiber with wireless distribution (hybrid model) for dense urban and low-density urban

• 5GHz for low-density urban and peri-rural

• Low frequency LTE (using 450MHz) for peri-rural and rural

By creating a platform with an app, as well as providing training and resources, we will remove potential friction points for MSMEs and help them monetize their connection

Poa is in partnership with Liquid Telecom. Liquid provides wholesale internet to poa as well as domestic fiber connectivity (local loop or ‘middle mile’) where poa then connects the last mile (or 100 miles) to the customers. We are deepening our relationship to move from traditional vendor-customer to strategic partnership, as our goals are very much aligned

We have also partnered with Google X as a test-bed for their new technology Free Space Optical Communications (FSOC) where we were the first company to commercially use this top off the shelf technology as a point to point wireless connection with extremely high throughput capacity. X is the moonshot factory within Alphabet (Google), trying to solve big problems, such as getting the next billion people online. They have found us to be instrumental in gaining insights into what possible ways there are to do so.

We have had positive experience in the past partnering with Community Based Organisations (CBOs) in the urban slum of Kibera where we operate. We partnered with Carolina for Kibera (CFK) that focuses on women empowerment through information, education and medical treatment. We also partnered with Amani Kibera (amani is the Swahili word for peace), another CBO in Kibera that focuses on peace and youth empowerment.

Poa is a for profit organisation. We generate revenues through the prepaid sales of Internet access to consumers and small businesses. This is a well proven model across the Global South. 

As more and more people will be able to access the internet, it will have positive impacts on access to services and welfare, such as social and health services, information about diseases and health risks, quality education and learning and access to information. 

Providing digital connectivity to these marginalized communities, urban slums and rural areas, will have tremendous impact on capacity development, such as new knowledge, skills, use and transfer of technology and innovation know how. We will be creating e-learning modules for the micro-entrepreneurs to help them maximize their revenue opportunities, thus making them more resilient.

Traditionally, the people living in urban slums and rural communities are marginalized and 'left behind'. The traditional operators, mobile or fixed, don't have a justifiable business case to provide high speed broadband access. In rural areas, it is usually the woman that stays behind, running a small shop from subsistence farming. And youth, for whom there was no money to take them to college. For these groups, providing connectivity will mean democratizing internet access and as such will have tremendous impacts on gender equality and social inclusion, such as women's inclusion, strategies that maximize the 'leaving no-one behind' agenda.

As poa we have raised money, a combination of equity and debt. We have also raised some grants that funded trials and proofs of concept.

The capital raised is then deployed into our core business, predominantly as network CAPEX and customer CAPEX. When selling to a new customer, we normally charge an installation fee and the 1st month of service. Besides the customer premise equipment, we incur additional costs once we have sold a customer connection; marketing, sales costs, commission, installation costs, etc. So on day 1, we have a negative cash flow on a per customer basis. This is then recouped over a period of time, currently 24 months. So after 2 years, we break even on a per customer basis. We are on a trajectory of becoming EBITDA positive on a month-by-month basis by the end of 2020, beginning of 2021. This is for our core business, not factoring in the sharing model and other proofs of concept.

For the rural deployment we are raising grant money to deploy a proof of concept, through this Elevate Prize. After the initial grant, this model should be able to sustain itself in that network footprint, so no additional grant funding required. If successful, we then intend to rollout at a larger scale, requiring grant money to do initial deployment of these new networks.

Since inception, we have raised funds in the order of:

• Friends and Family and other individual contribution: $1.7M 

• Investment funds, and other financial institutions: $9 M 

• Grant funding $610 K

Over 2019 we have generated $840K revenues through the sales of prepaid internet, both home internet as well as public WiFi access

The company intends to raise a substantial ($5m+) financing round in the second half of 2020 / early 2021. This capital will be used to:

• Improve profitability of broadband services and make them “bankable” 

• Demonstrate ability to scale infrastructure and services

• Sustain EBITDA positive position

•  Scale the company’s infrastructure and services nationwide in Kenya

• Begin deployment of infrastructure and services into several other African countries

The Elevate prize will be used to run a trial for the following proof points:

• Diversify revenues and demonstrate increased monetization of infrastructure from micro-entrepreneurs

• Show sustainable demand in rural communities

Overview of estimated expenses for 2020:

Costs of Goods Sold (COGS) $674,000

Distribution expenses $331,000

Admin costs $395,000

Staff costs $1,335,000

CAPEX $1,097,000

Total $3,832,000

Currently, our growth is constrained by the amount of capital deployed. As we have to both build infrastructure as well as invest in customer equipment, our growth rate is limited. This, in turn then results in customer pricing that is still prohibitive for a large part of the market. Disposable income is limited.

Winning the Elevate Prize will help us in running a trial for a different business model, the sharing model. We will do this by building this vital infrastructure which is missing in the rural areas. Empowering the rural communities will empower more people since they support a larger ecosystem. According to the 2019 Kenyan census, rural households in Kenya support an average of 5 members while urban households support 3 household members. 

We believe that building this infrastructure in the rural areas will give the rural communities access to the digital entrepreneurial platform and will go a long way in bridging the digital divide gap while creating good jobs and inclusive entrepreneurship. 

Winning the Elevate Prize will give us inroads into advisors that can help with access to additional grant funding, further deepening the social impact of our solutions, forge partnerships and give additional advice on sustainability, inclusion, etc.

Funding and revenue model: in order to be able to run this proof of concept, we will need external funding in the form of grant/prize money, as our current operational budget is already stretched. The revenue model for the micro-entrepreneurs will be similar to what we already have in the market, but the proof of concept is required to find the sweet spot for risk vs effort vs reward

Board members or advisors: as we are scaling the business and we are more and more focusing on impact, we welcome advisors and/or local board members

Monitoring and evaluation: the proof of concept for the sharing model will have a large M&E component. People with experience in this particular field are welcome to assist and contribute

Within the Solve ecosystem, you have several interesting advisors, for instance Eric Schmidt. he could be a person of interest when partnering with Google, as what we are doing is perfectly aligned with their objectives

Within the Solve team itself, there are various communities that could provide assistance, such as but not limited to: sustainability, partnerships, learning, etc. Our sharing model and platform with content is something that can have learning, health, etc all riding on the same infrastructure. 

Outside Solve, partnerships with GSMA for instance is a possibility. For very remote locations, 5GHz may not be the right technology, but using low frequency LTE instead (450MHz). GSMA can assist with licensing as well as best practices for network deployment.

In addition, we will want to partner with Community Based Organisations (CBOs) in the areas where we want to run the trial.

Besides that, partnerships with 3rd parties, whose strategic goals are aligned with ours, are desired. For instance in the content space (Bridge International Academies) as well as in the education/training space (Kuza Biashara and smrt.bio)