Beyond cheap coverage

13 Nov 2006

The headline reads: 'Mobile networks will provide coverage to 90% of the world population by 2010,' and comes from a press release issued by the GSM Association, the global trade association for mobile operators.

The release, issued in mid-October highlights the findings of a study by Intelecon Research and commissioned by the GSMA that governments are implementing 'misplaced policies' that emphasize subsidizing the rollout of fixed networks over mobile networks.

The study found 'that governments had collected more than $6 billion from the telecoms industry, of which $2 billion has come from mobile operators. Of the $1.5 billion that has been distributed so far, less than 5% ($75 million) has been used to extend mobile coverage, despite the distinct cost advantages of mobile technologies.'

The report goes on to note the World Bank's estimation that the capital cost of providing mobile coverage to an individual is one-tenth of the cost of installing a fixed-line connection.

What the report is referring of course are universal service funds, which governments collect from telecoms companies' revenues to subsidize the roll out of infrastructure to rural and low-income areas, which otherwise do not present a viable business case for telecoms investment.

The basic argument is that governments should spending less time following legacy policies that dictate coverage by fixed lines and explore new technologies such as mobile and wireless.

The conclusion seems blatantly obvious: one base station can cover a whole village, while a cable to every household is needed for fixed-line coverage.

Cost of access dilemma
Now, here is where I'm having problems with their argument. Why does it cost me more to use my mobile phone than my fixed-line number in Hong Kong‾

Yes, monthly subscriptions to a mobile service can still be cheaper than a fixed-line subscription, but every minute and packet of data I used on the network is charged. And the situation only gets worse with broadband, where I get better performance and unlimited usage for around $35 a month, while an HSDPA subscription with unlimited usage would put me back some $60 a month.

This doesn't include the $400 that I would have to pay for the HSDPA card to access the high-speed wireless network.

So here is my dilemma on the argument from the GSMA. Does coverage mean cheaper access to telecommunication services‾ While it very well might be cheaper for governments to provide mobile coverage to rural areas, are the ongoing costs of access cheaper as well‾

The fundamental problem is that the business model for mobile services is still based on the legacy notion of cost per minute. Access to telecommunications services should not just be coverage, but also the ability to use the service at an economically viable level for the users.

I seriously doubt that users in rural areas of emerging Asia can afford even the cheapest mobile packages ($5/month) that we are paying today in Hong Kong, which should be a network architect's dream come true.

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