Let the Left Hand Know

We got some good news the other day. A Kenyan friend’s younger brother passed his university qualification exams with high marks, enough to allow him some freedom of choice of his future education. We were all happy for him, of course, but one detail of the story struck me as particularly interesting….

Our young friend got his results by sending a text message containing his student number from his mobile phone to the Ministry of Education. The system performed a lookup based on that number, and returned the appropriate results.

The annual release of secondary exam results in Kenya is an immensely important event, because it determines whether a student will be eligible for admission to one of the more reputable – and subsidised – state-run institutions. In the past, results have been published in The Daily Nation, Kenya’s newspaper of record. They’ve been announced on national radio as well. A friend relates how entire families would travel to the nearest house with power and listen through half the night, waiting to find out how their child had done.

The fact that the Kenyan Ministry of Education chose to use the Simple Message Service, or SMS, reveals a great deal about communications in developing countries. Most obviously, they would not have chosen SMS as a medium if the majority of the country didn’t have access to mobile phones, and the money to pay to send a message.

Mobile telephone service roll-outs are exceeding all expectations throughout the developing world. The cost of infrastructure is many times lower than cable-based infrastructure, which means the money made per call is much greater. Where traditional telephone companies spread profit expectations over many years, a nimble and effective mobile provider can expect to recoup its infrastructure investment in a much shorter time.

This principle has been well understood for some time. A number of new entrants into the telecommunications market have built themselves entirely on mobile telephone services, especially in urban areas with high populations and very low investment in wired infrastructure.

What very few people envisioned, though, was the immensity of the demand for mobile phone services even in the most cash-poor areas. A recent article in The Economist recounts how, between March 2002 and August 2007, the number of mobile phone subscribers in India rose from 6.7 million to over 200 million. Equally interesting: individual mobile accounts earn about 750 vatu per month on average. That works out to about 150 billion vatu per month for all mobile phone providers in India.

It should come as no surprise, then, that new entrants into the telecommunications market should consider even the most marginal of markets worthy of investment. Digicel’s growth plan in the Pacific is, nonetheless, taking some people aback. Their willingness to create a mobile infrastructure that is many times larger than the incumbents’ is clear evidence of their confidence that they will be able to turn a profit by creating an economy of plenitude rather than of scarcity.

Since the days of Malthus and Adam Smith, many economists have assumed that the value of anything was defined by its scarcity. Careers have been made and broken arguing about how this plays out in practice, but the short and far-too-simple version is that a manufacturer needs to balance reduced profits per unit sold versus the number of units sold. For de Beers, this meant limiting the number of diamonds available in the world by exercising monopoly control of the production. For the Coca Cola Company, this meant finding ways to sell cheap drinks everywhere, all the time.

As long as telephone services were available only via expensive land-lines, the de Beers approach to equipment and service made the most sense. Or at least, that was the rationale. It was argued that too many operators in the market would dilute the potential profits to such an extent that investment in a multi-player market was unrealistic.

At the same time as Vanuatu was considering allowing a private sector telecommunications monopoly to invest locally, more developed markets were beginning to believe that a pluralistic market might be more advantageous for consumers. While this process resulted in vastly reduced communications costs, most notably for long-distance calls, the sheer ubiquity of communications in North America, Western Europe and Australia hid another critical bit of learning.

People value communications more than most analysts realise. They are willing to spend a significant proportion of their monthly income for the ability to converse with their friends and family. They will talk as much as they reasonably can, rather than communicating only essential information, or only when necessary. A 2004 survey by the Pipol Fastaem Network in the Solomon Islands determined that well over 60% of traffic on their email network consisted of families exchanging day to day news.

None of this is likely to come as news to Digicel. If they were unaware of this aspect of human behaviour, they would never have shown such a willingness to invest many times more throughout the Pacific region than most of the incumbent carriers have done in decades past. Those who are surprised by their apparent largesse should, however, take note. There is far more money at stake even in Vanuatu’s heretofore marginal market than most people seem to realise.

In months past, we’ve written about network effects. Building a communications system beyond its apparent capacity results in its being used to this new limit, regardless of what that limit is. New Caledonia increased its national data capacity from 1.5 to 50 megabits over the course of a few short years once the market threw off its fetters. It’s still growing rapidly. There is every reason to believe that communications capacity in Vanuatu can grow on a commensurate scale. If anything, government and business should consider whether we’re installing enough capacity, rather than worrying that we might be overdoing it.

The principle of vastly increased demand for communications in an economy of plenitude needs to be well understood by everyone involved in development. Planning becomes quite difficult when the landscape changes at such a rapid rate. In fact, the traditional process of descending from vision to strategy to policy to activity is going to require a fundamental reassessment.

Improved human communications means improved ability to act. Improved efficiency and effectiveness at the grassroots level means that organisations had better be ready to react to new demands, or they will either be opposed or ignored.

One of the hallmarks of the information age is impatience. People will not wait. Not as much as before, anyway. As a result, the sleepy state of affairs in Port Vila – and in the islands, too – is bound to be shaken up.

It’s impossible to predict exactly how this new dynamism will manifest itself. That’s the point of this week’s column, really. There is simply no telling exactly what the future holds.

But that’s a good thing. Those in business and government who have traditionally worn the office of custodian of the public good will find that, while the role is not diminished, it will be shared among a great many others. To coin a tortured phrase, improved communications means that we’ll have to learn to communicate better.

If we want some day soon to be able to send a text message and get our child’s year 10 results, we’re going to have to learn to cooperate in entirely new ways. We’re going to have to allow for a new kind of dynamism to take root, one which reacts nimbly and efficiently to the way people use this newfound wealth.

Barriers between institutions will need to come down as well. Some of them, such as interconnectivity between competing mobile phone systems, will be legislated away, but others will only fall through our collective willingness to accommodate others, to show some flexibility in the face of change, and most of all from our collective willingness to allow these new channels of communication to flow productively in both directions.

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