Worldview Magazine - Winter 2007 - (Page 11)

Commentary MARKET POWER Mobile phones empower the base of the pyramid Robert S. Katz & Ana P. Escalante F or Babu Rajan, a fisherman in Pallipuram, India, a new mobile phone brings substantial improvements to his daily existence. Rajan used to arrive at port with his daily catch and take whatever price the fish dealers were offering, according to Washington Post reporter Kevin Sullivan. If he tried to find another buyer with a better price it would take too long, and his fish would spoil. Local buyers knew these fishermen had no choice, and they colluded to keep prices artificially low. Now, thanks to ever-cheaper mobile phones, fishermen like Rajan call several ports and dealers while still at sea and find the best prices before deciding on a market. Armed with information, Rajan reaches port with the best offer, maximizing his profits and contributing to a more efficient marketplace overall. A study of market performance of South Indian fishermen by Robert Jensen and recently published in the Quarterly Journal of Economics showed that once mobile phones became available to Rajan and his compatriots, fishermen’s profits rose by eight percent on average and consumer prices fell by four percent on average. o, if mobile phones are good for the fish market, are they good for other markets in the base of the economic pyramid, those with the least power to make decent living? Rajan is just one example of mobile phones’ importance in improving the lives of the world’s poorest producers and consumers. e recent explosion in mobile phone service and use across emerging economies has had huge benefits for low-income businessmen and consumers alike. It’s not an overstatement to say that phone use leads to increased efficiency, S productivity, and the free flow of information. Many living at the base of the economic pyramid still lack access to information, making their often–informal business environments inefficient and unproductive–a problem phone service addresses. e recent boom in mobile phone sales worldwide suggests that there is demand for better access to information in low-income communities, and that the poor are willing to pay for it. Rajan exemplifies how information, whether provided free or for a fee, demonstrably improves the ability of base-of-thepyramid producers and consumers to operate more productively and efficiently. Mobile phone companies in developing countries are growing rapidly. e World Bank calculates that there are more than 1.5 billion mobile phone customers in developing regions–and that more than one billion will come online in the next two or three years. Research by the Groupe Speciale Mobile association, the trade association for more than 700 mobile phone operators in 218 countries, indicates that mobile networks now serve more than 80 percent of the world’s population, double the level in 2000. e report attributes this almost exclusively to “investment by mobile operators and the liberalization of telecom markets by governments,” and estimates that, “by 2010, 90 percent of the world will be covered by mobile networks.” It is fair to conclude that there is a huge market for telecommunications in developing countries. A recent study by the World Resources Institute and International Finance Corporation, “ e Next Four Billion: Market Size and Business Strategy at the Base of the Pyramid,” calculates household expenditures on information and communications technologies in many countries by income segment. According to expenditure surveys of low-income consumers, spending on information technology by the base of the pyramid is $51.4 billion per year and growing. While anecdotal evidence shows that mobile phones are bringing new economic prosperity to millions of poor laborers, Vodafone’s corporate social responsibility report indicates that there is a statistically significant correlation between the increase of mobile phone sales and GDP growth: for every 10 new mobile phones per 100 people, a developing country’s economy can be expected to grow by an added 0.6 percent. Not only do phones account for a huge market and help spur economic growth, they enable local base-of the-pyramid producers and service providers in rural villages and slums to access potential customers. With a mobile phone, independent plumbers, painters and other merchants in South Africa advertise services and reach new clients; in past years, these merchants had to advertise by standing on the roadside because landline phone service was too expensive for mosy of the customers. Farmers in the developing world–like their fishermen compatriots–can now access market data and prices for their crops more easily using mobile phones. is phenomenon is exemplified by ITC e-Choupal in India. ITC, India’s largest grain sourcing firm, set up a network of Internet kiosks called e-Choupals, through which farmers sell their harvest at a fair price without making a time-consuming and expensive trip to governmentrun–and often corrupt–markets. is WorldView 11

Table of Contents for the Digital Edition of Worldview Magazine - Winter 2007

Worldview Magazine - Winter 2007
Contents
President's Note
Lafayette Park
Note to Readers
Commentary
Letter from India
Commentary
Letter from Botswana
Letter from Ha Teboho
Letter from Jumbi Valley
Letter from Mununga
Letter from Medellin
Giving Back
Community News

Worldview Magazine - Winter 2007

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