Telecom Modernization and the Developing World

Related to the never-say-die hypothesis that with more globalization and global capitalism, "the poor are getting poorer". This table says that hypothesis is, once again, wrong. Even the poor in poor countries like Bangladesh, Mexico, Nigeria, Philippines, India, Indonesia, China, etc. can afford to buy mobile phones. Many of them are even buying 3G and 4G phones.

 source: http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers, May 2014

I like their title, "The 100 million club". The Philippines is one of the 14 countries in that club worldwide. The reported noted that "Iran and Egypt are knocking at the door" of the club. It further noted that 

• The top 14 countries account for more than 61 percent of the world’s total mobile subscriptions. 

• 29 percent of the world’s mobile users live in India and China. Subscriber numbers in either country dwarf the number of subscribers in third place USA.

And here is the overall global picture. Some 90 percent or 5.4 billion people in the developing world, have mobile phone subscriptions. Until about two to three decades ago, many middle class could not even afford to buy a mobile phone. Now even taxi drivers, bus drivers, ambulant vendors, have smart phones.

The report also noted the following:

• Portio Research – in the excellent free Mobile Factbook 2013 predicts that mobile subscribers worldwide will reach 7.5 billion by the end of 2014 and 8.5 billion by the end of 2016. 

• More than half of the world’s mobile subscribers are in Asia Pacific. With 3.6 billion subscriptions, according to the ITU, Asia Pacific accounts for 52.1 percent of the global number. This share is expected to rise – Portio estimates that Asia Pacific’s share of the mobile subscribers will be 54.3 percent in 2016. Portio also predicts that by 2016 Africa and Middle East will overtake Europe as the second largest region for mobile subscribers.

There. The anti-capitalism, anti-globalization logic is proven to be wrong again. Global capitalism works for the poor. The fierce competition among mobile phone manufacturers, among global telecom companies and related sectors or industries have forced the various players to keep churning out more products and models that cater to all segments of consumers including the poor, both in the developed and developing world. One can have a brand new smart phone now for only $50, just get the lesser known brands like Cherry or MyPhone.

On inequality, the poor before ride cows, carabaos, horses or bicycles while the rich ride a Toyota corolla, etc. Now the poor ride motorcycles while the rich ride SUVs, if not a Benz, BMW, Audi or Ferrari. Is this bad for the poor? Some may say Yes but most poor people would say No.

Some people suggest a "smartphone vs food or education" in their household budget. I think it is not a "vs" but rather "and". Let me cite the example of our part time caretaker in our farm in Bugallon, Pangasinan. He is a tricycle driver, rice farmer, part time worker in the farm, helps his wife manage a small sari sari store, while taking care of their 2 young kids. Some of his friends or neighbors will text him and ask him to drive them to Lingayen or Dagupan or San Carlos, etc. This raises his income, thanks to texting and his mobile phone. Then he can ask by text how much are prices of dried fish in Labrador, about 20 kms away, if the price is low, he would drive there and buy various dried fishes and retail them in the barrio and that again raises his income.

That is why access to telecom and mobile phones is largely an income-enhancing experience and investment of the poor. It is a more effective poverty-fighting event than some government welfare and dole out programs.

A German friend cited the example of watching tv in the UK after tv was introduced more than a century ago. One might say watching a comedy on tv is a waste of time. but perhaps the person is sitting on a sofa watching a comedy together with wife and not going to a pub instead. He is saving money, he can spend it on other things. In addition. after tv was introduced, about two-thirds of Britain's pubs had to close, there was more in the average household kitty (usually administered by women) and drink-related violence (stabbings, etc) decreased.

Less government interventionism and regulation, more competition among players and capitalists, they are led by an "invisible hand" to serve the interests of the poor which may not be their original intention.
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See also:
Telecom oligopoly 1: Smart takeover of Sun, April 02, 2011
Telecom oligopoly 2: Slow internet in the Philippines, April 13, 2011
Steve Jobs and innovation, October 07, 2011
Fierce Competition is Fair Competition, January 22, 2013
Globalization, Mobility and Inequality, February 18, 2014

Telecom oligopoly 1: Smart takeover of Sun

Last year, I made 3 foreign trips, all sponsored by the respective organizers of the conference that I attended. Chicago, USA in May, Sydney, Australia in September, and Jakarta, Indonesia in October. I was amazed by the greetings by the various telecommunication companies (telco) in those areas. Like these below (I'm a Globe Telecom pre-paid subscriber by the way, so these firms below should be Globe's foreign partners):

1. 5000: Welcome to Rogers Wireless! To call our customer care simply dial 211 as you do at Home. Enjoy your stay in Canada! (Detroit, 5/19/2010)

Nope, I did not go to Canada. After my conference in Chicago, I visited a Filipino friend in Michigan, his place is near Detroit, and he toured me around the Motor City. I didn't know then that only a river separates Detroit and the Canadian city of Windsor. There were greetings from US telcos I guess, but I deleted them already.

2. Vodafone: Welcome to Vodafone in Australia. To call home, dial (+)(country code)(number) or (0011)(country code)(number). For emergency services, dial 112. *charges apply. (Sydney, 9/27/2010)

3. SIM-WELCOME: For FREE wireless internet surfing at Wireless@SG hotspots, dial *186 for free account. Dial *777 for other visitor services. (Singapore airport, 10/06/2010)

4. Maxxis: Maxxis welcomes you to Msia! The current FOREX rate at 06-10-2010 is 14.0593 PHP = 1 MYR. If you need help, you can always call embassy at +60321484233. (Singapore airport, 10/06/2010)

5. Axis: AXIS welcomes you to Indonesia! Enjoy the best 3G services including data access and BlackBerry service with AXIS. To call home, simply dial +. Have a pleasant stay with AXIS. Dial 838 for AXIS Customer Care. (Jakarta airport, 10/06/2010)

6. 62811: Welcome to Indonesia! Dial 211 for your Customer Care, the same way as you do in the Philippines. Have a pleasant stay with Telkomsei. (Jakarta airport, 10/06/2010)

7. INDOSAT: Dear Globe customer, welcome to Indonesia. Thank you for choosing Indosat. Dial 001 or 008 for international calls. (Jakarta airport, 10/06/2010)

That's 5 greetings from 5 different telcos from 3 countries in 2 Asian airports in 1 day. Cool!

The reason why I also got greetings from a Singaporean and Malaysian telcos was because the conference sponsor in Jakarta booked me in Singapore Airlines. So my route was Manila-Singapore-Jakarta and back, Jak-Sing-Mla.

If one is a Smart telecom (in Manila) subscriber, one would also receive similar greetings from different telcos in Singapore, Malaysia and Indonesia.

My Filipina friend who works for a foreign publication and frequently goes to Jakarta says that telco competition there is dynamic, it's a lot cheaper to call a callphone in Manila from Jakarta than from within Manila. She also noted that most media people in Jakarta have Blackberry or Iphone or other wifi-enabled phones.

And this points us to the lack of sufficient telco competition in the Philippines. Before, there were only two players, Smart telecom (by PLDT head Manny Pangilinan group) and Globe telecom (by the Ayala group). Then Sun telecom (by Gokongwei group) came in. From duopoly to oligopoly. The latter is better than the former, and many Filipino individuals and companies shifted to the 3rd player while the original 2 players introduced various promos to retain their consumer base.

This week though, Sun-Digitel was bought by Smart. So the already no. 1, the already big Smart becomes even bigger. There were fears of the dangers of going back to a duopoly. Some sectors proposed to hurry up the creation of a Fair Trade Commission (FTC) for the government to regulate big, few players in utilities.

I am not a fan of creating a new government bureaucracy to impose another set of bureaucracies and regulations supposedly to encourage competition. What we will end up ultimately if we do that, is less competition and more regulations.

There are two BIG killers of competition in telco in this country. The first is the Constitution. For utilities, foreign equity is limited to 40 percent maximum to "protect local industries." Some sectors though have zero foreign equity allowed by the Constitution. So big, successful foreign telcos cannot come in unless they partner with other companies in the top 10 which are not controlled by the Pangilinan and Ayala groups.

The second killer of competition in local telecom is Congressional franchising. For utilities, they need to get a legislative franchise, a law from Congress, granting them a 25-years franchise to operate. This system is institutionalized monopolization of certain sectors. I heard that big time extortion happens there if a company wants to get a franchise, or if it wants to renew its expiring franchise.

There is a third but minor killer of competition, and that is certain regulations by the National Telecommunications Commission (NTC) and the Department of Transportation and Communication (DOTC). A fourth but also minor restriction are the local governments (provinces and cities), which have the power of granting (or denying) permits for construction of cell sites, among others.

So add up those four levels of regulations and it is not easy to understand why a 4th or 5th player in local telecom is almost impossible to come in. So if we put up the FTC, that will be the 5th layer of bureaucratic regulations.

Meanwhile, I am hoping that after the Gokongwei group has given up in the telecom sector, to use the money to expand on their other businesses like Cebu Pacific (airline) Robinsons (malls and real estate), etc., some really big investors will come in to become at least the 3rd player.

Government, oh government. Always playing double talk on competition when all they want actually is more regulation and more monopolization.