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MOBILE, REGIONAL CARRIERS BRIDGE DIGITAL DIVIDEThe digital divide is narrowing. It could do little else, with just one fixed phone line per 100 inhabitants in 1995 (that's a whopping three today). But the biggest surprise is the ultimate fill-in technology — mobile phones — and means. New investments by regional carriers are picking up the slack from their counterparts in richer countries that have all but abandoned their commitment to telecommunications development in nations that still lack a basic telecommunications infrastructure. Mobile phone use in Africa has skyrocketed with cell phone subscribers outnumbering those from fixed lines in countries like Morocco at an astonishing six-to-one rate. Over 80% of all phone users in the Congo, Cameroon, Kenya and Uganda do so from handsets. And mobile phone users more than tripled in Nigeria to 1.5 million in just over a year. The continent leads the world in mobile phone growth. That surge suggests that fixed line access may morph into an outdated measure of a maturing telecommunications infrastructure, and that follow-on services like Internet access will likely focus on the roving handset, instead. Worldwide, mobile phone users now outnumber fixed line ones with their numbers in low-income countries surging to over 500 million today from 3 million in 1993, for the fastest take-up rates in the world. Internet use is growing in emerging economies too, sometimes at rates four-to-five times higher than earlier estimates due to unreported users using free Web services, Internet cafes or prepaid cards. From 2001 to 2002, Internet users in low-income countries more than doubled, for the highest global growth rates. Sure, penetration still nudges a tiny 1%, but the burgeoning demand bodes well for future growth. But most remarkable of all are unexpected alliances among regional operators to supply mostly mobile phone services in Africa, and the heretofore unimaginable investments by, say, Asian operators and equipment makers in far-flung African locales which Western carriers have, by-and-large, avoided. The newcomers see the business case for being there. Such trends, challenges and opportunities will be discussed at the World Summit On the Information Society in Geneva from 10-12 December. The gathering, organized by the International Telecommunication Union, brings together business and political leaders to forge solutions focusing on nations with low to no infrastructure and builds on recent successes in lower-income countries. That bodes well for accelerated telecommunications take-up and continental solutions to telecommunications shortcomings, and of course, an economic spillover to the country providing the services or gear. Take Mauritius, a French- and English- speaking island off east Africa. The government of India (which falls into the low-income category), is injecting a healthy USD 30 million into the new USD 100 million "Cyber City", the island's answer to Silicon Valley. The project focuses on moving Mauritius beyond its core sugar, tourism, textile and financial services industries into new age markets, like software. Strong ethnic ties (nearly 70% of Mauritians are of Indian descent) were a natural for India, which saw Mauritius as a stepping stone to further business in Africa and Francophone countries. Earlier efforts to diversify Mauritius's economy bore fruit in healthy annual GDP growth of 5.9% between 1973 and 1999, earning the country the nickname "African Tiger" and the fourth-highest per capita income in Africa. South Africa's aggressive expansion in Africa is noteworthy, as well. Since the last World Telecom, South African operator MTN has kickstarted mobile telecommunications services in Uganda, Nigeria, Rwanda, Swaziland and Cameroon. Trans-Africa services include mobile, broadband, fixed and payphone services in the pre- and post-paid categories (one specialized South African application tracks a runner's progress through add-on shoe chips for short-messaging times to others. MTN even has a solar-powered phone in Uganda). Vodacom, another South African cellular company, has set up mobile service in Africa's third-largest country, the Democratic Republic of Congo, and in Tanzania where its total investment tops USD 150 million (its claim to fame is enabling mobile phone calls from Mt. Kilimanjaro). Both have grabbed lucrative opportunities from giant European carriers in retrenchment following the 3G fiasco and sluggish economic growth and which, with their bloated inventories and soaring debt levels largely stayed away from unsure spots. The newcomers' trump card includes better knowledge of the local culture, plus the extra efforts they provide for deals that would be considered chump change to behemoths. But those businesses make money. Even in the turmoil of war or economic upheaval, communication is key. Mobile phones continued to grow in the Democratic Republic of Congo despite ongoing civil war. "They know the environment and how to make profits there," says Michael Minges, acting head of the Market, Economics and Finance Unit within the Telecommunications Development arm of the ITU, a UN organization that focuses on telecommunications regulation and development. He sees such "South-South" deals driving telecommunications access growth in underserved regions over the coming years. "The developed nations lost the will to invest and are out of touch with local markets. Regional operators are stepping in and filling the gap". Asia, too, has produced some eyebrow raising tie-ups on its technological lead and low-cost manufacturing might. Singapore Telecom has bought into operators in both Indonesia and Australia; Malaysia Telekom's stakes in South Africa and Guineau are noteworthy. Asian gear makers have also stepped up to the plate through deals like Huawei's sale of mobile gear to Nigeria. China can thank Ericsson and Nokia, which built a strong manufacturing base at China's insistence - for teaching them the trade. "The Japanese and Koreans are coming on strong. The Korean government knew its broadband lead would spill over into exports," says the ITU's Minges. "This technological lead gives Asian companies an advantage over European and North American equipment vendors." But much remains to be done. Africa's robust growth leads that of Latin America and the former Soviet republics between Telecom 1995 and 1999, but its jaw-droppingly low penetration rate still leaves a yawning void. Under 3% of all Africans can access telecommunications of any kind with virtually all those outside urban areas unable to access fixed lines. The Internet is out of reach to the vast majority of Africans. That's why international organizations like the ITU make communication services everywhere a top priority. And for most developing countries broadband - which sports single digit penetration in wealthy countries like Japan and the US anyway - remains a distant dream. But the economic benefits of broadband, like speeding small business development, are undisputable. That's shifting the definition of Digital Divide. It increasingly focuses on high-speed Internet access as an essential economic growth driver rather than basic voice services which lagged even in 1980s Europe, when the idea of universal telecommunications access first took root in a celebrated report called "The Missing Link". The dual roles of affordability and education in luring in new subscribers have taken front stage, as well, particularly in impoverished and remote areas of high-income countries. There are success stories. Bhutan's Internet push through access at post offices allows users to dip their toe in the Internet; Philippinos send a whopping 75 million text messages a day. "A low-tech solution can be great," explains William Hahn, an analyst at market research firm Gartner. That's pushing business and international organizations to push for broadband in selected regions like South Africa and Uganda, as well, where fixed phone access demand has posted progress. Tele-medecine, for example, is really only feasible over a high-speed connection so that doctors across the world can work together in real-time. "The gap is today is more one of quality," explains Minges. "Without enough bandwidth you can't send files at high-speed or videoconference for tele-education or tele-medecine.' Telecenters with Internet access, and text messaging over mobile phones allows countries just coming online to get their feet wet on the web, often from devices they already have. As the first to reach the phone customer, mobile operators are eager to leverage that mindshare through feasible and affordable rural offerings that will carry over into follow-on services with higher margins. Revenue per user for broadband services is often much higher than for regular Internet use. New wireless technologies like Wi-Fi, which are less costly and easier to install than copper now make rural Internet services feasible. Public access points using such infrastructure can be profitable at revenues of as little as USD 5 a day. The government's role in driving both telecommunications and Internet buy in also a priority for both the private and public sectors. Experience shows that if an administration truly gets behind a project and backs it up with compelling content and resources, demand can be robust. South Korea leads the world in household broadband penetration, largely because its government spearheaded efforts to boost infrastructure and use through loans and tax cuts for gear makers and spurred the creation of cybercafes to boost Internet literacy. Developing nation governments realize that Internet use is most likely to come from such centers. (Around 80% of surfers in Peru, for example, do so from Internet cafes). ITU members have thus asked the ITU to measure subscribers from such public access points. In Venezuela, prepaid cards helped drive the country's mobile phone penetration rates to one of the highest in Latin America. Such pay-as-you go plans lure in many more users in emerging economies than the monthly subscriptions popular in higher-income countries. Privatization of the world's former incumbent operators (over half are now fully or partly privatized) also plays a role in bridging the digital divide. New entrants can provide sought-after services like Internet access that the government-owned operators resisted to keep their voice cash-cows intact. Teledensity in Nigeria grew fourfold, for example, when the government gave the green light to three new mobile carriers. For businesses eyeing the exploding business opportunity in emerging economies the ITU helps pave the way for investment by imparting invaluable information about local laws and regulatory conditions, the key role of involving the community and opportunities and challenges for new carriers. Equally important for telecommunications development is a regulatory body to oversee those new services, ensure competitive costs and offerings, and resolve disputes when operators overstep. The ITU plays a critical role in spurring such regulatory reform, through guidance in its reports like its soon-to-be-released "Trends in Telecommunication Reform: Promoting Universal Access to Information Communication Technologies". The guide highlights innovative financial vehicles for infrastructure build-out in rural areas (such as Colombia's USD 100 million rural telecommunications development project), effective pricing strategies and grassroots and small business efforts to bridge the digital divide, like the Grameen Bank's oft-cited handset rental scheme. The organization also helps spur such growth through seminars and workshops focusing on subjects like tariffs and interconnectivity, appropriate technology and universal access. But the landscape is still a long way from being level. "The incumbents are digging themselves into a broadband rut," says Hahn. There is good news: Since 2002 thirteen countries have created such regulatory bodies (over a quarter in Africa); today there are over 120 such regulatory agencies, up from 13 in 1993. In parallel over half of around 200 operators are now fully or partly privatized; another quarter have opened up their markets in some way by allowing in fixed, international or mobile operators. New shareholders now hold operators accountable, as well. Failed attempts at selling off stakes in Australia, Bulgaria, the Czech Republic, Costa Rica, and the Ukraine will likely bear fruits in the future. The future does look bright. Twenty-five countries say they want to sell at least part of their fully- or partially-owned operators. ITU TELECOM WORLD 2003 ForumThe ITU TELECOM WORLD 2003 Forum, which takes place in Geneva, Switzerland from October 12-18, will include more discussion and debate associated with industry growth, business models, investment strategies for developing nations and broadband technology: Sessions that focus on the Digital Divide are as follows:
All sessions are at the Geneva Palexpo. For more information on ITU TELECOM
WORLD 2003, please visit: http://www.itu.int/WORLD2003/ Please contact Kathleen Maksymec or Andreas Keller to arrange an interview on this topic with an ITU spokesperson:
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