The mobile bridge to the digital divide

Q: How is technology shaping the pace and scope of economic development around the world, and in particular, what is the scope of potential for the mobile revolution in areas that are not well developed? How can industry and government best support the growth of micro-initiatives that jumpstart grassroots development with this technology?

A: Stated simply, the "digital divide" is the gap between the world's technology haves and have-nots - a hotly debated topic in 2005. Yet, it is increasingly apparent that when it comes to bridging the divide, the mobile phone, not the PC, has the most potential.

Mobile phones have become indispensable in the advanced economies of the world. However, they are even more useful in the developing world, where the availability of other forms of telecommunications is limited or even non-existent. Mobile technology can leapfrog legacy telecommunications systems, "connecting the unconnected" in weeks or months rather than years.

Mobile phones let fishermen and farmers check market prices before selling goods, make it possible for people to find employment, allow quick and easy transfers of money and boost entrepreneurial opportunities. Mobile phones are, in short, a classic example of technology that helps people help themselves.

However, despite rapid subscriber growth in much of the developing world, only a small proportion of people-around 5% in both India and sub-Saharan Africa-have their own mobile phones. Why? The GSM Association (GSMA) found through research that the handset cost is the "biggest single barrier" to market take-up in emerging countries.

As advanced markets have become saturated, manufacturers have started to realize that future growth - the next billion customers and beyond - depends on catering to the needs of emerging markets. As a result, several operators from developing countries teamed up this year under the auspices of the GSMA, which represents operators from 210 countries across the world.

The GSMA invited handset manufacturers to bid to supply up to six million handsets at a sub-U.S.$40 cost. This tender was won by Motorola, which delivered its first handsets to the market in April. The low cost is not due to lower quality but to innovation (costs have been designed out of the equation) and quality and sustainability remain paramount.

Recently the GSMA began the second phase of this process in which more handsets, at a sub-U.S.$30 target will be delivered from January 2006.

Lower prices will make a second key barrier ever more apparent, namely the high taxes and duties imposed by many governments on handsets and services, often just as growth in the sector starts to take off. It clearly does seem odd that nations make communications access a public-policy goal, and yet put special taxes on telecoms operators, products and services.

In Turkey, for example, new subscribers pay up to 60% in taxes across the total cost of ownership of the handset and airtime service.

The GSMA is now undertaking a 50-country study that will provide conclusive proof of the benefits of cutting taxes on mobile phones. The aim is to show that a "win-win-win" scenario is possible, in which users get affordability, manufacturers and operators sell more handsets and airtime, and governments raise their tax revenues.

With its new focus on low-cost handsets, the industry is doing its part to extend access to communications technology. Now governments must do their part too.