Beyond the three billion mark

In mid-2007, we passed the symbolic mark of three billion mobile phones in use around the world. How did we get here? And how will we reach the next three billion users?

The spread of mobile phones across the developing world is remarkable. In 1990, there were only 14,200 mobile phones in Africa out of a global total of 11 million. By 2005, this number had risen to 137 million out of a total 2.2 billion. Since then, around one billion more mobile phones have been added, the majority in developing countries; growth in Africa – more than 50 percent per year – is the highest in the world.

Mobile phones are not just complementing, or substituting, fixed-line services. They often provide access to electronic communications for the first time. In the Democratic Republic of the Congo, some 1.7 million new mobile phones were added in 2005, reaching a total of 2.7 million. By contrast, the installed base of just 10,000 fixed lines declined.

Figure 1: Methodology for assessing gaps in the provision of phone services
Source: Winrock International/Pyramid Research ‘Costing ICT Infrastructure Needs for Africa’ ( Forthcoming, October 2007). (Larger version)

In a fraction of the history of fixed lines, mobile phones have come to dominate. How did this happen? Technical innovations helped: prepaid cards with low-value recharges reduced economic barriers and modern handset design increased the prestige of ownership. But the right policies also had to be in place – a mix of less government (liberalisation and competition) and more government (regulation and licensing requirements).

A key indicator of government policy has been the number of operators allowed into the market. Ethiopia, for instance, has maintained a monopoly: mobile penetration remained less than 1 per 100 inhabitants in 2006. In neighbouring Somalia, which has a similarly troubled past but largely unregulated market entry, penetration is already above 6 per 100 inhabitants.

Other helpful policies include allowing foreign investment and ownership, and requiring the main fixed-line operator to allow mobile operators to interconnect, and make calls across their networks, at reasonable rates.

In simple terms, however, mobiles work because they are driven by demand rather than supply, and by needs rather than technology. Everybody, it seems, wants a mobile phone. But how will 'everybody' get one?

We can assess this through analysis of the gaps between existing and potential use of mobile phones in developing countries (see Figure 1 above):

• Existing Access is the portion of a country's population already served by either fixed-line or mobile phones.
• The Market Gap is a measure of how many more people than currently have service could be reached if markets were functioning efficiently.
• The Access Gap measures those parts of the population that could only be reached with some kind of subsidy – capital expenditure, operational expenditure, or both.

Research carried out for the World Bank by Winrock International and Pyramid Research, covering 24 countries in sub-Saharan Africa, found that 57 percent of people were already within range of a mobile signal. By improving the efficiency of existing markets, a further 40 percent of the population could be served, with some US$3.0 billion of market-led investment (Market Gap) by 2015. Only the remaining 3 percent would require government intervention, through a subsidy of around US$2.1 billion (Access Gap), as they live in areas outside the range of commercially-viable mobile service provision.

Moving beyond the three billion mark is a major challenge. It will require low-cost handsets and services, innovative funding schemes and, most of all, more efficient markets. Research evidence suggests, however, that it will be possible to almost double current levels of penetration before services become uneconomic to provide. The development impact of that change, which could be achieved within a single generation, is hard to predict. But it does suggest a much faster rate of narrowing some development gaps than at any previous time in human history.

Tim Kelly
Standardization Policy Division, International Telecommunication Union, Place des Nations, CH-1211 Geneva 20, Switzerland
tim.kelly@itu.int

See also

Costing ICT Infrastructure Investment Needs for Africa, study for World Bank, by Winrock International and Pyramid Research, (forthcoming, October 2007)

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