How mobile phones empower South Asia's poor

The ubiquitous mobile phone has proven to be a prime empowerment tool for South Asia's poor, says Nalaka Gunawardene.

Progressive policies, market reforms and regulations have enabled millions across South Asia to access telephone services during the past decade. Can these also help bring broadband within most people's reach?

That is a timely question as we mark 25 years of mobile phones in South Asia. It was in mid- 1989 that Sri Lanka introduced South Asia's first mobile network. Other countries followed within a few years.

Today, mobile phones are ubiquitous in most parts of the region, cutting across social and economic divides. The Maldives and Sri Lanka now have more mobile subscriptions than people.

Few technologies have changed lifestyles and livelihoods in such a short time - and with no state subsidies. The humble mobile has become an empowerment tool for many of the 570 million South Asians who survive on less than US$1.25 a day.

Other developing regions have had similar experiences. Economist Jeffrey Sachs, who heads the Earth Institute, Columbia University, US, has described the mobile phone as "the single most transformative technology for development".

According to Sachs, poverty is equated with isolation in many parts of the world, and results from some people lacking access to education, markets, emergency health services or various government services. Mobile phones - and other information and communications technologies (ICTs) - have reduced or eliminated that isolation.

Among its early adopters was Bangladesh's leading microfinance organisation Grameen Bank, which in 1997, set up Grameen Phone as a joint venture, and today operates the country's largest mobile phone network. Their village phone scheme, a pioneering venture at the time, generated incomes and self-employment for thousands of poor rural women.

Grameen founder Muhammad Yunus wrote recently: "The poorest of the poor now use phones regularly and thus have become a viable market for telecommunications operators in the developing world. This extra attention gives the poor some clout and much-needed respect. However….they spend an inordinately high proportion of their income to meet their communication needs." Budget Telecom

The mobile phone was the first accessible ICT for many rural poor around the developing world, but it took time to evolve from a luxury item to an everyday gadget. The early, clunky instruments were expensive and the signal coverage was limited. For example, more than a dozen years passed before Sri Lanka gained one million subscribers. Then the markets gained momentum.

The past decade has seen the highest number of telephone connections being given out across South Asia. It happened thanks to what researchers call the 'budget telecom model', where low cost technologies coupled with business process innovations helped telecom operators to reduce costs.

First, regulatory reforms lowered or removed entry barriers for more operators to enter markets. Then intense competition brought down sign-up and call charges, so phone users started calling more. Higher volumes, in turn, enabled further rate reductions.

Introducing pre-paid packages was a critical element. It allowed small and irregular payments, eliminating transaction costs for companies and simplifying phone ownership for new users. This brought telecom services within reach of the common man and woman.

"The new model makes ARPU (average revenue per user) irrelevant, because what really matters is how many revenue-yielding minutes are carried on the network, not how much money is earned from an average customer" says Rohan Samarajiva, chair of the Colombobased think tank LIRNEasia, and a former telecom regulator of Sri Lanka.

He adds: "In the same way that Ryanair and AirAsia make profits while conventional airlines lose money, budget telecom networks make more money than conventional operators."

The model has some weaknesses. Given the scattered and numerous resellers, the quality of service is not consistent. And it increases the volatility of telco earnings. Bottom of Pyramid

Many insights have emerged from LIRNEasia's multi-country surveys on telephone use at the bottom of the pyramid (BOP), which explain why the poor have taken to mobile phones. Four surveys between 2005 and 2011 involved a total of 30,000 interviews in seven countries in South and Southeast Asia.

The findings show how BOP phone ownership had a marked increase across South Asia, espe- cially between 2008 and 2011. The greatest rise was in Sri Lanka, where it shot up from 31 to 71 per cent. Bangladesh and Pakistan also showed similar growth.

On the whole, like anybody else, the poor use phones to maintain social networks, but also for emergency use, and saving time and money on transport.

Although the poor are willing to spend a relatively high proportion of income on telecom services, they are cost conscious, and have turned to thrifty innovations to contain user costs.

Those who do not yet own a phone rely mostly on a family member or a shared household phone. Using public (pay) phones is on the decline, and even Bangladesh's acclaimed village phone ladies find fewer customers these days. Next wave?

As incomes rise and markets mature, more users would seek value-added services beyond voice and text messaging.

Mobile broadband is growing fast in the developing countries with most Asians and Africans experiencing their first contact with the Internet through mobile phones. Worldwide, the International Telecommunications Union says mobile subscriptions will reach almost seven billion by end-2014. It also estimates that by then, the total Internet users would have reached three billion, with two-thirds in the developing world.

Samarajiva believes that the budget telecom model can be adapted to deliver affordable broadband Internet to information-hungry millions in South Asia and other developing countries. But it requires provision for small, prepaid, irregular payment.

Although the frenzy of initial phone connectivity has passed, the South Asian mobile revolution is far from over. Agile policies and market innovation can sustain the next phase too.

Nalaka Gunawardene is a Colombo-based science writer, blogger and development communication consultant. He is also a trustee of SciDev.Net. The views in this column are his own.

Courtesy of SciDev.Net