From the literature review and our own analysis, we can draw several conclusions and pose many questions for further study. These involve numerous aspects of the mobile service affordability problem and the purchasing power of the poor.
The main conclusion of this study is that current tariffs and operators’ marketing practices result in mobile telephony services not being generally affordable for most of the Latin American population. This conclusion has an important inhibiting effect, not only in terms of penetration but also usage. This in turn fosters expenditure control practices that are tolerated by the operators, albeit
0 5 10 15 20 25 30 35 40 45
Argentina Brazil Chile Colombia Mexico Peru
%
outside the formal sector. Although competition has stimulated tariff reduction, there is still a wide price differential with respect to alternative services, such as fixed and public telephony. That said, in the case of the mobile-fixed comparison, the differential is lower than expected. In addition, we highlight the important price differential between the pre-paid and post-paid systems. This, together with the mobile-fixed issue, implies that most of the poor’s access to phone service represents a significantly higher cost than for the rest of the population.
Our analysis also shows that the implementation of changes in the operators’ marketing practices, such as per second pricing or micro-prepay, would result in a significant reduction in the costs faced by low volume users of pre-paid mobile phone service. Most interestingly, these changes, by reducing the cost of the service basket, could stimulate demand in such a way that there would be an essentially neutral impact on operators’ revenues.
Our results, however, give rise to issues that require further research on the many aspects of the mobile services demand of the poor. Since the basket has been built following theoretical assumptions, the first task is to collect information on the ground to determine the effectively consumed telecommunications basket of the poor. Moreover, although a basket constructed using empirical data on current consumption patterns would not be directly comparable across regions, it still has the advantage of reflecting what was consumed and thus what was actually spent by the poor in each country. Similarly, in addition to calculating the actual consumption basket, it is also necessary to explore the sensitivity of demand to changes in tariffs and business models, as well as to study users’ perceptions of the affordability of service and other dimensions such as the quality of service. This type of research would in turn enable a better understanding of the combination of factors affecting poor people’s purchasing decisions vis-à-vis current phone service alternatives.
References
ANATEL (2006). Projeto Micro Recarga no Serviço Móvel Pessoal - SMP. Available at:
http://anatelsite.anatel.gov.br/comunicacao_movel/estudos_tecnicos/projeto_micro_recar ga.pdf
IADB (2006). Building Opportunities for the Majority: Washington: IDB.
CHOWDHURY, S.K. (2001). Attaining Universal Access in Rural Areas of Developing Countries: Public-Private Partnership in Peru and Business-NGO Partnership in Bangladesh, ZEF, Bonn University
CRONIN, F. J., COLLERAN, E. K., PARKER, E. B. and GOLD, M. A. (1993). Telecommunications Infrastructure Investment and Economic Development.
Telecommunications Policy, 17(6): 415-430.
CRT (2005). Estudios de Elasticidades en Servicios de Telecomunicaciones. Centro de Conocimiento del Negocio. Available at: http://www.crt.gov.co/crt_2001-
2004/documentos/biblioteca/Elasticidades/SintesisEstudiosElasticidades.PDF
INTELECON (2005). Nigerian Demand Study. Available at:
http://www.inteleconresearch.com/pages/documents/July2005-Nigeriademand.pdf
ITU (1998). World Telecommunications Development Report: Universal Access. Geneva: ITU. ITU (2006). World Information Society Report. Geneva: ITU.
LIRNEasia (2006). Preliminary Methodology for Comparisons of Mobile Tariffs. Available at:
http://www.lirneasia.net/wp-content/uploads/2006/03/draft_mobile_tariffs_study3.pdf
MARISCAL, Carla BONINA and Julio LUNA (2006). New Market Scenarios in Latin America. In Galperin and Mariscal (ed.), Digital Poverty: Latin American Perspectives. Available at:
http://www.dirsi.net/espanol/files/03-Mariscal-Bonina-Lu_12dic.pdf
MILNE, Claire. Telecoms demand: measures for improving affordability in developing countries. A toolkit for action. Main Report. January 2006. Department of Media and
Communications (MEDIA@LSE). Available at:
http://www.lse.ac.uk/collections/media@lse/pdf/affordability%20report%2031.01.06.PDF
MOONESINGHE, A., de SILVA, H., SILVA, N., & ABEYSURIYA, A. (2006). Telecom use on a shoestring: Expenditure and perceptions of costs amongst the financially constrained. Available at: http://www.lirneasia.net/wp-
content/uploads/2006/04/Moonesinghe%20de%20Silva%20Silva%20Abeysuriya%20200 6%20Teleuse%20Exp%20Cost%20V2.2.pdf
NAVAS-SABATER, J, DYMOND, A., & JUNTUNEN, N. (2002). Telecommunications and information services for the poor. World Bank Discussion Paper No. 432. Washington, DC: The World Bank.
OECD (2002). OECD Mobile Basket Revision. A revision of the OECD Mobile Telephony baskets, based on information received at and after the OECD/Teligen meeting on the mobile baskets in October 2001. Available at:
http://www.olis.oecd.org/olis/2002doc.nsf/0/02842f20bb153c97c1256beb00404cf5/$FILE/ JT00129163.PDF
OESTMANN, S. (2003). Mobile operators: their contribution to universal service and public access, Intelecon Research and Consultancy Ltd. Available at:
http://www.inteleconresearch.com/pdf/mobile%20&%20us%20-%20for%20rru.pdf
REGULATEL (2006). Nuevos Modelos para el Acceso Universal de los Servicios de Telecomunicaciones en América Latina. Available at:
SAMARAJIVA, R. (2007). Wireless communication and development in the Asia-Pacific: Institutions matter. Information Technologies and International Development 3 (2). SMITH, S. (2004). Smart Communications’ BOP-Driven Business Model. Available at
http://www.digitaldividend.org/case/case_smart.htm
SOUTER, D. (2005). The Economic Impact of Telecommunications on Rural Livelihoods and Poverty Reduction: A Study of Rural Communities in India (Gujarat), Mozambique and Tanzania. Commonwealth Telecommunications Organisation.
TAYLOR, Alan y Mark TAYLOR (2004). “The Purchasing Power Parity Debate”. Journal of Economic Perspectives -Journal of Economic Perspectives- Volume 18, Number 4-Fall 2004-Pages 135-158.
URETA, Sebastián. (2005). “Variations on expenditure in communications in developing countries, A synthesis of the evidence from Albania, Mexico, Nepal and South Africa (2000-2003)” World Dialogue on Regulation for Network Economies, Media@LSE and International Development Research Centre (IDRC), Canada. Available at:
http://www.regulateonline.org/content/view/528/31/
WAVERMAN, L., MESCHI, M. & FUSS, M. (2005). The impact of telecoms on economic growth in developing countries. In Africa: The Impact of Mobile Phones: Moving the Debate Forward, The Vodafone Policy paper series, No.2.
WHEATLEY, J. (2006). Price Elasticities for Telecommunications Services with Reference to Developing Countries. Available at:
http://www.lse.ac.uk/collections/media@lse/pdf/Wheatley%20paper%2003.02.2006.PDF
Websites of institutes for statistics in each country: o Argentina: www.indec.gov.ar o Brazil: www.ibge.gov.br o Chile: www.ine.cl o Colombia: www.dane.gov.co o Mexico: www.inegi.gob.mx o Peru: www.inei.gob.pe
Appendix A: Methodology to define the baskets
In order to measure the affordability of mobile phones for the poor in different countries in Latin America, we used a service basket methodology. This enables the standardisation of every plan and tariff found, as well as comparison at an international level. The main purpose of the baskets is to define the benchmark for different types of users (low volume, medium volume and high volume).
The basket we used is based on the mobile service basket proposed by the OECD, with minor adaptations reflecting Latin America’s service marketing models. In this first stage we collected tariffs for the six major markets of the region: Argentina, Brazil, Chile, Colombia, Mexico and Peru. Below is a description of the characteristics of the various baskets and the data collection methodology (carried out in October 2006), as well as the other indicators included in the analysis.