Mobile phones for ordinary folk

Friday, August 5, 2005

?Fortune at the bottom of the pyramid? is a compelling idea whose time has come. CK Prahalad, the renowned management guru, has articulated this idea in his award-winning book with the same title (The New York Times best-seller of 2004). The crux of the message is a fresh attempt by leading edge technology companies to make products targeted at the bottom of the pyramid?the four billion people who live in Africa, China, India and South America?whose purchasing power is individually low, but collectively high. The process is demanding, exciting, profitable (no charity) and such products would find markets even in First World countries.

The typical reaction of technology companies to-wards the emerging markets has been to suggest for use by Third World countries those products that have reached the end of their useful lifecycle?e.g. PCs powered by Intel 386 microprocessors and Microsoft Windows 95. It represents a ?dismissive? view, that investing in R&D to make products targeted at the emerging markets is a non-paying proposition. Technology companies continue to build more products and services that are nice and expensive to serve the First World, where the markets are saturated and the companies have a tough time increasing their top lines. Against such a backdrop comes the refreshing view of Professor Prahalad, that is slowly finding acceptance. New products with amazing price-performance are emerging.

Access to mobile phones can bring economic prosperity to the rural masses. In 2004, GSMA (that represents GSM vendors who serve a billion-plus customers) observed that though GSM coverage reaches nearly 80% of the world?s population, only 20% among them can afford to own a mobile phone. A key element of a mobile phone cost is the cost of the handset itself. To address this, GSMA announced broad specifications of a low-cost (not cheap) mobile handset and requested bids for up to six million handsets at a sub $50 price point. The idea was to seed one percent of the handsets in 2005 through this initiative.

American telecom giant Motorola won the bid in February 2005 and agreed to supply up to six million handsets at $40 during 2005. The handset is a Motorola C114 platform-based handset. After winning the order, Motorola made it amply clear that even at this price

point it was making profit, though small. Emphasising Prahalad?s view that there is, indeed, fortune at the bottom of the pyramid.

These phones are rugged, have an excellent battery life and are durable?the demands of emerging markets. They have good voice quality, SMS capability, customisability (for display, ring-tones, wall-paper). Buoyed by the success, GSM Association has fixed another bid to be decided at the Singapore conference in early September 2005, where they are talking of $30 phones. Several GSM service providers in Africa, Latin America, India, China and Philippines are participating in this initiative. These include Bharti, BPL, BSNL, Hutch and IDEA from India. With the operators participating, the call rate, too, would come down. GSMA is requesting governments to reduce duty on equipment and tax on phone rates.

Another development that adds to the excitement is the announcement early last month by Infineon (the semiconductor major that was earlier part of Siemens) of a single-chip based ?reference design,? that would translate to a $20 phone. The design includes full phone functionality?phone functions, software for SMS and voice calls, keypad display, charging system, packaging and documentation. It is expected to be licensed to EMS manufacturers for production by early 2006.

The design brings down the electronic components from about 200-plus in current design of basic models to just about 100. And integrates send/receive functions and the processor into a single-chip. The phone would have four hours of talk-time and 10 days of standby, comfortable for most users of basic communication functions.

Finally, there are mobile phones affordable by the common man?a true triumph of technology with a human touch, that is sustainable in the long run. IT can be a bright spot for India?s tomorrow!

The writer is director of IIIT, Bangalore. These are his personal views.

Source: Financial Express (link opens in a new window)