Choices: Calls or gold?

Posted on March 10, 2007  /  0 Comments

By Rohan Samarajiva 
LBO >> Choices : Priceless Link      
08 March 2007 08:26:29 
March 08 (LBO) – Indonesia, like Sri Lanka, sends its women to foreign lands to work as housemaids. The numbers may be larger, though the proportion is smaller. 
Telecom networks are expanding fast in both countries, Indonesia faster. The telecom sector is attracting massive investments in both countries as operators scramble to meet the burgeoning demand.

Generally, politicians and officials responsible for a sector are happy when it grows. Therefore, I was surprised to hear several senior telecom officials in Indonesia express concern about lowered gold sales supposedly caused by excessive use of calling cards by expatriate housemaids.

I could understand concern from those in charge of gold sales, but this was telecom.

I thought this was an Indonesian peculiarity, until I heard it in a different form from a Sri Lankan journalist. “The westerners had given us phones,” he said, “but not taught us how to use them: our people are wasting their money on phone calls.”

“What is waste,” I asked. I did not receive an answer.

Beneath both statements lay a concern about “wrong” uses of technology by people lacking the good judgment that the speaker was endowed with. But let us see what the evidence is on how poor people use phones.

How do people actually use telephones?

LIRNEasia recently conducted a five-country sample survey, involving almost 9,000 respondents, of how people at the bottom of the pyramid (BOP) use information and communication technologies (ICTs). AC Nielsen affiliates in the five countries conducted the field research in July-August 2006.

This study, which used quantitative methods including a diary in which people recorded each call made in a two-week period including purpose, duration, and cost, provides unique insights on teleuse at the bottom of the pyramid, defined as the two lowest (D and E) socio-economic classification (SEC) groups in each of the five countries.

In Sri Lanka, the study accurately represents teleuse by 4 million Sri Lankans, ages 18-60 in SEC D and E, with a margin of error less than 3 percent.

Ninety two percent of those approached had used a telephone in the past three months. Of the users at the BOP in Sri Lanka, 41 percent owned the phone they had used. The others relied on friends, relatives, neighbors, and communication bureaus.

Both numbers are unexpectedly high. An overwhelming majority of people in these countries (that include a substantial part of South Asia, the largest concentration of poor people in the world), are familiar with the telephone. This allows one to infer that many of the world’s people are indeed familiar with, and have used, telephones.

This is a sea change from the claim made just eight years ago that half the world’s people have never made or received a phone call by then UN Secretary General Kofi Annan in a speech at an International Telecommunication Union event. (Read Speech)

The number that owned mobile phones or had a fixed phone within the house in Sri Lanka (41 per cent) was also high; in India, the comparable number was 19 per cent.


As recently as in 2004, the Central Bank’s consumer finance survey showed that 25 percent of the households had some kind of phone, fixed or mobile. The LIRNEasia survey shows that, just two years later, 41 per cent of the poorest households had some kind of phone in the house, indicating that the percentage of households with phones overall has to be even higher.

Sixty five percent of those at the BOP in Sri Lanka could reach a telephone within five minutes. Over 95 percent could reach a phone within one hour.

These people used the phone sparingly: 13 outgoing calls a month on average and 10 incoming. Obviously, those who owned a phone made/received more calls than those who had to go to a neighbor’s house or a communication bureau for that purpose.

Their calls were of short duration, 80 percent being less than three minutes long.

The principal purpose of calls for 65 percent of users at the BOP was to keep in touch with friends and family. Except in Thailand (29 percent), very few at the bottom of the pyramid used the phone for explicit business or instrumental purposes. In Sri Lanka, only eight percent reported this as the principal purpose.

Of course, the task of differentiating a call to friends and family from a business call in a not-fully monetized economy is not an easy one. Unlike in developed countries where roles are clearly demarcated and the division of labor is sharply defined, in countries like Sri Lanka, especially at the bottom of the pyramid, the roles are intermixed.

For example, maintaining good relations with one’s brother-in-law may be no different at the BOP than making a call to one’s insurance agent, because in a society lacking insurance, the reliance has to be on friends and family.

Compared to other South Asian BOP teleusers, the Sri Lankans made more international calls, explainable both by the large number of expatriate workers and the low international call prices. Four percent of the calls made at the Sri Lankan BOP were international, just below the Philippines (six percent)

A 2005 study conducted during the window of opportunity created by the MOU in 2002-2004, showed that the inhabitants of Jaffna were the heaviest users of international calls among the four districts (Badulla, Colombo, Hambantota and Jaffna) surveyed.

Seventy five percent of Jaffna mobile users made calls to family and friends abroad. Fifty five percent of public-phone users in Jaffna called abroad.

Teleusers at the BOP used a variety of cost-saving techniques. Sixty percent use texting (SMS) though the levels of use are less than in the SMS capital of the world, the Philippines, where everyone texts and almost everyone texts at least once a day.

In 2006, calling off-peak and missed calls (ringcuts) were among the most popular cost-minimizing strategies at the Sri Lankan BOP, used by 40 percent and 35 percent users respectively.

When asked the reasons for owning a phone, the highest weight was given to its utility in an emergency, 4.58 on a scale of 5. The phone was seen as improving the efficiency of day-to-day lives, 3.98 on a scale of 5.

However, the value assigned to allowing one to make money or save was the lowest in Sri Lanka (3.19/5 as against 3.97/5 for India, for example), possibly an artifact of the RPP [Receiving Party Pays] regime that remains only in Sri Lanka among the countries surveyed.

Only one per cent at the BOP used the Internet. Seventy percent had heard of the Internet but never used it, a much higher number than India (28 percent).

So this is the portrait of teleuse at the BOP. These people appear to be using the phone most frugally and intelligently, though they do spend a higher proportion of their limited income on telecom services.

So what could be the concern about gold and waste?

Obviously, the rapid growth of telecom is pulling time (attention) and money away from other industries. But why do officials in one case and a journalist in the other think that money and time spent on telecom is misdirected?

It could be that the critics consider telephone calls, lacking tangibility, as ephemeral and lacking in value. But they should just look at the Stock Market and the entertainment industries: ephemeral products, but a great deal of value changing hands.

It may not be the phone that is drawing their ire, but the users. In the “bad old days” of government-owned integrated monopoly, one had to be somebody to get a phone; either you knew the right people or had a lot of money.

This is no longer the case with over 5 million mobiles in use and almost 2 million households connected; nobodies are using mobile phones think the self-appointed somebodies. The phone is no longer a factor that differentiates somebodies from nobodies.

The objection to phones could be a remnant of paternalistic thinking. Perhaps the thinking goes that a call from a mother in the Middle East to the children left behind is not the best use of limited Dirhams. Better to use that money to buy gold to bring home and bury in the garden for use in a time of need.

These people have obviously not heard of consumer sovereignty. The poor, as much as the rich, have a right to spend their money as they see fit.

The fact remains that the BOP in the Asia Pacific (South Asia in particular) is teaching the whole world about the value of connectivity. They are talking and texting more for less, forcing the adoption of new business models that allow profits to be made with very low average revenues per user.

In India, a mobile is used for over 400 minutes a month (incoming and outgoing) and generates around USD 7 in monthly revenue. In Sri Lanka the equivalent numbers are 200 minutes and USD 6.

In the rich countries represented in the OECD, the minutes of use per month is as low as 65, for a much higher payment. And yet, the companies in emerging Asia are investing massively and making more than respectable profits.

Globalization and mismanagement of national economies are making all people more mobile. Even those at the bottom of the pyramid have been compelled to abandon their settled ways and migrate to distant parts, within and outside their countries. Telecom provides an invaluable link with loved ones in this turbulent time. 

Relationships are more valuable than gold. They are built and sustained by talk, on the phone and in person. Talk of this kind is definitely not a waste. 

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