Impact of Internet Applications on Mobile Network Revenues in Developing Countries

Posted: 23 Mar 2016

See all articles by Erezi Ogbo

Erezi Ogbo

Carnegie Mellon University, Students

Tim Brown

Carnegie Mellon University

Douglas Sicker

Carnegie Mellon University; University of Colorado at Boulder - Department of Computer Science

Date Written: March 21, 2016

Abstract

Mobile technologies are known to be a key contributor to socio-economic growth and productivity across the globe. Within the mobile industry, continuous improvements such as smarter devices, faster connections speeds, larger bandwidths and a plethora of applications (or “apps”) are transforming the structure of mobile networks in terms of design, usage, pricing and revenue. Sub-Saharan Africa (SSA) is home to the fastest growing mobile market in the world. Within the next 5 years, mobile broadband connections in the region are expected to increase by over 100%, as the availability of cheaper devices drive new mobile broadband connections up by 400 million users. This is in line with a global shift to data-intensive communication and increased connectivity; with consumers connecting multiple devices and streaming large media content over mobile broadband. However, in SSA – largely due to digital literacy barriers – communications are predominantly non-smart; with 88% of the mobile traffic being voice and SMS, generating high revenues for mobile providers (5.7% of the GDP in 2014).

From a user perspective, mobile service is relatively expensive in SSA where consumers can spend up to 28% of their disposable income on mobile phone service and are motivated to find lower-cost options. Globally the number of minutes spent on calls and number of text messaging via SMS globally are reducing. This correlates with users turning to over-the-top (OTT) Internet applications for messaging and calling, such as WhatsApp, Skype, WeChat and FaceTime. Applications like WhatsApp with lower per message costs remain relatively unknown in countries with flat-rate pricing like the US, whereas worldwide there are 1B WhatsApp users mainly in price-sensitive developing countries.

This paper investigates how the emergence of mobile broadband and OTT apps have affected individual spending habits on mobile as a resource in SSA, and how this change in demand has affected the revenue of Mobile Network Operators (MNOs) over time. The findings from this study can be used by telecommunications regulators to inform policy decisions such as those involving rural access and its implementation Net Present Value. Prior research has focused on how mobile broadband can increase economic growth and also how it affects mobile revenues. However, to the best of the authors’ knowledge, there have been no studies published on how it affects consumers’ willingness to pay for mobile voice, SMS, and data services. Furthermore, there is a lack of research on the impact of OTT services on mobile revenue in a region with limited prior access to the Internet. The long-term goal is to consider how these revenue changes might impact the network operators and possibly even network design. This paper uses primary data collected from key MNOs and subscribers in a number of African countries, including Nigeria and Rwanda where we have access to detailed (anonymized) call record data. This study is also complemented by the use of secondary data published by relevant regulatory bodies in the countries as well as data from the World Bank.

Keywords: Mobile, Africa, Network Design, Revenue

Suggested Citation

Ogbo, Erezi and Brown, Tim and Sicker, Douglas, Impact of Internet Applications on Mobile Network Revenues in Developing Countries (March 21, 2016). Available at SSRN: https://ssrn.com/abstract=2752766

Erezi Ogbo (Contact Author)

Carnegie Mellon University, Students ( email )

Pittsburgh, PA
United States

Tim Brown

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Douglas Sicker

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

University of Colorado at Boulder - Department of Computer Science ( email )

Boulder, CO
United States

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