2. The Current Environment
2.1  General Overview
2.2  The State of Rural Service Today
2.3  Technological Advance and “Leap-frogging”
2.4  Establishing a Realistic Level of Penetration
2.5  Overview of Sector Reform Approaches
2.6  Public Sector Reform with Limited Liberalization
2.7  Joint Venture, Risk/Revenue-Sharing and Outsourcing
2.8  Privatization of Main Carriers
2.9  Regional Rural Operators
2.10  Competitive Rural Operators
2.11  Summary

This chapter gives a brief summary of the current state of rural telecommunications in developing countries and emerging markets, where well over 50% (and in populous Asian countries even more than 70%) of the population lives in rural areas.

It points out that through technological trends developing countries have the opportunity to leap-frog developed countries in the way they approach and can accelerate rural service provision. The authors give guidance on what level of penetration can be achieved realistically.

The main part discusses the implications of key models of sector reform and deregulation for rural network expansion and service provision, such as:

• public sector reform with limited liberalisation
  
• joint venture, risk/revenue sharing and outsourcing
• privatisation of main carriers
• regional rural operators
• competing rural operators

By reviewing country experiences, specific initiatives within the sector reform strategies to accelerate rural telecommunication development are shown, as well as policy instruments which encourage or hinder rural service provision.

The range of potential reform initiatives show that rural service provision can be accelerated in a viable manner under various circumstances. However, neither liberalization nor privatization is in itself sufficient to adequately increase rural investment levels. In most cases these measures need to be complemented by establishing service extension or investment targets, as well as incentive or cost/revenue sharing schemes. Although several of these schemes help to address previously unmet demand, very high-cost subscribers may continue to remain without service.

To reach these areas often requires deliberate policy instruments including financial subsidy or resource pooling. Even though deregulation may contribute to increased rural investments, policy interventions will continue to be necessary. The specific mechanisms are discussed in more detail in chapter 6 and 7.