A successful NREN is a financially sustainable organisation that serves the ICT needs of its constituents. Of course, this simple definition does not reflect the complexity of becoming a successful NREN. The services provided, with international connectivity being the most important one, need to be financed.
As NRENs are often in competition with commercial ISPs for attractive connectivity tariffs, these tariffs need to be competitive. Even though NRENs can provide unique services for members, the reality is that connectivity tariffs are compared with commercial ISPs and the least expensive option is often selected. Therefore, government support is as essential as member buy-in and commitment.
To help benchmark the situation and relationship of an NREN with its stakeholders, it may be useful to consider its position on a grid of member engagement and government support, as visualised below.
The horizontal axis represents the level of member engagement whilst the vertical axis shows the level and type of funding (government vs. member funding). As a result, an NREN can be mapped in one of the four quadrants.
A number of points can be drawn:
- In many countries a successful NREN is likely to be situated in or in proximity to the sweet spot1: strong member engagement with mixed government/member funding.
The route to this spot can be either initiated and driven by securing government support (clockwise), or by taking a more grassroots approach where members are the driving force (anti-clockwise). In either case, the most stable point is commonly where both members and government provide the financial basis for the NREN business model, and where strong user engagement keeps the NREN alert to the ICT needs of its users.
- This is not the only viable position however, depending on local circumstances. Even if member engagement is quite low, provided there is strong government financing support then a stable NREN can be formed – though it is recommended that attention is still paid to fostering member relationships to ensure their needs are met and there is support for the NREN service.
This model relies on a long-term continuation of government support. In the event of government policy shifting there can be a major risk to sustainability, unless the NREN and its members can convince the government to maintain funding support, or quickly diversify the NREN’s sources of funding.
- Another potentially successful situation is where the NREN has been able to generate sufficient revenues from its members, or other sources, so that it is largely or wholly independent of government financial support.
In some countries member/user revenues are the only possible business model. However, the NREN is at greater risk to competition from commercial operators where the added value of NREN connectivity and services is not appreciated by the users’ funding decision makers, or if the NREN’s added value is not continuously updated. Where there is scope to increase NREN financing with government sources, then this can provide a cushion which can help weather any competitive ‘storms’ versus the commercial market.
The section presenting showcases will demonstrate how existing NRENs have managed to achieve successful positions and thus become more sustainable.
Essential readingNetwork Value
This document deals with the pricing of NREN services, mainly aimed at NREN customers. NREN Organisational Best Practice
A checklist for a sustainable NREN. NREN’s – The Economic Case
This documents outlines the economic benefits an NREN can bring to a country.