Teleuse on a Shoestring:

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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

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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 peoples pockets through telecom, rather
  than taking money out

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Connecting the millions at the bottom of the
pyramid
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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.

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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 . . .

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Answers from LIRNEasias Teleuse _at_ Bottom of the
Pyramid (T_at_BOP) research (2008)

• Six countries
• Bangladesh
• Pakistan
• India
• Sri Lanka
• Philippines
• Thailand
• 9,950 sample, representing gt500m Bottom of the
  Pyramid, age 15-60
• Design and analysis by LIRNEasia fieldwork by
  Nielsen affiliates

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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

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The hardest problem Internet use and awareness
in 2008
Among BOP teleusers
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Little growth in South Asian Internet use since
2006
Among BOP teleusers
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Will we ever get there? . . .

• But there is an alternative path . . .

Access mobile?
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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 (worlds
  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

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Recent use of the phone to make/receive calls
Used a phone in the last 3 months
Used a phone in the last week
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Among BOP (OUTER SAMPLE)
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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
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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 members mobile
• CDMA fixed phone

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Total BOP phone ownership (mobile fixed) at
household level

• Mean price paid by BOP for
• Brand new handset USD 63
• Secondhand handset USD 32

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Among BOP teleusers
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Mostly calls, SMS, missed calls, balance
checking, but some download/upload, mostly
entertainment-related
Among BOP mobile owners
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SMS more popular among those below 35 yrs
Among BOP mobile owners
Below 35 years
Sri Lanka
Among BOP fixed phone owners
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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

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Among BOP prepaid mobile owners
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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

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Among BOP prepaid mobile owners who use each
respective method
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Top-ups are closer in urban areas
Among BOP prepaid mobile owners
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Awareness ? trial ? use

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

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Poor awareness in the Indo-Gangetic Plain better
in LK and Southeast Asia
(n56)
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Among BOP teleusers
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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
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Payments Most who are aware don't know how or
don't feel the need to use it
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Among BOP teleusers who are aware of services but
dont use them
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1/3rd of the unaware in Bangladesh, Sri Lanka
and Philippines willing to use money transfer
services govt services via mobile
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Among BOP teleusers who are not aware
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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

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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 lt USD 5 BD, IN, PK, LK
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High EBITDA margins, suggesting . . .
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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

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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.
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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

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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

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Extension to (mobile) broadband . . .
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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?

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How much and for how long?
Value of last prepaid top-up

• Is expected to last

Mode values
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Among BOP prepaid owners (mobile or fixed)
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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?

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Some broadband services and significance of
quality

• highly relevant, very relevant,
  relevant, - not relevant

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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

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ADSL/WiMax Colombo Download speeds within ISP
domain
2 Mbps
February 2009
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ADSL/WiMax Colombo Download speeds accessing
international server
100
February 2009
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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)
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RTT from Dhaka- Submarine Cable vs Satellite
(international sites)
October 2008
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Colombo International bandwidth a problem in
2009, but less than in 2008
100
February 2009
February 2008
February 2008 2009
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Colombo HSPA better than ADSL/WiMax
100
February 2009
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Latency some operators, but not all, meet IDA
(Singapore) standard
IDA standard 300 (ms)
February 2009
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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

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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

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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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Technical solutions that need to be made for
mobile more-than-voice
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Handsets

• Lower costs
• Higher functionalities
• Voice interfaces
• Trust-building features

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Network equipment

• Design of 3G networks to give decent QOS with
  high load factors

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Web interfaces

• Optimized for mobile not conventional Internet
  access

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Social science has a major role to play

• Everyone wants to understand the end user
• Handset designers
• Network designers
• Service designers
• Who will tell them?
• LIRNEasia quantitative research
• Nokia, Telenor qualitative research
• Where are the universities
• U of Salzburg, usability labs
• ???

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Putting money in users pockets, not taking from
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Need innovations in making/saving money from ICTs

• Agricultural information
• Our research shows the key interventions should
  be at
• Selling stage (market information in real time)
• Decision stage (ability to tell what the prices
  will be at harvest time)
• M-payments
• Reduce transaction costs for migrant workers
• Reduce expensive cash use
• Transportation
• Help in cutting travel time and costs
• More . . . ?

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Survey asked about perceived benefits of telecom
access how has telecom access improved

• Your ability to
• make more money (generally, and via sale of talk
  time)
• find out about employment/work opportunities
• access price or market information
• save money
• save on travel cost
• act in an emergency
• contact others in an emergency
• The efficiency of your day to day work
• Your relationships with family and friends
• Your social status/ recognition in the community

Economic benefits
Emergency communication
Efficiency
Emotional / soft benefits
Five-point scale 1worsened ? 5improved
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Largest benefits perceived in emergency
communication and relationship maintenance
1worsened 2 slightly worsened 3no
change 4slightly improved 5improved

• Smallest benefit on economic factors

Among BOP teleusers with personal incomes gt 0
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Teleusers less certain when it comes to financial
benefits
1worsened 2 slightly worsened 3no
change 4slightly improved 5improved
Among BOP teleusers with personal incomes gt 0
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Zooming in on the Indian BOP

• Indians who use the phone for business activities
  see more benefits in terms of making more money
  (also via sale of calls), ability to find out
  about employment, save money, improve efficiency
  of daily work
• 77 of Indian teleusers at BOP use their mobile
  for business, financial or work-related purposes
• More than half of these do so on a daily basis

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77 of Indian teleusers at BOP use their mobile
for business, financial or work-related purposes
more in BD and PH
72
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Daily use
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Among BOP mobile owners
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Most pronounced differences between BOPs in urban
and rural Thailand
Among BOP mobile owners
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Who is the most entrepreneurial of them all?
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Among BOP mobile owners
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