TechZine – Alcatel-Lucent

Business

Accelerating the Mobile Impact

Highlights

  • The mobility/GDP relationship is not fixed - we can increase the impact
  • 3 factors will drive growth: Infrastructure, applications and affordability
  • Countries that want to build mobile economies should focus on the 3 factors

Today only 59% of the world’s population uses mobile phones. That means nearly 3 billion people are excluded from the mobile economy. This number is far too large to be a problem; it has to be an opportunity.

A 10% increase in mobile penetration leads to a 1% increase in low to medium income GDP. That means if we put mobile phones in people’s hands, we have an opportunity to add approximately US$160 billion to the global economy. But is that it, or can we add more?

According to a model developed by Bell Labs and the World Economic Forum, with the right combination of actions and investment, we can accelerate the impact of mobility by as much as 36%, measured in GDP.

The model predicts how mobile policies, applications, technology, and economics can impact the future. The team found that while mobile broadband is a good thing for economic and social growth when we combine it with the right applications it gets even better.

Driving adoption

Mobile networks provide access to people, markets and services. They provide a means to connect more people to the growing digital economy. This is especially important to developing countries and rural areas.

Developing countries now comprise 86% of the world’s population, and over half the people in those nations are living in rural environments. Mobile access in these areas is still far behind adoption in developed regions.

People in emerging markets are only half as likely to have access to mobile communications as the residents of developed countries. And fewer than 10% have Internet access, far below the global average of 23%.

If we can provide more people with mobile access, we can grow economies and improve lives. Numerous studies have demonstrated the impact of mobile penetration on GDP growth.

Brought down to an individual level, GDP per capita is an indicator of standard of living. GDP is used along with data on life expectancy and education to calculate Human Development Index scores. Mobility affects GDP and can be a tool to drive social benefits such as education and healthcare into underserved areas.

But accessibility can be a challenge because the economics for serving rural and low-income populations are tough. As a result more countries such as – Australia, Singapore, Malaysia, Mexico and New Zealand – are starting to drive digital economy agendas. These initiatives call for substantial investments in infrastructure. Like any investor, nations want to maximize their return.

According to the World Economic Forum and Bell Labs, 3 main factors will drive the largest returns.

  1. Rethinking infrastructure. With current traffic and technology adoption patterns, our team predicts many urban networks will soon be overloaded. Conversely, many rural areas are underserved. Mobile access today is not ubiquitous. To achieve ubiquity quickly, we need to look at new business and green technology models that lower costs and accelerate universality.
  2. Scaling relevant applications. We need broad deployment for certain mobile applications. One of the most telling aspects of the study is how applications can accelerate economic and social growth. We’ve seen it in Kenya with mobile payments. These sorts of applications have real social benefits and we need to find ways to scale them more quickly. The issue here is not one of innovation – it’s about broad deployment.
  3. Developing a near-zero cost mobile device and services that are less than 5% of income. This is not new. If we want to extend mobile services to lower income communities we need to address this. Our model shows pricing has a major impact on mobile related growth. Tackling this target may seem like an impossible task, but we need to set the bar.

Revisiting infrastructure investments

The economics of traditional business models are being challenged. Organizations and governments that want to drive economic growth will need to rethink their approach to infrastructure. They will need to be creative to grow capacity and extend reach.

In rural areas, coverage will be the major concern. Developing a business model that supports cost-effective mobile service delivery will require innovative thinking and a partner ecosystem. Some rural settings do not have access to electricity, but we no longer need to choose between delivering electricity or communications infrastructure. With new alternative energy solutions, electricity and mobile can now arrive hand in hand.

In urban areas, providers will deal with staggering traffic demands. Bell Labs predicts the average number of devices per square kilometer will grow from 400 in 2011, to 12,800 in 2015. That increase in the number of users will generate a more than 30-fold increase in traffic. Scalability will be critical to ensure that networks can respond to the load and provide coverage to meet the growth.

Applications must be relevant and scalable

Countries that want to maximize growth should encourage mobile applications that support basic human needs. The more relevant the application, the more incentive people have to adopt the technology. One of the most interesting findings from the study was that not just one, but rather a suite of applications can drive growth much faster than select single applications (Figure 1). Research substantiates that technology adoption happens at a much faster rate when applications are bundled together and appeal to a large portion of the population. Education, healthcare and banking applications are important examples, but they must be simple and locally relevant. Additionally, mobile applications that target the specific needs of women in developing countries will help bridge the gender gap and address this underserved market.

Figure 1: Mobile adoption accelerates when applications are bundled and have mass appeal

Affordability is key

The higher earning segment of the population isn’t the focus here. For ubiquitous access to become a reality, affordability at the lower income level must be addressed. In developing markets, device costs combined with a monthly service charge can be a huge barrier for many. Accelerating the adoption of mobile broadband to make communication services available to all socio-economic levels means they must be affordable. When the price of the mobile solution falls below 5% of the household expenses, mobile adoption becomes much more realistic (Figure 2). However, there are a number of factors that need to come together to make this happen:

  • Technology vendors need to develop innovative network architectures requiring very low capital and operating expenses
  • Device manufacturers and content providers must develop extremely low-cost, simple interface devices with Lighthouse applications to drive uptake
  • Operators must work together with public and private sector organizations to create low-cost services for low-income households
  • Government agencies need to implement tax incentives and policies that will drive economic growth

Figure 2: Affordability is key to mobile adoption

The reality is, without a strategy that will put broadband within the reach of the low-income population, no policy will work – even for countries with a mobile broadband agenda. All of the players identified above must participate to create a feasible ecosystem to drive adoption.

A common goal for the common good

Countries that develop a mobile broadband strategy can optimize growth. But they need the right combination of infrastructure, applications and economics. According to our model, countries can drive GDP growth as much as 36% higher than an access-only approach. Simply put, when people have infrastructure and applications at an affordable price, mobile use will grow along with a country’s digital economy and its people.

To contact the author or request additional information, please send email to techzine.editor@alcatel-lucent.com.