MOBILE-izing Revolution

Our world is going mobile. Cell phones have quickly evolved from high-tech toys of the rich to a staple of development in emerging markets. Phones are becoming a tool to overcome distance, connect people with each other and access information across the world. In rural areas, mobile phones allow farmers to monitor crop prices, herders to check the weather, and migrant workers to transfer funds to their families millions of miles away. According to the Economist, more than 4 billion cell phones are now in use around the globe, and 75% of them are located in developing countries.  The proliferation of cell phones is creating new challenges and opportunities across the telecom value chain. Network operators, entrepreneurs, and end users are all innovating to create value and share the widespread benefits of this revolutionary technology.

Network operators in emerging economies must find cost-effective ways of serving significantly lower income consumers. Indian mobile operators have made the most effective inroads to support a huge population with limited infrastructure and extremely low income by employing a “managed capacity” model.  When moving to a new area, the operator requests a limited amount of calling capacity and pays for it NET 90 at the agreed price per unit of capacity. That leaves IT vendors such as IBM to manage the base station and customer service systems while running the mobile networks is handled by Ericsson and Nokia. This highly outsourced model allows them to transfer most of the risk to other parties and to focus on marketing and sales.

Mobile money has taken interconnectivity to another level. Using a similar transfer mechanism to PayPal, mobile users can utilize services like M-Pesa to pay bills or make transfers to customers. Mobile money makes formal financial services a reality for the millions of people who lack access to banking and credit. Fraud and data security issues are an obstacle, but should be dealt with through low balance maximums and transaction limits rather than hindering access to low income customers. These pioneering systems also represent an opportunity for the financial services industry to create new products and distribution channels that serve the millions of eager users in the developing world.

Entrepreneurs in these markets are finding opportunities to realize savings from running a small business that provides their community with mobile access.  Village telephone operators receive a small loan of start-up capital and a cell phone which they use to charge customers to make calls.  These decentralized sales models reach rural customers at a low cost to telecom companies and allow entrepreneurs to create sustainable businesses that support their communities. While India is leading in information technology job creation, China and the Phillippines are also generating new, higher paying jobs that require skilled labor.

Mobile phones are ushering in a new wave of development. The technology has made a more significant impact in more lives more rapidly than any previous technology.  Who knows what economic and social doors cell phones will open? The keys to success are making sure that IT infrastructure, regulations, and financial mechanisms are in place to allow a broader range of players to participate in this growing industry.