US legal loop-hole creates a business model for ZenoRadio’s phone-up radio service in Africa and elsewhere

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A US law designed to compensate rural carriers has created an arbitrage opportunity for ZenoRadio’s IVR-based radio service that is both listened to by several African diaspora communities and more recently across Africa. Russell Southwood spoke to ZenoRadio’s Yossi Rosenberg about its African business.

ZenoRadio’s current business model relies on the law of unintended consequences in two ways. What customers pay for the radio services which they dial into is minutes which are certainly not free. But because many US carriers offer unlimited monthly packages, they are for all intents and purposes free.

Critics of the Act, though, say this subsidy structure should be revisited, but most likely nothing will change because support is too strong on Capitol Hill. So for the moment, ZenoRadio's business is safe. Without this loophole, ZenoRadio would find it much harder to survive.

On this basis, the service has become extremely popular with African diaspora (particularly taxi drivers) communities, particularly from Burkina Faso, Cote d’Ivoire, Gambia, Ghana, Guinea, Mali and Senegal. In some instances ZenoRadio has helped African radio stations (for example, Radio Nieta in Mali) get their broadcasts streamed live online. Its Guinea radio station partner does 31,000 minutes a day but the biggest of the partners can do 0.5-1 million minutes a day:”It’s a poor man’s Pandora.”

"We have an interesting platform that targets thousands of immigrants in the U.S.," said Baruch Herzfeld, ZenoRadio's founder. "ZenoRadio assigns U.S. phone numbers to popular ethnic radio stations from around the world. U.S. listeners do not need a smartphone to listen and the call is absolutely free."

To make money ZenoRadio takes advantage of US telecommunications legislation. A loophole in the Telecommunications Act of 1996, originally intended to help compensate rural carriers, allows the company to receive a few cents for every five minutes or so that a customer listens to the station. The exact amount depends on the carrier, but for the most part, it's only a few cents. But multiply that by close to a million customers—some of who listen for hours a day—and revenue starts pouring in.

In addition to this arbitrage income, ZenoRadio makes money from selling advertising,

When I sat talking to ZenoRadio’s Yossi Rosenberg, he checked the listener stats on his laptop on a UK morning (the middle of the night in the USA) and there were 8,567 but he told me that there can be as many 100,000 at any one time. Ghana Radio had 1,700 calls to it at that moment. In effect, the are making a call to something similar to an IVR number and simply keeping the line open while they listen.

Most recently it has set up the service for the BBC World Service in Nigeria for its Hausa service. In this instance, Nigerians not in the diaspora are paying domestic call rates to listen to the station. The pattern of listening is significantly different to the diaspora audience but they have hit upon a market. There have been between 2-4,000 active users but with as many as 600,000 people using it in a month. Average listening time is 2-3 minutes. The service is streaming one hour programmes.

So what does this tell us? Ignore the curious arbitrage income stream and it shows that there will be a significant number of customers for short-form radio by phone in Africa and long-form radio in the African diasporas. The question then is how to take advantage of this. At present, at the low end of the market, a significant percentage of users listen with the FM receivers that are built into cheap phones. But what if operators were to package a service in 5 or 10 minute chunks with data costs rolled in and actually do an equitable split with the content providers?

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