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Although tariffs are often high, low-income earners have started using mobile communication because it opens up new income opportunities, especially for the self-employed and those running micro-businesses. If more people are to have telephone access, however, call charges must be reduced to make it affordable.

December 20, 2006

High call costs shape user behavior in growth markets. Lower tariffs are the key to increasing the use of mobile communication in daily life. In turn, this can open up a range of opportunities in growth markets and provide telecommunications access to those who need it most.

 

For example, in growth markets, phone calls lasting no longer than 10 seconds are common. Mobile phones are also often used as pagers, with a certain number of rings used to communicate a particular meaning. 

 

Michael Bjärhov, director of Ericsson Radio Business Strategies, says: “The benefits for micro-businesses are evident. A hairdresser needs to keep the business open only when someone needs a haircut, and can make appointments from home. A person who wants to buy something can call first and make sure the goods are in stock. For low-income earners, every call is an investment and their behavior is shaped by the cost of the call. Private calls often last 10 seconds or less, while business calls which have the possibility of generating savings or income, can be a bit longer.”

 

This attitude is a direct contrast to mature markets, because a mobile phone can make a far greater difference to quality of life for a poor family than it can for a rich one.

 

There is also a strong desire to have one’s own mobile because is gives direct, private access. However the cost means a family, or even a whole village, may share one mobile subscription. Consequently, the traffic can be quite high per subscription.

 

“Instead of talking about how low ARPU is, it is more important to understand that there is a segment in growth markets that will pay, but also that there is room for growth if call costs are reduced,” Bjärhov says.

 

“If you earn USD 1 a day, you cannot afford to use a mobile phone. If you earn USD 2 per day, you are interested in using mobile telephony as an investment. Those earning USD 3-5 per day already own mobile phones.”

 

Ericsson is focusing on reducing the total cost of ownership for operators in order to make communications more accessible to low-income earners. The key is to understand how low-income earners in growth markets use existing mobile services.

 

“In mature markets, the ‘top-down’ approach has seen services launched through the educated elite. But in high-growth markets where the mobile phone is the only available technology, there is the possibility of working ‘bottom-up,’ giving more people access. For that reason, we will bring mobile services to the villages.”


Five key benefits
Research from Ericsson Consumer & Enterprise Lab points to five benefits mobile telephony offers to low-income earners:

  • It contributes to savings and generates income
  • It strengthens social networks
  • It is a sign of modernity and status
  • It is an infrastructure that works
  • It allows direct, private contact.