Rural areas drive next-phase growth

Country & Wireless

Why China and India are ready to chase the rural dollar

The so-called 'digital divide' is either narrowing or widening, depending on who you believe. Deloitte's Technology, Media & Telecommunications industry group, for example, said in a report last month that the digital divide has been widening and will continue to widen this year as efforts to bridge the divide 'fail to address the underlying problems, including economic, political and social issues.' The ITU's World Summit of the Information Society, on the other hand, maintains that the digital divide between developed and developing nations - as measured by teledensity - has narrowed considerably since 1994.

The latest 'e-readiness' study from IBM and the Economist Intelligence Unit seems to back the ITU, although via a more complex methodology that includes everything from connectivity and the local business environment to social, cultural, legal and policy issues. The study of 68 markets found that while all markets across the economic spectrum had improved their overall scores in the past year, lower-tier markets (which is to say, developing ones) showed greater improvement than the top-tier markets did.

The proliferation of mobile phone technology has been given ample credit for much of that, not least because global mobile phone subscriptions outnumber PC ownership two to one. ITU WSIS stats say that in mobile telephony alone, the difference between penetration rates in developed and developing markets on average has dropped from 27 times higher penetration (for developed markets) in 1994 to just four times higher in 2004.

Of course, there's more to measuring mobile connectivity than the number of lines or cellphones per 100 people. Just as public call offices allow multiple people to make phone calls with one or two lines, mobile phones can do likewise. Indeed, operators in various emerging markets have already discovered some of the innovative ways mobile can bring connectivity to the rural populace. The phone ladies of Bangladesh are a famous example - women who tour villages and sell mobile phone calls. In Uganda, MTN publiCom offers wireless services with phones mounted on tricycles and quad bikes. In India, Shyam Telecom mounts them on rickshaws in Rajasthan. In Mongolia, MobiTel employs resellers to run portable kiosks selling telephony services using wireless white desktop phones.

Such is the state of rural comms in emerging markets. Up to now, most if not all of mobile growth in emerging markets has come from urban take-up. Even in markets like Laos and Cambodia, where Lao Telecom and Cambodia Shinawatra have targeted rural areas with WLL systems using iPSTAR satellite connections for backhaul, their respective mobile markets have grown 29% and 37% respectively since the satellite-based systems were installed, but most of that increase came from continued growth of urban and suburban prepaid sales.

However, in Asia's two largest developing markets, China and India, the urban sector is now strikingly well served - so much so that cities such as Shanghai and Bangalore have almost the same level of mobile phone connections as developed nations, according to Peter Korsten, European director at IBM's Institute for Business Value. Consequently, the focus from cellcos and regulators alike is shifting from the urban sector to the countryside.

Traditionally, a rural play could never be justified economically by cellcos, as the cost of rolling out service could never be recouped by a sparse low-income customer base.

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