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Teleuse@BOP

Digital Divide  Digital Opportunity
Rohan Samarajiva (samarajiva [at] lirne.net)

www.lirneasia.net

Session 1: Accelerating the growth of broadband 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?
500 450 400 Population aged 15-60 (millions) 350 300 250 200 150 100 50 0 Pakistan* India Sri Lanka ** Philippines Thailand 85 44 12 10 5 12 32 282 436

16

Middle & top' of the pyramid (SEC A, B, C)
*excluding FANA/FATA Tribal Areas; **excluding North & East Provinces

Bottom of the pyramid (SEC D, E)

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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
 Diary respondents also representative of BOP

SEC A, B & C SEC D & E

Small (non-representative sample) taken of SEC groups A, B & C

Quantitative sample
South Asia SAMPLE Pakistan 731 1,081 1,812
2.7%

South East Asia India 652 3,348 4,000
1.5%

TOTAL Thailand 348 352 700
7.0%

Sri Lanka 596 481 1,077
3.0%

Philippines 92 1,008 1,100
3.0%

TOP
(SEC A, B & C)

2,420

BOP
(SEC D & E)

6,269 8,689

Total
Error margin at 95 percent CI

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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 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 Entertain Voice for the voiceless Niche publishing Not only to interact, but to make payments Use of software and computing power that is elsewhere

Ability to retrieve information that will
   

Ability to publish
 

 

Ability to transact
 

Remote computing

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What are the prerequisites?    Reliable electricity A computer A broadband connection
  More than 256 kbps up and down Always on

. . . . Classic home Internet user?
 How many at the BOP?

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   

Service from an ISP Familiarity with the interface Literacy Language skills

Teleuse@BOP

Digital Divide

Internet at the BOP…

Pakistan Use the Internet 1.9%

India 0.3%

Sri Lanka 1.5%

Philippines 8.8%

Thailand 10.4%

16% 14% 12% % at BOP 10% 8% 6% 4% 2% 0% Pakistan India Sri Lanka Philiphines 3% 1% 0% 0% 2% 1% 12%

14%

7% 6%

Male Female

Large gender divide, even in South East Asia

Thailand

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Internet use

What Internet??

Have not heard about the Internet before
80% 72%

% at the BOP

60% 36% 29% 14% 36%

40%

20%

0% Pakistan India Sri Lanka Philippines Thailand

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Awareness poor, even in urban areas

Internet awareness: Never heard of the Internet before
100% 80% % of BOP 60% 40% 20% 0%
Pa ki st an Th ai la nd La nk a pi ne s In di a

78% 67% 43% 30% 23% 20% 9% 10% Rural

24%

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49%

Urban

Ph i lip

Sr i

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? What kinds of terminals?

How many currently own terminals?

Are they capable of supporting more than voice?

 Use for voice without ownership  use for voice with ownership  more-than-voice applications  digital opportunity?

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How many likely to join the ranks of owner-users by 2008?

Access is surprisingly high  familiarity

Most people approached for survey (BOP and other) had used a phone in the last 3 months
South Asia Pakistan India Sri Lanka South East Asia Philippines Thailand

Used phone in last 3 months

98%

94%

92%

93%

95%

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

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Ownership is not as high

 Especially in South Asia…
Ownership and GDP per capita (USD, PPP)
90%
81%

9,000
76% 64% 59%

80% % at bottom of pyramid 70% 60% 50% 40% 30% 20% 10% 0%
23% 18% 9% 11% 7% 22%23% 38%

8,000 7,000 GDP per capita, USD (PPP)

60%

6,000 5,000 4,000
23% 14%

3,000 2,000 1,000 0

Pakistan

India

Sri Lanka

Philippines

Thailand

Own a mobile Own nothing (but use something)

Own a fixed phone (household) Per Capita GDP PPP (USD)

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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 Own mobile Household member’s mobile CDMA “fixed” phone

Access for more-than-voice, in order of importance
  

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Access modes among BOP phone users  S Asia BOP mainly used public phones; SE Asia mobiles
Most frequently used mode
% at BOP 100% 90% 80% 70% 60% 40% 50%

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

Also note that 12% in PK, 4% in IN & 6% in LK use the mobile of another household member

Except in India, combined BOP household use > BOP public phone use

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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 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

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Mobile access is high … and growing
South Asia Pakistan % of non-owners who plan to get connected between mid2006 and mid-2008 150 53% India 38% Sri Lanka 53% South-east Asia Philippines 42% Thailand 38%

100% 86% 77%

125 100 75 50 25 0 36% 70%

Type of phone prospective owners would buy 80% 78%
72%

90% 50% 80% 70% 60% 50% 19% 40% 30% 20% 10%

9%

7%

60%

41%

40% 40% 67%
20%

68%

91%

Not decided yet Mobile Fixed phone

52% 0%

Pakistan

India

Sri Lanka Philippines 29%
23%

Thailand
8% Philippines

Already own something 0% Current ownership at BOP (%) Pakistan

Don't own but plan to buy Penetration at BOP bySri Lanka mid 2008 India

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100%

% of households at BOP with a telephone

Connections at BOP (millions)

4% 62%

1%

SMS as the main non-voice application; highest in Philippines, lowest in India (declined in the last quarter)

Frequency of SMS use (DE)
100% 90% 80% % of mobile owners 70% 60% 50% 40% 30% 20% 10% 0% Pakistan India Sri Lanka Philippines Thailand
40% 50% 65% 70% Never Less than once a month At least once a month At least once a w eek Daily 0%

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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.”
From a focus group on phone use; reference is to an American Idol-type show

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Payment systems in place for more-than-voice applications

Pakistan Pre Paid @ BOP Post Paid @ BOP

India

Sri Lanka

Philippines

Thailand

99% 1%

95% 4%

92% 8%

99% 1%

96% 4%

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

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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

Foreshadowing the mobile-centric Internet?

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 Mobile = 4 x Fixed

Teleuse @ BOP

Non-owners  owners: barriers

Key barrier to ownership is affordability

Reasons for not owning a phone
100% 7% 18% 2% 16% 8% 19% 7% 15% 7% 15%

% of non-owners at BOP

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

75%

82%

72%

77%

77%

Pakistan

India

Sri Lanka

Philippines Other

Thailand

I cannot afford it

Don't need one

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The cost of getting connected…Expectation vs. affordability gap

Expected cost of a new phone by non-owners 100% 90% 80% 70% % of non-owners at BOP 60% 50% 40% 30% 20% 10% 0% Pakistan India Sri Lanka Philippines % of prospective owners at the BOP >USD 176 USD 146-175 USD 116-145 USD 86-115 USD 56-85 USD 26-55 <USD 25 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Pakistan

Initial cost that prospective owner can afford

More than USD 71 USD 51 - 70 USD 31 - 50 USD 10 - 30 Less than USD 10

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

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Use cost: most can afford less than USD5 per month on communication
Monthly charges: expected vs. affordable 100% 90% 80% 70% % of users 60% 50% 40% 30% More than USD 20 USD 11 - 15 USD 5 - 10 Less than USD 5

10% 0% expected expected expected affordable affordable affordable affordable expected

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

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20%

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

 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

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BOP mobile market is growing; much of the BOP will first experience the Internet via mobiles Prerequisites for ‘more than voice’ applications are in place