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Teleuse@BOP

Digital Divide  Digital Opportunity

Rohan Samarajiva (samarajiva [at] lirne.net)
Session 1: Accelerating the growth of broadband

www.lirneasia.net
India Telecom 2007
December 13th, 2007, New Delhi
Plan of presentation

 Relevance of the BOP
 Methodology
 Digital opportunity
 Digital divide
 Bridging the divide and seizing the opportunity
 Non-owners  owners: barriers
 In sum . . .

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Teleuse @ BOP

Relevance of the BOP
How big are the markets in emerging Asia: BOP and M & TOP?

500

450 436

400
Population aged 15-60 (millions)

350

300 282

250

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200

150

100 85

44
50 32
12 10 12 16
5
0
Pakistan* India Sri Lanka ** Philippines Thailand

Middle & top' of the pyramid (SEC A, B, C) Bottom of the pyramid (SEC D, E)

*excluding FANA/FATA Tribal Areas; **excluding North & East Provinces
Teleuse@BOP

Methodology
Bottom of the Pyramid (BOP) defined

 Many definitions of poverty, but this study
uses SEC D and E; between ages 18-60
 SEC does not take into account income, but it is
closely related to income levels

 BOP segment is representative of the BOP
population SEC A, B & C
 Diary respondents also representative of BOP
SEC D & E
 Small (non-representative sample) taken of
SEC groups A, B & C

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Quantitative sample

South Asia South East Asia TOTAL
SAMPLE
Pakistan India Sri Lanka Philippines Thailand

TOP 731 652 596 92 348 2,420
(SEC A, B & C)

BOP 1,081 3,348 481 1,008 352 6,269
(SEC D & E)

Total 1,812 4,000 1,077 1,100 700 8,689

Error margin at 95
2.7% 1.5% 3.0% 3.0% 7.0%
percent CI
Teleuse @ BOP

Digital opportunity
What are the opportunities afforded by ICTs?

 Ability to communicate
 One-to-one
 One-to-many
 More than voice
 Social networking
 Ability to retrieve information that will
 Improve ability to make money or save money
 Enhance ability to coordinate activities across time and space,
thereby improving quality of life
 Educate, improve know-how

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 Entertain
 Ability to publish
 Voice for the voiceless
 Niche publishing
 Ability to transact
 Not only to interact, but to make payments
 Remote computing
 Use of software and computing power that is elsewhere
What are the prerequisites?

 Reliable electricity
 A computer
 A broadband connection
 More than 256 kbps up and down
 Always on
 Service from an ISP
 Familiarity with the interface
 Literacy

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 Language skills

. . . . Classic home Internet user?

 How many at the BOP?
Teleuse@BOP

Digital Divide
Internet at the BOP…

Pakistan India Sri Lanka Philippines Thailand

Use the Internet 1.9% 0.3% 1.5% 8.8% 10.4%

Internet use

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16%
14%
14%
12%
12%
10%
% at BOP

7% Male
8%
Female
6%
6%
Large gender
4% 3%
2%
divide, even in
2% 1% 0% 0% 1% South East Asia
0%
Pakistan India Sri Lanka Philiphines Thailand
What Internet??

Have not heard about the Internet before

80% 72%

60%
% at the BOP

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40% 36% 36%
29%

20% 14%

0%
Pakistan India Sri Lanka Philippines Thailand
Awareness poor, even in urban areas

Internet awareness: Never heard of the Internet
before

100%
78%
80% 67%
% of BOP

60% 49% Urban

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43%
40% 30% Rural
24% 23% 20%
20% 9% 10%

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Teleuse @ BOP

But divide can be bridged and opportunity seized
Why not a different starting point: “more-than-voice” uses of mobile?

 Access and use implies familiarity with the technology
 Access/ownership
 Is ownership of the terminal necessary?
 Any conditions under which non-voice applications can be used
without individual ownership?
 How many currently own terminals?
 What kinds of terminals?

Are they capable of supporting more than voice?
 How many likely to join the ranks of owner-users by 2008?

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 Use for voice without ownership  use for
voice with ownership  more-than-voice
applications  digital opportunity?
Access is surprisingly high  familiarity

 Most people approached for survey (BOP and other) had used a
phone in the last 3 months

South Asia South East Asia

Pakistan India Sri Lanka Philippines Thailand

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Used phone in
98% 94% 92% 93% 95%
last 3 months

“Half the world’s population has not made a phone call” was wrong when Kofi Annan said
it in 1999; absolutely wrong now
Ownership is not as high

 Especially in South Asia…

Ownership and GDP per capita (USD, PPP)

90% 9,000
81%
80% 76% 8,000

GDP per capita, USD (PPP)
70% 64% 7,000
% at bottom of pyramid

59% 60%
60% 6,000

50% 5,000

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38%
40% 4,000

30% 3,000
23% 22%23% 23%
18%
20% 14% 2,000
11%
9%
10% 7% 1,000

0% 0
Pakistan India Sri Lanka Philippines Thailand

Own a mobile Own a fixed phone (household)
Own nothing (but use something) Per Capita GDP PPP (USD)
Easy access needed for more-than-voice . . .

 Easy access provided by ownership is important
 Unlikely that public/shared phones will be used for anything other
than basic voice
 Access for more-than-voice, in order of importance
 Own mobile
 Household member’s mobile
 CDMA “fixed” phone

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Access modes among BOP phone users

 S Asia BOP mainly used public phones; SE Asia mobiles
Most frequently used mode
100%
% at BOP

90%
80%
70%
60%
50%

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40%
“Fixed” phones at S Asia
BOP are mostly CDMA; 30%
Mimic GSM features. 20%
10% Also note that 12% in PK,
4% in IN & 6% in LK use
0%
Pakistan India Sri Lanka Philippines Thailand the mobile of another
Public phone 35% 71% 30% 8% 7% household member
Relative / friend's phone 10% 1% 12% 14% 6%
Neighbours phone 8% 7% 14% 7% 1%
Mobile of another household 12% 4% 6% 11% 5%
member
Household fixed phone 14% 9% 21% 4% 8%
Own mobile 21% 9% 17% 56% 73%

Except in India, combined BOP household use > BOP public phone use
Sophisticated handsets at the BOP: Average for new is USD70+

Average price paid for mobile handsets: brand new & second-hand

USD 160

USD 140

USD 120
Average price paid

USD 100

USD 80

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USD 60

USD 40

USD 20

USD 0
Pakistan India Sri Lanka Philippines Thailand

ave. price paid for brand new ave.price paid for second hand

 60-70% of mobile owners at BOP use brand-new handsets
 But even simple sets allow mobile payments and such
Mobile access is high … and growing

South Asia South-east Asia
Pakistan India Sri Lanka Philippines Thailand
% of non-owners who plan to
get connected between mid- 53% 38% 53% 42% 38%
2006 and mid-2008

% of households at BOP with a telephone
150 100%

86%
Connections at BOP (millions)

125 Type of phone prospective owners
78% 80% would buy
77%
70% 72%
100 100% 1%
4%

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9% 62% 7% 60%
90%
75 50%
80%
41% 40% 40%
36% 70%
50 67%
60% Not decided yet
68%
91%
50%
19% 20% Mobile
25
40% Fixed phone
30%
0 52% 0%
20%
Pakistan India Sri Lanka Philippines
29% Thailand
10% 23%
Already own something Don't own but plan to buy
8%
0%
Current ownership at BOP (%)
Pakistan Penetration
India at BOP bySri
midLanka
2008 Philippines
SMS as the main non-voice application; highest in Philippines, lowest
in India (declined in the last quarter)

Frequency of SMS use (DE)
0%
100%
90%
80% 40%
50%
% of mobile owners

70% 65%
70% Never
60% Less than once a month

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50% At least once a month
At least once a w eek
40%
Daily
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines Thailand
Mobile as a voting device

 “A key advantage of a phone, as seen by participants, is its
ability to promote democratic participation. The example
presented was a reality TV show . . . to select a ‘Super Star’ . . .
based on the SMS/phone voting by the public. . . . Study
participants viewed this as a case of telecom enabling the
‘unheard’ to voice their opinion. . . . They felt that their voice
was heard; that they have been elevated from the level of mere
observers to that of active participants in democratic processes.
. . . None of them complained of having to pay five times the
regular cost of an SMS to place their votes.”

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From a focus group on phone use; reference is to an American Idol-type show
Payment systems in place for more-than-voice applications

Pakistan India Sri Lanka Philippines Thailand

Pre Paid @
99% 95% 92% 99% 96%
BOP

Post Paid
1% 4% 8% 1% 4%
@ BOP

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 For example, Sri Lanka’s largest GSM operator (~ 3.6 million
subscribers)
 86% prepaid subscribers, overall
 Approx. 50% of prepaid top-ups are via electronic reload (50% via
card system)
 12,000+ electronic reload outlets
 Mobile payment system recently launched for the first time in S Asia
 Philippines is the world leader
 Personal accident insurance system via mobile connection also
recently launched
India’s mobile Internet users growing

 As at 30 June 2007 (TRAI, 2007; p.14)
 Fixed Internet subscribers: 9.22 million (declined in last
quarter!)
 Internet subscribers accessing Internet via mobile handsets
(GSM/CDMA): 38.02 million and growing
 One out of five mobile users in India use their handsets to access
Internet

 Mobile = 4 x Fixed

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Foreshadowing the mobile-centric Internet?
Teleuse @ BOP

Non-owners  owners: barriers
Key barrier to ownership is affordability

Reasons for not owning a phone

2%
100%
7% 8% 7% 7%
90% 16%
% of non-owners at BOP

18% 15% 15%
80% 19%
70%
60%

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50%
40% 82% 77% 77%
75% 72%
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines Thailand

I cannot afford it Don't need one Other
The cost of getting connected…Expectation vs. affordability gap

Expected cost of a new phone by non-owners Initial cost that prospective owner can afford
100% 100%

90% 90%

80% 80%

% of prospective owners at the BOP
70% 70%
>USD 176 More than USD 71
% of non-owners at BOP

USD 146-175
60% 60% USD 51 - 70
USD 116-145
50% USD 86-115 USD 31 - 50
50%
USD 56-85
USD 26-55 USD 10 - 30
40% 40%
<USD 25 Less than USD 10
30% 30%

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20% 20%

10% 10%

0% 0%
Pakistan India Sri Lanka Philippines Pakistan India Sri Lanka Philippines

 E.g., 70% of non-owners at BOP in Sri Lanka believe that the cost to get
connected will be greater than USD56
 But only 11% can afford more than USD50
 New mobile and connection possible for USD 36; lower with second-hand
phone
 Greater potential for more-than-voice applications as prices of mobiles with
additional capabilities decrease
Use cost: most can afford less than USD5 per month on
communication

Monthly charges: expected vs. affordable

100%
90%
80%
70%
60% More than USD 20
% of users

USD 11 - 15
50%
USD 5 - 10
40% Less than USD 5
30%
20%

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10%
0%
expected

expected

expected

expected
affordable

affordable

affordable

affordable
Pakistan India Sri Lanka Philippines

 Expectations and affordability are in line
 Most expect the monthly cost to be less than USD 5, which most can
afford to pay
 Also in line with ARPUs of mobiles (USD 3-4)
 32% of customers of Sri Lanka’s largest mobile operator pay around
USD 1 per month
Teleuse @ BOP

In sum
In sum

 Digital opportunity ≠ the way we use the Internet now
 Need think of digital opportunity in terms of functions such as
information retrieval
 Massive divide exists if we think conventionally about the BOP
 But possible to bridge the gap if we start from the mobile
 BOP are not necessarily heavy users, but they do use mobiles
 Even non-owners are participating in telecom
 Potential owners, if connected, would also use phones for more than
voice
 BOP mobile market is growing; much of the BOP will first

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experience the Internet via mobiles
 Prerequisites for ‘more than voice’ applications are in place
 Digital divide can be bridged and digital opportunity can be
seized, only if we take a road less traveled by

. . . that will make all the difference