The future of telecoms: availability, accessibility and affordability

Innovations in technology, tariffs and marketing can make using telephones affordable for people on low incomes. Extending coverage in developing countries requires better knowledge of what potential customers are able to pay. If existing operators are unwilling to offer low-priced services, others should be given the chance.

A report from the World Dialogue on Regulation for Network Economies looks at how telecommunications users feel about the costs involved. The author argues it is possible to arrive at a ‘win-win-win’ situation, in which industry profits more, consumers get better service and the regulator wins more praise.

The explosive growth of mobile phones shows no sign of slowing down. Mobile handsets are becoming ever cheaper: a basic model is now available for under US$ 30. Mobile phone prices tend to be relatively high at the launch of the service, but fall with market saturation and competition. The cost structure of mobile networks suggests that there is room for operators to sell their spare capacity at low prices, to the benefit of low-income users. SIM cards cost so little to produce that they can be given away and make it easy for friends to share a handset.

Recurrent mobile phone charges are unnecessary. The author urges regulators to encourage companies to offer micro-prepay, whereby customers purchase a very limited amount of mobile telephone time. For most operators, this is technically and financially easy to arrange, but not all operators choose to serve the lowest income customers. Micro-prepay can increase opportunities for people with limited cash to access the technology. It is likely to arrive in some form in most developing countries within the next few years.

Key findings include:

• Regulatory interference with operators’ disconnection procedures could discourage them from providing service to low-income subscribers.
• Competition between new and used handsets could be increased – only five percent of discarded but functional phones are currently re-used.
• Microfinance and hire-purchase schemes allow customers to pay for phones in manageable instalments: as with the Grameenphone initiative in Bangladesh, the owner pays back an initial loan out of profits from selling phone calls.
• Handsets that are suited to reselling calls, but much cheaper than the early Grameenphone handsets, are now available.
• Even in wealthy countries with high telephone use and coverage, there are still groups of poor people that can benefit from more affordable options.

The author cites the ‘Bottom of the Pyramid’ marketing concept to remind business to include people with very limited purchasing power in their marketing strategies. Regulators, providers and policymakers must:

• ensure that targets and strategies for achieving universal service and access are based on accurate information on consumer spending patterns
• include affordability measurements in international communications statistics, such as those collected and published by the International Telecommunication Union
• ensure consumers receive information about options to unlock phones from their SIM cards
• protect consumers by telling them clearly in advance of purchase when prepaid credit expires
• oblige providers to offer longer periods before prepaid credit expires: this reduces ownership costs and encourages more light users.

Source(s):
‘Telecoms Demand: Measures for Improving Affordability. A Toolkit for Action: Main Report’, World Dialogue on Regulation for Network Economies, by Claire Milne, 2006. Full document.

Funded by: International Development Research Centre

id21 Research Highlight: 24 November 2006

Further Information:
Claire Milne
Antelope Consulting
99 Monkhams Avenue
Woodford Green
Essex, IG8 0ER
UK

Tel: +44 (0)20 8505 9826
Fax: +44 (0)20 8505 9826
Contact the contributor: cbm@antelope.org.uk

Antelope Consulting

Robin Mansell
Media and Communications Department
London School of Economics and Political Science
Houghton Street
London, WC2A 2AE
UK

Tel: +44 (0)20 7955 6380
Fax: +44 (0)20 7955 7248
Contact the contributor: r.e.mansell@lse.ac.uk

London School of Economics and Political Science, UK

Other related links:
'Understanding rural telephone use'

'Mobiles and markets – providers of telephones for Africa’s rural poor?'

'Do marginal communities make good markets for telecommunications services?'

'Understanding the connections between ICTs and poverty'

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