On mobiles and development: Three reasons why Steve Song is off the mark

Posted on November 2, 2011  /  1 Comments

First, you must read Steve Song’s self-described rant. He is a thought leader. Will do anyone good to read his thoughts. What follows is my response:

This could be the beginning of a good brawl, so let me first thank Steve for starting the debate right, with some facts wrong and slightly in rant territory. Without these elements one would not get a lively debate. I specialize in rants, but hopefully my evidence is better.

What development?

I am not going to take on the confusions inherent in Steve’s title. But it seems that there are (at least) two contending conceptions of development (broad) out there.

In the first, the “activist/scholar” knows what development is and engages in various 4D actions. I have, for the most part, kept away from saying I am doing x or y 4D, because that posits that I know what development is, and that my x or y actions will yield the development that is pictured in my head. Activists who thought community radio would yield development for the First Nations in the northern parts of Canada found that the first community broadcasting station played country and western music, more or less non-stop. Wasn’t what was in their heads, but it made the actual developees, the people of the First Nations, happy.

The second conception of development (one that I subscribe to) is minimalistic. It is about the creation of opportunities (more accurately, the removal of barriers) for people to do things for themselves. I recall being asked whether we approved of people using mobiles for relationship maintenance, as documented by Teleuse@BOP research. My answer was in two parts: the question was misguided, focusing on quantity of calls (because one call is not equal to another); what people choose to do with their hard-earned money is their business, not mine. I would answer differently if subsidies were involved, but I am generally not a fan of subsidies (except when I get them for LIRNEasia!).

Whatever one may say about prices, etc., one has to accept that mobile operators have given billions of people their first form of electronic connectivity. From my conception of development this is a great thing: it expands their opportunity space. Could be for good or ill, I agree. What I try to do is to further expand the opportunity space by catalyzing new applications that I and my funders think are good. Emphasize catalyzing, versus providing. Whether the applications will be taken up or not; whether the connectivity will be used to facilitate murders instead; that we cannot control, but using the tools of paternalistic libertarianism, we will try to make more difficult.

Bashee selection

It’s fun to have someone to bash. I know; I have the same weakness. For me it’s governments who have created the conditions under which operators function, as tax collectors, or oligopolists, or whatever. It’s operators for Steve. To each his own, but to have real effect, one must pick the right bashee.

First let us look at evidence on prices. The best indicators we know are the basket comparisons done by Nokia (but might be easier to use Nokia as a search term on LIRNEasia.net since the Nokia search is wonky). In 2007, of the 77 emerging economies, only four were under USD 5 per standard basket a month: Bangladesh, India, Pakistan and Sri Lanka. In 2008, the club had expanded to include, in addition, Honduras, Uzbekistan, Indonesia, MADAGASCAR, China, GUINEA, Mongolia and Malaysia (African countries in caps). By 2010, KENYA and EGYPT were in the under-five club. SUDAN and ETHIOPIA were under 10. So it is incorrect to claim that Kenya is the only exception to high prices in Africa. Prices have come down, even in Africa. If I was Steve, I’d be cautious about linking them to the prospects my death.

When one looks at the tax data, one sees a partial answer as why price are high. Governments that have trouble collecting taxes on their own are increasingly using mobile operators as tax collectors. But even with that (a condition that exists in South Asia, but at lower levels), adequate levels of competition can trigger a shift to the Budget Telecom Network model. This is what started happening in E Africa with the entry of Bharti Airtel. Guess who slowed down the process: governments. So the evidence supports my choice of bashee, rather than Steve’s.

The governments that created the conditions for the BTN model did not do it intentionally. They were out for the money that came from new licenses, some to government some to personal accounts. But the end result was a good thing, except now we have operators bleeding red ink and an imperative need to create clear conditions for market exit by those who cannot continue to play in the hard markets.

BTW, I do not believe that low prices are the alpha and the omega. Some upward movement from the levels found in S Asia may be justified. Currently, only 2.4 percent of household expenditure goes to telecom and Internet in Sri Lanka though of course the percentage would be higher in the lower deciles.

Operators are not do-gooders. If they were, they could implement the BTN model on their own. Their managers have the same kinds of incentives we have, as documented by Kahneman, Thaler, et al.: they fear downside risk more. So they are cautious, until the status quo becomes untenable.

They would like to maintain end-to-end control. But increasingly, it’s slipping out of their grasp. Skype is being advertised by Sri Lankan operators these days. The smartphone basically rips out a large area from the operators’ control. These are good things, but they were not done either by governments or by do-gooders. They were the results of the actions of other capitalists out to make a buck and other managers trying to keep their jobs.

So we are talking really about wireless platforms provided by competing operators, not integrated mobile networks as such or mobile handsets of the present (what are they anyway?). So when Steve talks of the big lesson of “the future is going to be a surprise and tying the notion of development to a particular mode of technology is as bad an idea now as it was in 1999,” he is bashing a straw horse. The networks are changing, the devices are changing, who controls them is changing, none of it with a central plan. Steve may know people who are tying their plans to some particular static technology, but I do not. He must have made a special effort.

Mobile industry subsidies

Observer bias is at play here. In the larger scheme of things, the subsidies offered by the GSMA and their members are peanuts. If you place those numbers in the context of what these companies invest and their turnover, you’ll be looking at several zeros after the decimal. They don’t really matter much. It is only those who live in the world of pilot projects who think these are significant.

LIRNEasia was founded on the premise that lowering leased line prices (which we have successfully catalyzed throughout S Asia, and part of SE Asia) was more important than 10,000 subsidized telecenters. So I cannot but agree with Steve that reducing prices is the key. But not only of voice and SMS, but of data as well. Why get hung up on specific services (the straw horse again?)? The BTN model is not for voice, or SMS. It can work with data as well.

1 Comment

  1. Hi Rohan,

    I should have known I might count on you for a good riposte. :-) I don’t think we disagree substantially.

    I agree with you on your take on all things “4D” but refer in my post to those organisations and initiatives that have deliberately and self-consciously donned the mantle of “M4D”.

    You blame government not operators. I blame both especially when it is so hard to tell the difference with government still a major investor in the incumbent operators. You say that the Kenyan government slowed down the process of competition? Was that the Kenyan government interfering or was that another kind of invisible hand from Safaricom?

    In terms of price, I think we see the world differently because of where we live. Here in South Africa the horse is still made of something much more substantial than straw. Vodacom’s pre-paid pricing (http://www.vodacom.co.za/vodacom/Deals/Prepaid/Prepaid+Price+Plans/4U+Prepaid) is virtually unchanged from 3 years ago. South Africa is far from alone on this in sub-Saharan Africa.

    I think too you are a little over-optimistic in assuming the end of operator control of the network. Why else are voice and SMS charges still so high if Skype and WhatsApp have replaced them? Are voice and SMS a straw horse? Maybe one day when they aren’t so fantastically over-priced compared to delivering the same functionality over IP.

    Perhaps in the end it comes down to the pace of change. I am dissatisfied with the pace of change, aren’t you? As a technologist I see a world of possibility and cheaper, more ubiquitous access that is being needlessly stifled by oligopolies.