How the Developing World may Participate in the Global Internet Economy: Innovation Driven by Competition
Joint Workshop on 'Policy Coherence in the Application of Information and Communication Technologies for Development,' Paris, France, September 10-11, 2009
Full participation in the global Internet Economy requires electronic connectivity of considerable complexity. Today, due to a worldwide wave of liberalization and technological and business innovations in the mobile space, much of the world is electronically connected, albeit not at the levels that would fully support participation in the global Internet Economy. Yet, many millions of poor people are engaging in tasks normally associated with the Internet such as information retrieval, payments and remote computing using relatively simple mobiles. Understanding the business model that enabled impressive gains in voice connectivity as well as the beginnings of more-than-voice applications over mobiles is important not only because widespread broadband access among the poor is likely to be achieved by extending this model but because it would be the basis of coherent and efficacious policy and regulatory responses.
This report demonstrates that voice connectivity was achieved for a majority of the world’s people, including substantial numbers of the poor, because governments removed or lowered barriers to participation in the supply of telecom services and created conditions somewhat conducive to competition, even if less than perfect. This was the necessary condition. Where multiple suppliers existed, intense competition, the critical step of implementing the budget telecom network model, occurred. The radically lower prices attracted more minutes of use, which in turn made further reductions possible. Operators were able to load their networks with high volumes of revenue-yielding minutes because they had succeeded in reducing the transaction costs of dealing with low-volume customers. Prepaid, which accommodates the needs of those with irregular earning patterns was also a critical element. Along with these business process innovations, the exponents of the budget telecom network model also succeeded in drastically reducing costs, especially opex. 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 a customer. In the same way that Ryan Air and Air Asia make profits while conventional airlines lose money, budget telecom networks make more money than conventional operators. However, the model increases the volatility of earnings and results in lower quality of service.
Number of Pages in PDF File: 41working papers series
Date posted: March 7, 2010
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