India?s Mobile Revolution

Thursday, May 22, 2008

The last decade has seen a dramatic growth in the communication sector in India. Until the 1980s, a telephone was considered a luxury. There was a waiting list of 20 million. Thanks to the liberalization in government policy and the entry of private players, the situation has changed beyond recognition. Few wish to have a landline today. India represents one of the fastest growing economies in terms of mobile communication penetration with millions of new users being added every month. What makes the transformation remarkable is the diffusion of the technology to the grassroots level. It is quite common to see construction workers, cab drivers, fruit and vegetable vendors, maintenance crew and farmers using the mobile phone as if they were born with the gadget. Consider the following:

  • Fishermen in the Southern Indian state of Kerala routinely use mobile phones to ascertain the price of their catch before heading back to the shore.
    Stock Brokers use the device to exchange information about price movements in real time and make buy / sell decisions in seconds.
  • Farmers know when to expect rain and can even be warned about any impending natural disaster such as a cyclone.
  • Vegetable, fruit and flower growers are directly accessing market information bringing in the process an unprecedented level of disintermediation.
  • The young generation finds it an absolute necessity to keep in touch with friends and of course with parents.

In all of this, the most notable feature is that the government has merely been a facilitator. Looking at similar success stories in IT and BT, one is tempted to infer that whenever the government decides to play only a facilitating role, the sector does very well. There is no dearth of either the entrepreneurial spirit or the willingness to take risks and take on the world on its terms. What is needed is a supportive environment.

When the mobile communication technology was introduced in the 1990s, the price of a handset was beyond the reach of an ordinary person. Call rates were as high as 75 cents per minute. Today, with both CDMA and GSM technologies complementing each other, one can get a handset with a pre-paid connectivity and a few hundred free calls for as little as $25. Call rates, including long-distance calls, are just about 2.5 cents per minute. As scale economies are exploited and a critical mass is reached, call rates may go down further.

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Source: Harvard Business Blog (link opens in a new window)