How to Make Internet-Enabled Phones More Affordable in Low- and Middle-Income Countries

According to a report published by the GSMA, "Owning an internet-enabled handset can be life changing. Yet, for many living in low- and middle-income countries (LMICs), they are still unaffordable. For the 3.4 billion people who live in areas with mobile broadband coverage but are not using mobile internet, affordability is a key barrier."

The GSMA explains that its "report provides an overview of approaches and business models that are improving the affordability of handsets for various underserved populations in LMICs. It explores some of the nuances among these groups, considerations for meeting their different needs and variations between markets in Sub-Saharan Africa and South Asia." Moreover, the report "also provides practical recommendations for stakeholders to make internet-enabled devices more affordable and an analysis of how the policy environment can contribute."

The report is structured into four chapters. The first one aims at defining handset affordability. The second and third chapters discuss the two key supply-side levers to deliver more affordable handsets: reducing the price of a handset through efficiency gains and cost savings in the value chain and improving customer access to financing. In the final chapter, the GSMA provides eight policy considerations, highlighting the importance of strengthening the enabling environment to improve handset affordability.

Below are the report's key findings:

1. The affordability barrier is not just about the economic cost of purchasing a handset relative to income. "It is just as important to consider the cost of a handset in relation to a person's needs, preferences, and perceived value to their life. Non-income-related constraints also have an influence, such as awareness of mobile internet, digital skills, mobile-related safety and security and the social norms that constrain certain groups from accessing and using mobile and mobile internet, recognizing that some of these constraints disproportionately impact on certain groups of the population, including women."

2. New technologies have emerged, disrupting the market and offering new opportunities to make handsets more affordable. "Over the past few years, two main innovations have driven down the cost of handsets: the development of lightweight operating systems (OS) and remote handset locking technologies. Lightweight OS have enabled the development of handsets that are less costly to manufacture, particularly smart feature phones and ultra-low-cost smartphones. This has narrowed the price differential between a basic 2G phone and a 3G or 4G handset. Similarly, the emergence of remote handset locking technologies has enabled a wider range of providers to offer financing with no or limited credit scoring by using the handset as collateral."

3. Lower prices can be offered by providing customized smartphones that meet local needs. "Several mobile operators, manufacturers and PAYG solar companies have been designing smartphones that are customized to the needs of end users in a specific market or region while simultaneously optimizing the costs of smartphone components."

4. Procurement, distribution and marketing should not be overlooked when lowering handset costs. "It is possible to reduce handset costs by passing on the savings from more efficient procurement, distribution and marketing. The convergence of commercial interests to increase the availability and affordability of internet-enabled handsets has created new opportunities for partnerships, for instance, between the mobile industry and organizations that have developed last-mile distribution networks. Marketing partnerships can not only help reduce costs, but also reach a wider audience and raise awareness of the availability of affordable handsets and finance schemes."

5. The emergence of refurbished phone business models not only opens access to quality phones at a reduced price, but also helps the planet. "Keeping handsets in use for longer or giving them a 'second life' can improve affordability. Those selling their handset receive money in exchange, thereby increasing their buying power. Those purchasing a refurbished handset can benefit from 10 per cent to 80 per cent discounts compared to buying one new."

6. Innovative finance schemes and payment models better suited to the livelihoods of people in LMICs are being developed. "There are context-specific factors to consider when developing an appropriate inclusive handset finance business model. Finance schemes that use alternative data for credit assessments or accept a handset as collateral allow customers to repay the handset in instalments, thereby reducing the upfront cost. Offering flexible payment terms, such as daily micro-repayments, are particularly well-suited to those who earn income on a daily basis."

7. Strengthening the enabling environment is key to improve handset affordability. "This report provides eight key policy considerations to improve access to internet-enabled handsets ownership for underserved populations. This includes reducing sector-specific taxes, providing subsidies to target user groups, developing public-private partnerships to de-risk handset financing, and stimulating demand by increasing awareness and willingness to pay."

8. There is no one-size-fits-all solution. Implementers should be mindful of the context in which they are operating and who they are aiming to reach. "Depending on the region or country, some solutions may be easier to implement than others. For example, a thriving mobile money ecosystem makes it easier to offer handset finance and good infrastructure is necessary for the collection of used phones in a refurbishment business model. Meanwhile, regulations such as high taxes on imported handsets and laws forbidding device locking inhibit innovation."

Referencing the 2021 GSMA Consumer Survey, the report notes that "the affordability of handsets remains the top-reported barrier to mobile ownership in LMICs and a key barrier to mobile internet adoption, particularly for women and rural populations. Ensuring that handsets are affordable for different underserved segments of the population is critical to enable access to mobile broadband and close the digital inclusion gap."

What is more, "Mobile internet connectivity has a strong macroeconomic impact; an increase of 10 percent in mobile internet penetration results in an increase in 1.8 percent of GDP in middle income countries and 2 percent in low-income countries. However, without a compatible device to access mobile internet, millions of people cannot reap the potential benefits mobile internet has to offer."

Lastly, the report importantly points out that "[m]ost of the unconnected live in LMICs and certain groups are more excluded than others, including women and those living in rural areas. Although smartphone adoption continues to increase across LMICs, penetration varies significantly by country and region. For example, in Sub-Saharan Africa, smartphones account for less than half of total connections while in South Asia they account for just over 60 percent."

Do you support the report's findings? What are you recommendations for making internet-enabled phones more affordable in low- and middle-income countries?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

China Will Be Home to 892 Million 5G Connections in 2025, Says GSMA Report

"Since the initial outbreak of Covid-19, mobile networks have been instrumental in providing the reliable connectivity needed to sustain social and economic activities," the GSMA says in its 2022 report on China's mobile economy. While the GSMA published its report prior to the spread of coronavirus that is gripping the country, the UK-based organization, which is unifying the mobile ecosystem to discover, develop and deliver innovation foundational to positive business environments and societal change, adds that Chinese "operators have harnessed their networks to support frontline healthcare efforts to curb the spread of the virus, including the use of 5G-powered remote patient diagnosis. In this sense, the pandemic has presented a testing ground for an array of 5G-enabled solutions, further demonstrating the benefits that the technology can bring to society."

Available in English and 中文, the report explains that "[b]y the end of 2021, over 1.2 billion people subscribed to mobile services in China, equivalent to 83% of the population. While this places China among the world's most developed mobile markets, unique subscriber growth is slowing. Nevertheless, smartphone adoption and mobile internet usage continue to grow steadily as operators focus on expanding access to digital services such as video. Increasing engagement with bandwidth-hungry applications will drive the rise in data traffic, which is set to grow by almost 3.5× by 2027."

With respect to the Chinese mobile ecosystem looking to frontier technologies, the report importantly notes: "The metaverse – broadly defined as myriad virtual environments blended with the real world to enable immersive user experiences – is receiving huge interest around the world. This emerging phenomenon is being explored by tech firms across China, as well as mobile operators, which could use 5G as a main pathway to engage in this space." What is more, "Operators are looking to combine best-in-class telecoms networks with frontier technologies to make an impact in key sectors, including manufacturing and mining."

According to the GSMA, "4G adoption peaked in 2020 and fell throughout 2021 as consumers increasingly switched to 5G packages. Due to the rapid take-up of 5G in China, the region is one of the global leaders in terms of 5G adoption." Companies developing services utilizing 5G technology will appreciate that "As consumers signal relatively strong upgrade intentions, GSMA Intelligence expects that China will be home to 892 million 5G connections in 2025 (representing 52% adoption)."

On the topic of the mobile industry continuing to tackle digital exclusion and social challenges in China, the report asserts: "Mobile operators play a key role in efforts to achieve the UN Sustainable Development Goals (SDGs), primarily by delivering the connectivity that enables access to life-enhancing services and tools, and providing a platform for industrial transformation. As a consequence of operators' heavy network investments, more than 1.04 billion people in China now use mobile internet services. This figure is expected to increase by a further 146 million by 2025, reducing the proportion of unconnected people to 20% of the population."

Lastly, "During the Covid-19 pandemic," the GSMA says "society has relied heavily on communications and digital technologies, which have acted as a lifeline for citizens, businesses and institutions. In a post-pandemic world, supportive investment-friendly policies will be fundamental to stimulating telecoms infrastructure build-out, which will be a central pillar of economic recovery and future crisis resilience." I support the assertion that "As countries bring the pandemic under control, a top priority for governments will be to drive economic recovery, promote sustainable growth and increase resilience to future shocks. Advanced connectivity will be crucial to realizing this objective, for instance by enhancing productivity and efficiency through 5G- and IoT-enabled digital transformation of industries."

While a post-pandemic world is not arriving as quickly as Chinese officials planned, corporations and entrepreneurs alike are continuing to develop innovative cloud, big data, IoT, AI, blockchain, and security solutions.

What are you recommendations for driving economic recovery, promote sustainable growth and increase resilience in a post-pandemic world?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.