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:
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.
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?
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