Rural markets offer undersaturated opportunities for start-ups

As global telecom markets become increasingly saturated, especially in urban areas, rural consumers represent the final frontier of unlocked consumption for start-ups and digital providers. Consequently, both governments and businesses are attempting to reach this consumer bracket through infrastructural projects and special programmes that can improve digital access and affordability. The trend of investors and telecom firms chasing the rural dollar is evident across both developed and emerging markets. London corporate finance, for example, has long been advocating greater digital connectivity in the UK’s rural regions. Start-ups able to enhance rural connectivity or develop services for rural users are likely to see growing demand among financiers.

In both developing and advanced economies cities are increasingly oversaturated in terms of mobile subscriptions and Internet usage, which is forcing governments and private operators to look beyond urban areas for the expansion of telecom markets. Consequently, rural consumers are becoming more appealing, despite the higher input costs associated with developing rural information and communications technology (ICT) infrastructure.

Rural digital consumption is sought after by governments in advanced economies to nurture economic growth and create income streams for local citizens. The EU subsidises rural broadband programmes for its member states while the USA has publicly acknowledged its telecom deficiency across swathes of mainland rural territories and set aside US$4.5 billion in 2011 to develop broadband Internet in such areas. State-owned China Mobile is investing up to US$7.0 billion in 2013 into its nationwide mobile broadband 4G LTE network, while India has focused on providing cheap telecom equipment to its rural citizens in order to get them more IT literate and come online. Private businesses can benefit from state-funded development of rural markets by piggy-backing on such schemes.

However, connecting rural consumers in emerging countries could be a game-changer for telecom consumption globally. Unlike developed economies, markets such as China and India have huge rural populations that would massively boost segments including e-commerce, digital and social media if they came online, transforming domestic telecom segments altogether.

Rural consumers globally offer a strong market for online services due to a lack of necessary infrastructure locally and much weaker exposure to services compared to urban residents. E-commerce can offer access to goods found on urban high streets, while e-services in education and healthcare can help replace physical facilities to some degree.

However, the outflow of young people to cities in search of jobs means rural populations are older and less likely to adopt new technologies or try trending online services. Rural consumers are also less IT literate and hold weaker purchasing power than their urban counterparts due to limited economic and academic opportunities. Bridging the purchasing power gap between rural and urban homes will also remain a challenge for increasing consumption, which can be partly offset by offering budget and low-cost telecom goods and services specifically in rural zones.

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