Getting by on US$4 a month

If we are indeed entering a world of the ultra-low but practicable ARPU,
this has big implications

"Oh, no!" the conference organiser wailed, after being given his brief, "not another programme entitled 'The Digital Divide'."

I sympathised and could see no one showing up to the session. But not a hundred metres away, across the conference area, an impassioned Carl-Henric Svanberg--Ericsson's CEO no less--was meanwhile declaring "a village without communications is a forgotten village".

It's perhaps the most important subject in global telecom but it's arguably become the saddest and most boring one. In fact, if all the documentation and materials issued about this were placed end to end, they'd reach, well, a very long way. For its sins, it's seen a lot more talk than action, with relatively few stunning successes. And, in a post-bubble industry, there is certainly no shortage of unprofitable subjects to avoid, and this may be one of them.

In fact, getting some new ideas in the picture is part of various current moves forward. But the key factor may simply be the ability to leverage the sheer global momentum of mobile. No one would have predicted a community of 1.5 billion mobile subscribers globally, with two billion realistically on the cards. True, this leaves four billion still un-served, or under-served, but it remains remarkable and unparalleled as a statistic of modern society.

But what does this actually mean for everyone else, and for the economics of the industry itself? Affordability will always of course be the main issue. A noted Indian expert on the subject, professor Ashok Jhunjhunwala, explains that it is no use searching for increased ARPU from many of these subscribers; what has to happen, he argues, is being able to drive down the ARPU for rural areas in developing countries, along with some idea of how to do sophisticated business transactions profitably and cheaply. Ashok's presentations are peppered with examples of how much ingenuity is going into developing solutions for rural areas in India (simple radio-based ATM machines offering cashpoint services being one).

More recently, major industry vendors have also realised the advantage of leverage with new initiatives based on established cellular platforms, such as the Ericsson Expander. These approaches are hardly rocket science but could provide village-based communications of the sort Svanberg was suggesting.

Unusually, the eye-catching feature is not the technology but the projected ARPUs involved. Ericsson says that the solution will be useful for operators targeting subscribers with ARPUs as low as US$4 per month. The figure probably requires a lot of analysis, but the principle is clear enough: ultra-low ARPUs might still be able to support a network that runs on commercial lines.

If we are indeed entering a world of the ultra-low but practicable ARPU, rather than another round of apparently-cheap-but-in-fact-really-expensive deployed technology, this has big implications. After the network and the tariffs come the applications, and we've seen enough in countries like the Philippines with SMS development to know that people are capable of creating substantially new applications. With all of this, a genuine revolution would be well on the way, and would undoubtedly spark further activity.

Perhaps we should wait and see. But it's ironic that after years of chasing customers in a market share landgrab that has left many operators in developed markets with subscribers they knew were unprofitable when they were signed up, the industry might just be turning the corner on a whole lot of other, rather more needy and yes, even perhaps, more profitable customers around the world.

Stephen McClelland, editorial director, Telecommunications[R] International

COPYRIGHT 2004 Horizon House Publications, Inc.
COPYRIGHT 2004 Gale Group