Every year Nokia conducts the telecom equivalent of the Economist’s “Big Mac” study; it compares the total costs of using an identical basket of services over a mobile phone in multiple emerging economies. It used to cover 77 countries, but now they’ve pared it down to 50 major emerging economies.

If only the voice and SMS services are counted (plus 1/36th of the cost of the cheapest Nokia phone in that market), Bangladesh is the winner. A Bangladeshi user will pay only USD 1.91/month as against the average of USD 11.47. Brazil continues to be the most expensive, with a user having to pay 23 times what a BD user pays: USD 43.69.

When the Internet premium is added (a modest additional amount of Internet use from the mobile handset), Sri Lanka pulls ahead, at USD 2.91 (as against USD 3.31 for Bangladesh). The worst performance in this comparison comes from Morocco, where a user would pay 57 times what is paid in Sri Lanka: USD 52.14.

The Internet premium is not in the mounted slide. We will get that posted in a few days.

Rohan Samarajiva, CEO of Lirne-Asia, has been a long opponent of USO funds and has often stated that they are a waste of money which distort the market, and that USO-type projects should be funded from central budgeting process instead.

However, Samarajiva makes an exception for Pakistan which has succeeded in pushing out USO funds. Other countries are good at collecting money, but not spending. $4 billion (130 billion baht) is locked up in USO funds in Brazil and an equal amount again in India. Seventy five percent of the USO money is stuck in governments, unspent.

The Pakistani model is different as it has private participation in its governance model. Iftikhar said that 50 percent of his board is from private operators and the charter is such that the board is not complete if even one of the private sector members is absent.

The USO is also registered as a company rather than part of the regulator, which makes the decision-making process much faster.

Given the policy was almost fully formulated, I decided to focus on performance indicators, a subject I was working on for both UNCTAD and one which had preoccupied me since the time I was a regulator. It is also a subject that LIRNEasia has developed considerable expertise in. My guess was correct. Decisions had been made on the policy instruments that would be used and the ends that were desired, but not on how to figure out whether the policy instruments were working or not. Brazil_May10.

I first raised the standard criticisms about “teledensity” and such, where the failure of the ITU to recognize the qualitative change from a government-dominated monopoly service to a vibrant competitive industry had led to continuing reliance on supply-side data that came through multiple steps (operators to regulatory agency to ministry to ITU) with all the attendant delays and errors, had resulted in a mess. The flaws in the data increased from fixed lines to mobile to Internet, with massive problems caused by non-standard definitions and flawed data collection. For example, no one knows what an active SIM is, despite their numbers being bandied around. Broadband lacks common definition and in some cases, arbitrary multipliers have been used (10 in the case of Indonesia) to arrive at numbers of Internet users.

I then moved on to discuss the work I had done with Haymar Win Tun of the LKY School at National U of Singapore, where we had organized the countries covered by the ERI, NRI, IDI and KEI by deciles. Here too the end results were problematic because they drew from the same poisoned wells of UN system indicator databases, but at least they recognized factors other than ICTs. The inclusion of other indicators in the mix diluted the errors in the ITU databases, though perhaps introducing additional errors. Haymar and I argue that it was more defensible to simply talk about deciles and not about positions in a ranked list because the existence of input errors makes the small differences between countries insignificant.

Brazil was in the third decile from the top in KEI and IDI, which posed the question as to what target they should adopt. Advancing a decile at the top of a league table is a lot more difficult than doing so at the bottom. To advance to the next decile, Brazil would have to displace an OECD country and or city-states such as Hong Kong, Macau and Singapore. The sense of the room seemed to be that they would like to set the country an ambitious target. It would be nice indeed for a BRIC to take out a European country. I pointed out that Cypress and the Slovak Republic seemed doable and that Greece, which was currently two deciles ahead was also vulnerable.

We discussed the ways in which the target could be achieved, including unpacking the indices to identify the subcomponents most amenable to increase and then concentrating policy attention on them. The value of relying on demand-side data that would allow the questions most pertinent to Brazil’s broadband policy was underlined, even if this meant that comparability and benchmarking would suffer.

Given the heavy reliance on subsidies and other interventions, I asked whether it would not be better to let market forces operate by allowing greater entry, thereby triggering a shift to the Budget Telecom Network Model. I wondered why Brazil was consistently at the bottom of the rankings in terms of Nokia’s mobile and mobile data TCO tables and why billion of USD were lying unspent in the Brazil Universal Service Fund. If these problems could be resolved there would be less need for subsidies, I said. I also pointed out the need to ensure cost-oriented and non-discriminatory access to fat pipes, not only within Brazil, but also under the sea. Unless these input prices declined, there was no point in lowering retail data and voice prices, which would only result in congestion and poor QoS. Without lower retail prices more people would not get connected and use would not increase.

As neither we nor most of our readers do not have access to the thread it was posted, we like to continue the discussion here.

__________________________________________________________________

Hi people,

I come from one of the ten largest economies in the world, with nearly 200 million people, 8.5 million km2, and 5.564 municipalities, where 94% of the people do *not* have access to any form of broadband – the “B” in the famous BRIC acronym.

I am just coming out of the IGF workshop “Expanding broadband access for a global Internet economy: development dimensions”. I left the workshop a bit shocked with the concepts expressed, not by the AT&T representative (who not surprisingly said AT&T subdsidiaries countries other than the USA should be considered local companies because they employ local people), who as usual is just doing his job in defending the so-called “market”, but by other speeches which seemed to completely ignore that, in most of our contries, there is a de facto monopoly or cartel situation regarding the telco infrastructure, and that public policy ought to centrally take this into account if the aim is to universalize broadband access with quality to all families.

One of the speakers (from LIRNEasia) said that “lower prices require lower costs” and therefore one should just “phase out universal access levies and rationalize taxes”. I retorted that pricing per Mb/s of ADSL broadband in São Paulo might be 65 times higher than the same price charged by the same company in London — and therefore no amount of levies or taxes would justify such scandalous pricing difference, not to speak of the much lower QoS.

I suggested that, instead of eliminating the universal service funds (whose levies are a very small portion of price composition of broadband), we should insist on reforming policy regarding the use of these funds. The reply I heard was that it makes no sense to keep funds that are not used or are squandered (!!). Impact of the fund’s levy in Brazil is just 1% of the price of the fixed line telephone connection — its impact in the price of broadband (a separate bill even if the service is not unbundled) is zero.

There was also a recommendation that we should be “gentle on QoS” to facilitate things regarding universalization of access — fascinating. Again, examples abound in which telcos guarantee only 10% of the nominal contracted rate, and in practice this might be even less. Should we just agree with absurds like this in the name of “it is better to have something than nothing”???

And then there is the crucial question of unbundling, central to the policy debate in the developed countries as it directly impacts universalization through an effective reduction of prices for the final user. It is a major challenge for broadband public policy in developing countries, where regulators are usually in the hands of the telco cartels. The word was not mentioned (not a single time) by anyone in the panel, as if irrelevant to the development dimensions of broadband.

The speaker also mentioned that the “need” to reduce costs for the big telcos would require reduction of international bandwidth costs. One of the two big carriers in Brazil, a Brazilian conglomerate, owns redundant fiber running from Brazil to Miami in rings passing through countries in the Caribbean and Central America. They own their own international link, in summary. So do the other carrier in the de facto duopoly — a major operator from Europe. This does not make any difference in pricing for the final user, although it does contribute to their profits in Brazil being far higher than in Europe for example.

Finally, the fascination with mobile. Of course the AT&T speaker started his talk by waving a fancy iPhone to the audience — mostly natural for a commercial wireless giant. But the infoDev representative and others mentioned mobile as a “solution” for the poor, and not even bothered to separate the discussion in the two main topics here: first, the mobile phone as a connectivity device to enable the user to fully use the Internet through a friendly human-machine interface, be it a common PC or special equipment for people with disabilities; second, the phone itself as *the* alternative to the full user experience that a PC or similar might provide. It seems the agency bureaucrats are satisfied with having two castes of users: a small minority of the ones who can fully use the Internet as it evolves requiring more and more multimedia capabilities on both sides (server and client), and the ones relegated to a small device on which it is barely possible to type small messages.

In the first regional LA&C preparatory meeting for the IGF, in 2008, a representative of a major telco said we should not worry about bringing the next billion to the Internet — they have cell phones, so they are connected already, problem solved. I wonder if this executive would take the place of a carpenter looking for a job, who has to compose and send by email his CV together with images of letters of recommendation to his would-be employer, and had nothing but a cell phone (smart or not) to do it. Not to speak of comparing the executive’s thin-fingered hands of a pianist with the big callous hands of the carpenter.

fraternal regards

–c.a.

Anybody could have guessed this. It is unimaginable that entire world will go through a recession simultaneously. Not everyone can be losers for too long. There should be winners somewhere. For example, what would the US firms that find their human resources costs, logically do? They outsource to Bangalore. So the BPO industry in India grows. Peter’s loss becomes Patel’s gain.

The Economist today presented the evidence.

MOODY’S Economy.com has mapped the geographic spread of the worst global downturn since the Depression. All of North America is in recession now. In Europe only Norway, Slovenia and Slovakia have avoided a similar fate, although Moody’s reckons these countries are on the brink of a downturn. Emerging Asia looks cheerier, although the small export-led economies of Singapore and Hong Kong are shrinking, as are Malaysia and Thailand. Even the BRICs are looking a bit diminished, with downturns in both Brazil and Russia. At least India and China are growing (the latter at a pace that is causing worries about overheating). Data for Africa are spotty but the continent’s biggest economy, South Africa, is in recession. The IMF expects global GDP to shrink by 1.4% this year, with rich countries’ economies contracting by around 3.8%.

The number of people going online has passed one billion for the first time, according to comScore, an online metrics company. Almost 180m internet users—over one in six of the world’s online population—live in China, more than any other country. Until a few months ago America had most web users, but with 163m people online, or over half of its total population, it has reached saturation point. More populous countries such as China, Brazil and India have many more potential users and will eventually overtake those western countries with already high penetration rates. ComScore counts only unique users above the age of 15 and excludes access in internet cafes and via mobile devices.

www.economist.com

With hard times at our doorsteps, all we can say is a remittance mechanism that employs mobile communications would be an excellent idea. By the way, that is one area our research on Mobile2.0@BoP will focus.

Title: Diversifying Participation in Network Development: Case studies and research from WDR Research Cycle 3
Editors: Amy Mahan and William H. Melody
Document date: September 2007
Pages: 230

The book is divided into three sections. The first, entitled Affordability and Use, opens with a study on affordability – definitions, analysis and issues. This is followed by two demand side studies, the first focusing on mobile use by the poor; and the second assessing communication expenditures across four developing countries. The final chapter in this section reports on a survey of ICT use by SMEs in eight African countries.

Section 2, Models to Extend Participation in Network Development considers microfinance, smart subsidies, community owned microtelcos and the extension of research networks. The countries used to highlight these alternative approaches include Bangladesh, Nepal, Argentina, Brazil, Colombia, Peru and Ghana.

Section 3, Regulatory and Information Practices, begins with two chapters dedicated to the information provision and communication practices of regulators – which are important for cultivating informed participation in regulatory processes. Next regional regulation in support of national regulators and to ensure competitive markets is examined using the Organisation of Eastern Caribbean States as a case study. Further perspective on this is provided by a chapter on multinational operators in African mobile markets. The section concludes with a case study on the regulatory environment in Guyana.

This report is the third in a series of research cycles that WDR is undertaking to assess different approaches to regulation in a rapidly changing telecom environment. With the advent of privatisation, competition, and converging infrastructure sectors, the role of the regulator is in a transitional phase. The first World Dialogue on Regulation research cycle assessed two emerging regulatory trends and the report, The Next Step in Telecom Reform: ICT Convergence Regulation or Multisector Utility Regulation; and the second cycle, Stimulating Investment in Network Development: Roles for Regulators – are both available for download and hardcopies of the second can be ordered from WDR.

Diversifying Participation in Network Development, A.K. Mahan and W.H. Melody (eds), Uruguay, 2007. ISBN (printed version): 978-9974-8067-0-2

Table of Contents:
Chapter 1. Introduction | William H. Melody
Section 1 – Affordability and Use
Chapter 2. Improving Affordability of Telecommunications: Cross-fertilisation between the developed and the developing world | Claire Milne
Chapter 3. Telecom Use on a Shoestring: Expenditure and perceptions of affordability amongst the financially constrained | Avanti Moonesinghe, Harsha de Silva, Neluka Silva & Ayoma Abeysuriya
Chapter 4. Variations in Expenditure on Communications in Developing Countries: A synthesis of the evidence from Albania, Mexico, Nepal and South Africa (2000-2003) | Sebastian Ureta
Chapter 5. ICT Usage and its Impact on Profitability of SMEs: A case of eight African countries | Steve Esselaar, Christoph Stork, Ali Ndiwalana & Mariama Deen-Swarray
Section 2 – Models to Extend Participation in Network Development
Chapter 6. An Investigation of the Replicability of a Microfinance Approach for Extending Telecom Access to Marginal Customers | Malathy Knight-John, Ayesha Zainudeen & Abu-Saeed Khan
Chapter 7. Smart Subsidies – Getting the Conditions Right: The experience of expanding rural telecoms in Nepal | Harsha de Silva & Ratna Kaji Tuladhar
Chapter 8. Microtelcos in Latin America and the Caribbean | Hernan Galperin & Bruce Girard
Chapter 9. Research and Education Network in Ghana: Promoting ICT in developing countries through research cooperation | Reza Tadayoni & Knud Erik Skouby
Section 3 – Regulatory and Information Practices
Chapter 10. Benchmarking National Telecom Regulatory Authority Websites of the Asia-Pacific Region | Chanuka Wattegama
Chapter 11. An Institutional and Practical Evaluation of URSEC – Uruguay’s Communication Regulator – and its Relationship with Citizens | Gustavo Gómez & Amy Mahan
Chapter 12. Regional Regulation of Telecom Markets in the Organisation of Eastern Caribbean States | Andrew Barendse
Chapter 13. Multinational Operators in African Mobile Markets | Ewan Sutherland
Chapter 14. Privatisation, Regulation and Investment: A case study of the telecom regulatory environment (TRE) and investment in Guyana | Samuel Braithwaite

Foundation Partners | About the Authors
Diversifying Participation in Network Development

The Nation Economist, Sunday 26 August 2007 | See Print version

I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

By Indika Sakalasooriya
The entry of the Indian business tycoon Sunil Miththal’s Bharti Airtel, India’s biggest mobile operator into the Sri Lankan market has left many players in the telecom sector to ponder on the harsh effects of severe competition in the future.

The existing mobile operators in the market seem to have appraised the impact even before the physical arrival of the Indian giant. The majority of the industry analysts are now of the view that the profit margins of the mobile operators will become thin due to the expected intense competition in the market.

However, amidst all these developments, from the government’s side we heard a story of further taxation of the growing mobile industry. The Nation Economist thought it opportune to get some insights from Professor Rohan Samarajeewa, a former head of the Telecommunications Regulatory Commission of Sri Lanka who is a keen observer of developments in the telecommunication sector in the Asian region to find out his assessment of the Sri Lankan mobile industry and where it is heading.

Here are the excerpts of the interview
Q : What is your general assessment of the Sri Lankan telecom sector as it stands today?
A : Doing well and could do much better. Why do I say doing well is compared with every other sector, the telecom sector is doing well. Its contribution to the GNP growth rates is considerable. Why do I say it can do better is Pakistan has overtaken us in mobile and our ADSL data situation is not really satisfactory in terms of people getting value for money. A lot of the BPO industry is not growing as fast as we expected. So in that sense we really could do much better than we are doing now.

Q : What kind of an impact will the arrival of Bharti Airtel have on SL telecom industry and to the mobile operators in the market?
A : Well, first we have to look at the Indian market and Bharti Airtel. India is one of the exciting markets in the world because every month 7 million new phones are added to the market. That means 7 million new subscribers. So now you get a sense of how big the Indian market is. And also India belongs to BRIC (Brazil, Russia, India and China). BRIC has the most happening markets in the world and we are sitting next to a BRIC. In the Indian telecom industry Sunil Miththal and Bharti are seen as innovators. He is getting awards and prizes in India. We have to find out for what he is getting prizes?

They are not getting those for being the biggest or for being profitable. We have to understand that there is no technological innovation but business innovation when Bharti is considered. The business innovation is how you make high profits on very low revenues per user. The company has pioneered very innovative techniques and that is they don’t run their networks. They outsource the whole thing down to the supplier. So what they are doing is basically brand managing. They own the brand and manage the interface with the government and they supervise the outsourcing process. Having the two facts in mind let us think of the size of Sri Lanka. Sri Lanka is about the size of greater Mumbai or greater Delhi. So, here we have is a company extremely good at managing costs and handling numbers. So here they come to Sri Lanka. I’ll be very concerned if I’m one of their competitors.

However there are two things that go against them. One is Sri Lanka has a few very efficient and sharp mobile companies and among them nobody is a sleeper. The second reason is Bharti is investing two little. It suggests to me that they are basically going to do a very conservative roll out. In 2004 the Central Bank of Sri Lanka in the Consumer Finance Service said 25% Sri Lankan households except in Mannar, Kilinochchi and Mulathiwe areas had some kind of phone. Now I’m willing to stick my neck and say it has gone up to 55% by now and that’s an extrapolation from some data we have. So we have to understand that this is a highly saturated market. At the same time we don’t have mobile number portability. The only country that has mobile number portability is Pakistan. So considering all these facts I’d say it is not easy for Bharti.

Q : Will the competition be healthy in terms of survival of the industry?
A : Yes sure. I’m always there for intense competition. Many think that the margins of the service providers will go down with the entrance of a new player. But I don’t think so. In 1994 when Dialog enter the market many people thought Sri Lanka was a tiny little market and there was no way that a fourth mobile operator can succeed. First it was said that Dialog would not succeed and secondly the margins will come down. But what happened? A fourth player came. Did the margins come down? Let us assume that what you are saying is correct. So the worst thing that can happen is the exiting of one player. The player who cannot give the enough commitment will exit the market. What is wrong in that?

Q: With the arrival of Bharti it was reported that some parties in the government had proposed to further tax the mobile industry as the sector is considered to be profitable. What is your reading on that?
A : I have to say that JHU does not know economics. What is the rationale behind taxing the only sector that is growing? The industry is giving government enormous amount of revenue. Twenty percent of every mobile rupee goes to the government. If you squeeze the goose for more eggs the goose will ultimately die. To my knowledge some of the taxes the government is thinking of will really kill the industry. We have got data which say people in the bottom of the pyramid are willing to spend Rs.500 per month on communication. So if the government put another tax these people will be discouraged to get themselves connected and as a result of that the government will lose revenue.

Q: Since you mentioned the issue of number portability, what are the pros and cons of number portability? Will the implementation of number portability lead to some perfect competition?
A : Competition has to be the basic rule we should be working on. An essential quality of competition is when a customer is not satisfied he or she should be free to go to another supplier. So now the question is if I’m not satisfied by my present mobile services provider I still have to bare it since I’m not ready to change my mobile number. But in a place where you have total competition you should be free to go to another service provider while keeping the same number. That is what mobile number portability is all about. People might ask me if the number portability is so important why didn’t you push for it when you were the DG of TRC? I had to deal with less than million phones and we had various problems such as interconnection. So during that time the idea of having number portability is very close to a dream. By now our telecom industry is growing and today mobile number portability has become a very important aspect of the industry.
There are two ways of doing number portability. One is call forwarding and the other way is to do it in a straight way through an intelligent network. It has costs and will take time. But it will definitely improve the market.

Q: As a former TRC DG and present advisor to the government of Bangladesh on telecom related matters, what are the reforms you are suggesting for the present telecom regulatory regime for the betterment of the industry?
A: I am a policy and regulation guy. For the industry to grow what we really need is a greater attention to be paid to what we call wholesale access. All the mobile operators should get the privilege to use the under sea cable going out from Mt. Lavinia on a non discriminatory cost oriented way. At the moment there are only three companies using the cable, SLT, GSNL and Dialog. But these other two companies get step motherly treatment from the SLT and that should be straightened. That’s a regulator’s job. Within the country majority of the fiber optic cables belong to SLT. But they should offer that facility to other companies at reasonable prices. Because it doesn’t make any sense in our country for every company to have their own fiber optic cables or to build microwave networks on top of already existing networks. So at a fundamental level I would put that as the highest priority because that can reduce the cost of a call. The other thing as I mentioned earlier is the mobile number portability.

Q : What are the key areas that the existing and the prospective telecom service providers should concentrate in carrying out operations?
A : The bottom of the pyramid is the place they should focus. I’m telling this because we have done research on the matter. The companies should understand that it is where the money is. As Professor Prahalag said, there is a fortune to be made at the bottom of the pyramid. The other fact is in Sri Lanka the main two growing sectors are telecom and banking. Why can’t we put the industries together since that is where the action is.

Q : Some say that the present regulatory system is in favour of the SLT of which the government still has the major stake. What is your opinion on this?
A : The Act we at the moment have is archaic and obsolete. The law is not very good and the staff is not very competent and it is possible that the regulatory authority is not doing well. What I can say is in my time Sri Lanka Telecom was fined for violating its licence condition. Therefore at least I can say during my period SLT was not favoured.

Q : As a person who is running a research body that overlooks the entire Asian region, can you explain why India still does not practise 3G operations?
A : Well the reason is the problem we also have. But India has it in a bigger way. Indian military is occupying a lot of frequencies. Therefore to start 3G operations the Indian Army and the other defence forces should be moved away to clear the frequency. We are not in bad shape as in India but we are close to it. We have not only military problems but also there are other parties who are using these frequencies for low value purposes.

Now the French telecoms regulator has approved plans to allow the incumbent GSM network operators to reuse their 900Mhz bands for 3G services. 

ART has also announced that any 3G new entrant authorised following the application procedure for the fourth UMTS licence would also have access to the 900 MHz spectrum once it has been returned by the existing 2G operators. Read more.

As can be seen in the graph below, sales to emerging markets like China, India, Indoesia, Brazil etc is what is and will drive Ericsson’s telecom equipment business globally.

The equipment suppliers are already aware of the tectonic shift in the structure of global telecom business that is inexorably moving to emerging markets especially in Asia. It is time that consulting firms and equity analysts also smell the coffee…

Source: Ericsson Annual Report 2006

BSNL confirms Ericsson, Nokia Siemens to get $4.5b deal

India has been selected because of its success in establishing a framework of policies and regulations, which have stimulated the growth of mobile telecommunications over the past three years.

The latest data from the Indian government shows that India’s mobile operators are now collectively adding six to seven million new subscribers each month.

GSMA’s CEO Rob Conway presented the award to Thiru Dayanidhi Maran, India’s minister for communications and information technology. The presentation took place at the GSMA’s Leadership Summit in Barcelona.

The Indian government’s policies have not only helped revive but stimulate the country’s mobile industry, whose growth, only a few years ago, was stifled due to various challenges.

Since then, the government has done various policy and regulatory reforms. Relaxing rules on foreign direct investment, raising the limit for foreign investment in a telecoms company from 49 percent to 74 percent is a major milestone.

It has liberalised the domestic and international long-distance markets, facilitated the sharing of network infrastructure, increased the amount of commercially available radio frequency and secured spectrum for third generation mobile in the IMT-2000 core band.

The GSMA’s Government Leadership Award was given to Brazil in 2005 and to Pakistan in 2006.

Looks like this will change the nature of the debate.   The report states that Intel and Microsoft are not happy with Negoponte’s baby. 

For $150, Third-World Laptop Stirs a Big Debate – New York Times

Mary Lou Jepsen, the chief technologist for the project, likes to refer to the insight that transformed the machine from utopian dream to working prototype as “a really wacky idea.”

Ms. Jepsen, a former Intel chip designer, found a way to modify conventional laptop displays, cutting the screen’s manufacturing cost to $40 while reducing its power consumption by more than 80 percent. As a bonus, the display is clearly visible in sunlight.

That advance and others have allowed the nonprofit project, One Laptop Per Child, to win over many skeptics over the last two and a half years. Five countries — Argentina, Brazil, Libya, Nigeria and Thailand — have made tentative commitments to put the computers into the hands of millions of students, with production in Taiwan expected to begin by mid-2007.

The laptop does not come with a Microsoft Windows operating system or even a hard drive, and the screen is small. And the cost is now closer to $150 than $100. But the price tag, even compared with low-end $500 laptops now widely available, transforms the economic equation for developing countries.

The Race for Numero Uno in Latin Wireless (Businessweek November 27, 2006):

More than 80% of Brazil’s mobile-telephone customers use prepaid service—buying cards to recharge their phones—rather than signing monthly contracts. América Móvil’s average client uses just 71 minutes of airtime each month, spending around $12.50. Although such revenue can add up, signing up all those customers has an impact on profits as well. “The two big operators have had to become more competitive in pricing to win customers,” he says. “They’re trying to build economies of scale to decrease their costs, but even as they’re doing that, their revenue per subscriber is decreasing.”

As América Móvil and Telefónica battle it out, the big winners are Latin American consumers, who have seen the cost of handsets and airtime drop significantly over the past five years. Wireless technology has made it possible for consumers to skip waiting lists for fixed-line installation and go directly to mobile or fixed-wireless phones. “Mobile telephones were considered a luxury, but today, the ice cream salesman on the street has his own cellular phone,” says Telefónica’s Zaldivar.