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The path to the information society: Does it lie through the mobile?

The path to the information society: Does it lie through the mobile?. Evidence from Asia and thoughts for Africa Rohan Samarajiva SA Connect Public Seminar, Cape Town 14 April 2009. The challenge . . .

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The path to the information society: Does it lie through the mobile?

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  1. The path to the information society: Does it lie through the mobile? Evidence from Asia and thoughts for Africa Rohan Samarajiva SA Connect Public Seminar, Cape Town 14 April 2009

  2. The challenge . . . • Solve the hardest problem: getting the poorest millions connected to the Information Society • This will potentially unlock many markets and drive the world economy to a new level • Innovation at multiple levels needed • Business models to connect large numbers of poor people to electronic networks; extend from mobile to broadband • Technical solutions to make it possible for them to do more-than-voice, once connected • More-than-telecom solutions to problem of putting money in people’s pockets through telecom, rather than taking money out

  3. Connecting the millions at the bottom of the pyramid…

  4. WSIS definition of Information Society • “a people centered, inclusive, and development-oriented information society where everyone can create, access, utilize and share information and knowledge enabling individuals and communities to achieve their full potential in promoting their sustainable development and improving their quality of life.”

  5. In other words . . . • Everyone should be able to do some of what we do routinely using the metamedium known as the Internet • Communicate in multiple forms • synchronous/asynchronous • One-to-one/one-to-many/many-to-many • Push/pull . . . • Retrieve information from multitude of sources • Publish • Transact • Remotely compute . . .

  6. Answers from LIRNEasia’s Teleuse @ Bottom of the Pyramid (T@BOP) research (2008) • Six countries • Bangladesh • Pakistan • India • Sri Lanka • Philippines • Thailand • 9,950 sample, representing >500m Bottom of the Pyramid, age 15-60 • Design and analysis by LIRNEasia; fieldwork by Nielsen affiliates

  7. SEC A, B & C SEC D & E Bottom of the Pyramid(BOP)= SEC D & E • BOP defined as SEC D and E; between ages 15-60 • SEC determined by education and occupation of CWE; closely related to income levels • BOP sample is representative of the BOP population • Diary respondents also representative of BOP • Only in Philippines, sample entirely SEC E, which gives a better match with the below USD 2/day classification

  8. The hardest problem: Internet use and awareness in 2008 Among BOP teleusers

  9. Little growth in South Asian Internet use since 2006 Among BOP teleusers

  10. Will we ever get there? . . . • But there is an alternative path . . . Access = mobile?

  11. What are the prerequisites for ‘more-than-voice’ mobile? • Familiarity with the technology • Access and use • Easy access via mobiles or CDMA ‘fixed’ phones is most appropriate • Ownership • Only 40+% in the Indo-Gangetic Plain (world’s largest concentration of poor people) own a phone • Sophisticated handsets can aid uptake • Potential for use of “more-than-voice” • SMS is the most popular more-than-voice application • Payment systems in place: e-reloads as “gateway” to advanced applications

  12. Recent use of the phone to make/receive calls Used a phone in the last 3 months Used a phone in the last week 13 Among BOP (OUTER SAMPLE)

  13. Mobiles are used most as the primary phone; public phones in second place Access within the household “Fixed” phones at S Asia BOP are mostly CDMA; Mimic GSM features. Also note that 20% in BD, 32% in PK, 13% in IN &10% in LK use the mobile of another household member Among BOP teleusers

  14. Easy access needed for more-than-voice with mobile… • Easy access provided by ownership is important • Unlikely that public/shared phones will be used for anything other than basic voice • Access for more-than-voice, in order of importance • Own mobile • Other household member’s mobile • CDMA ‘fixed’ phone

  15. Total BOP phone ownership (mobile + fixed) at household level • Mean price paid by BOP for: • Brand new handset: USD 63 • Secondhand handset: USD 32 16 Among BOP teleusers

  16. Mostly calls, SMS, missed calls, balance checking, but some download/upload, mostly entertainment-related Among BOP mobile owners

  17. SMS more popular among those below 35 yrs Among BOP mobile owners Below 35 years Sri Lanka Among BOP fixed phone owners

  18. E-reloading most popular in Bangladesh, Pakistan, Philippines BOP • Qualitative research is showing interesting hybrid strategies, where, e.g., Indian users will use a scratch card for monthly/weekly use and then top-up with small e-reloads 20 Among BOP prepaid mobile owners

  19. Trust is key to payments over the mobile • 71% of Thai top-up card users “completely trust” their method; highest level of distrust in Sri Lanka • 77% of Bangladeshi electronic reload users “completely trust” their method; again, Sri Lankans most distrustful 21 Among BOP prepaid mobile owners who use each respective method

  20. Top-ups are closer in urban areas Among BOP prepaid mobile owners

  21. Awareness  trial  use • Does the BOP know about more-than-voice services? • What experience do they have with these services? • Do they use them?

  22. Poor awareness in the Indo-Gangetic Plain; better in LK and Southeast Asia (n=56) 24 Among BOP teleusers

  23. Trial and use are even poorer Thai and Sri Lankan BOP a little more advanced than other countries Among BOP teleusers who are aware of services

  24. Payments: Most who are aware don't know how or don't feel the need to use it 26 Among BOP teleusers who are aware of services but don’t use them

  25. 1/3rd + of the unaware in Bangladesh, Sri Lanka and Philippines willing to use money transfer services & govt services via mobile 27 Among BOP teleusers who are not aware

  26. Innovations to get from here to there • “Less for less” (budget-telecom-network) business model to be successfully extended from mobile voice to mobile broadband • Special attention to quality of service experience • Technical innovations

  27. An incredible innovation that has already been made in South Asia and is now spreading • Average for 77 emerging economies was USD 13.15; four South Asian countries were below USD 5 TCO in 2007, now joined by 12 others (Guinea and Madagascar in Africa) Total cost of ownership < USD 5: BD, IN, PK, LK

  28. High EBITDA margins, suggesting . . .

  29. A new business model • Driven by hostile external conditions, low purchasing power and pressure from disruptive innovation, South Asian operators are • Executing a new “budget-telecom-network” business model • Service-process innovations that enable exploitation of long-tail markets • Revenue-yielding minutes not ARPUs  high minutes of use and high EBITDA margins • Because of high loading of networks quality of service is likely to be spotty • However, this being a necessary feature of the model, excessive quality regulation could have prevented/delayed its discovery/ implementation

  30. An inapplicable definition … • “Disruptive competition may be defined as existing when competitors to the incumbent have been so aggressive with their pricing that they do not cover their costs and end up making short-term losses. Their hope is in this way to gain market share and possibly force the exit of some of their competitors. In the longer term they hope they will be able to price more profitably.” Fransman, Global broadband battles (2008) Fransman does not explain why operators would engage in this kind of behavior. We know it makes sense for multi-product firms with one line of business that is under regulation or where it enjoys monopoly power; this would most likely be the Incumbent/dominant operator. But his claim here is about challengers. On the face, it does not make sense.

  31. What we do use and what makes sense: Disruptive innovation (“less for less”) - Christensen & Raynor • Potential customers want a service, but because they lack money or skill, a simple, inexpensive solution has been beyond reach • They will compare the disruptive product to having nothing at all. They are happy to buy it, even though it may not be as good as other products available at high prices to current users • The enabling technology can be quite sophisticated, but disruptors deploy it to make purchase and use of the product simple and convenient (enabling people with less money and training to begin consuming) • The disruptive innovation creates an entirely new value network. The new consumers typically purchase the product through new channels and use the product in new venues

  32. Postpaid vs. prepaid • Think of postpaid as the conventional mode of supply • Prepaid was a different service delivered through different channels to customers who could not have taken postpaid • It required more sophisticated technology than postpaid • Minutes increased with low ARPUs prices declined service-process innovations & exploitation of economies of scale and purchasing lower costs per minute  prepaid & postpaid prices also declined • 98% of BOP mobiles are prepaid • 54% of “fixed” phones at BOP in LK are prepaid

  33. Extension to (mobile) broadband . . .

  34. Recognize that not everyone has regular income • Budget-telecom-network model for voice recognizes that income is irregular at the BOP and comes in small increments: e reloads •  Broadband pricing should follow; all-you-can-eat, flat-rate pricing models will not work at BOP • Should it be based on time (easier to understand) or on volume of data?

  35. How much and for how long? Value of last prepaid top-up… Is expected to last… *Mode values 37 Among BOP prepaid owners (mobile or “fixed”)

  36. Unbundle the mobile Internet • The Internet is a metamedium, which includes multiple functionalities •  those who are starting may not require all the functionalities and may not be able to pay for all at first • What does “less for less” mean in broadband?

  37. Some broadband services and significance of quality +++ highly relevant, ++ very relevant, + relevant, - not relevant

  38. Keep costs (and prices) down • Low prices are key, but cannot be sustained unless costs are also lowered • This would, most likely, require economizing on links to the Internet cloud • Domestic access network is not the main problem now

  39. ADSL/WiMax Colombo: Download speeds within ISP domain… 2 Mbps February 2009

  40. ADSL/WiMax Colombo: Download speeds accessing international server… 100% February 2009

  41. Where is the bottleneck (Colombo)? 170 ms 65 ms 25 ms 10 ms NB: Upto 5th hop IP addresses are within SL (www.whois.net)

  42. RTT from Dhaka- Submarine Cable vs Satellite (international sites) October 2008

  43. Colombo: International bandwidth a problem in 2009, but less than in 2008 100% February 2009 February 2008 February 2008 & 2009

  44. Colombo: HSPA better than ADSL/WiMax 100% February 2009

  45. Latency; some operators, but not all, meet IDA (Singapore) standard IDA standard 300 (ms) February 2009

  46. Actions • Buy more international capacity, and/or • Do a lot of mirroring • Can this be done within the region? • And, encourage locally hosted content • Given nature of mobile broadband (possibly more P2P content), this may be a significant factor

  47. Regional mirroring? • The route to www.yahoo.com (hosted in USA) from Colombo takes roughly 250-300 milliseconds with 11 hops • To next-door India (ww.yahoo.co.in), takes roughly the same time and 17 hops to Mumbai via Singapore and Chennai • Unless these links are improved, not much benefit from regional mirroring

  48. Quality adequate to purpose at affordable prices • If voice quality is atrocious and price is high, will people buy voice services? • But when service was offered at quality adequate for purpose and at low prices, the market flourished and enabled needed investment • This is the key to broadband success, though the quality problem is more complex than was with voice

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