This is post number 50 on Marketer’s Kaleidoscope and a proud moment for yours truly. With Diwali around the corner, it’s also festival season and a time for some celebration. What better than to highlight a technology that promises to ‘light up’ the economy worldwide.
Growth in mobile
In previous posts – under the category ‘growing the Internet market’ (see sidebar) – we looked only at the Indian Internet market. This post looks at the global Internet scene. A big shift is taking place. Internet access is increasingly happening through the mobile, not the PC, that too at broadband speeds.
The world has approximately 4.3 billion mobile subscriptions (and an estimated 3.1 billion unique phone users , when multiple handset and multiple SIM card use are taken into account). The GSM Association estimates that by 2013, this will grow to 6 billion. Of the incremental 2 billion, half will be from China and India alone.
1.4 billion mobile broadband subscribers by 2014
Lot of the mobile growth is happening through 3G mobile networks , these are now also making possible high-speed wireless Internet connectivity i.e. mobile broadband. By one estimate (The Economist quoting market intelligence company Informa ) , 1.4 billion mobile broadband subscribers are likely by 2014. To put this in perspective, about a decade and a half after the Internet’s been in existence, the world still has only 1.67 billion Internet users.
Other broadband technologies viz. the fixed-line ones cannot lead to comparable growth. Cable and DSL (fixed-line copper) do not have high penetration in developing markets (~ 40 million in India) and fiber optic cable is too costly to lay all over.
On mobile phones, Internet access has so far been possible via GPRS and EDGE. 3G will enable speeds upto 2Mbps and make video access possible too in addition to voice and data.
Given rollout of 3G, one remaining bottleneck to the mass adoption of broadband is the price of the access device. The devices options currently are laptops, netbooks and phones (smartphones). Phones are too small to enable a complete Internet experience (e.g. cannot be used in schools).
Netbooks are better suited than phones but can become mass only if prices go down further, say below $100, the best price got so far is $200. This chiefly involves breakthroughs in chipmaking and manufacturing.
In India, as we saw in a previous post , Tata Photon Plus and Reliance NetConnect are the mobile broadband services currently available, and 1.5 million mobile connections connections are expected by end of this year.
Now, in addition to voice and person-to-person SMS, phones are being used for many value-added services. Entertainment and email kicked off first. Notable ones with mass-market potential in emerging markets are those for agriculture, health, banking, weather, education, classifieds ads, etc. These are all information-based services and are currently being delivered via SMS. Here are some of them : Grameen Foundation’s Applab (Uganda), Reuters Market Lite (India), mPedigree (Ghana), CellBazaar (Bangladesh) & Nokia Life Tools(India).
Mobile broadband will enable more people in emerging markets access the Net ever more easily, giving a boost to the above information-based services and enable many others. With voice increasingly getting commoditized,operators will also willy-nilly evangelize these value-added services. Rajesh Jain’s prediction for the Indian market is that of an average ARPU of INR 200 per month, INR 75-100 will come from data services.
World Bank study on broadband’s impact on economies
A recent World Bank study across 120 countries has compared the relative impact of the introduction of four telecom services viz. fixed line phones, mobile phones, dial-up Internet access and broadband Internet on a country’s GDP per capita. The findings ? Of these four services, the highest increase in per capita GDP occurs through broadband.
This macroeconomic study suggests that each increase of 10% in a country’s broadband population results in an increase in per capita GDP of 1.2% p.a. for developed and 1.38 % p.a. for developing countries. Considering that developed countries have grown by only 2.1% (between 1980 and 2006), the impact of broadband will be considerable. As regards the above 1.38 % number for developing countries, the study cautions that broadband penetration here has not reached critical mass , only when critical mass is reached can we say this % increase holds true.
In 2006, 3.4% of the population of low-income, 3.8% in middle-income and 18.6% in developed countries had broadband.
So far the roll out of mobile phones has been more successful than that of dial-up or broadband access. Indeed, in all of human history, mobile telephony is the technology that has spread the fastest and proved the easiest and cheapest to adopt. It seems that everyone will soon have one. And the benefit to the economy is there for all to see.
Empirical evidence of the benefits of broadband
With 1.4 billion mobile broadband subscriptions expected by 2014, a big boost in world GDP growth – in line with the World Bank study – is to be expected. Broadband has been likened to ‘the next utility’ – after water and electricity – with many benefits, economic and social.
In practice, in most countries critical mass in terms of broadband penetration has been achieved only recently. Therefore, real-world data on the impact of broadband on a country’s economy is in many cases not yet available.
Data is available for Korea, however. Korea is a major broadband economy. In 2007, 90% of Korean households had broadband access (99% had Internet access) of which half enjoyed speeds of 50 to 100 Mbps. A knowledge economy – with broadband as a key component – was identified as long ago as 1995. Broadband has played a significant role in transforming Korea’s economy and making it globally competitive (Chapter 3 of World Bank Report).
Let’s hope then that when we look back several years hence, we will say mobile broadband ushered in a golden age for the world.
With inputs from The Economist Special Report on Telecoms in Emerging Markets of Sep 26, ’09 & The World Bank’s Information and Communication Report for Development for 2009.