Teleuse on a Shoestring 2: Poverty reduction through telecom access at the Bottom of the Pyramid Harsha de Silva and Ayesha Zainudeen, LIRNEasia Colombo, 6 December th Annual Symposium on Poverty Reduction

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Questions Questions

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Questions Questions

*excluding FANA/FATA – Tribal Areas; **excluding N&E Provinces definition Bottom of the Pyramid SEC D and E SEC D and E Respondent: teleuser between ages Respondent: teleuser between ages PakistanIndia Sri Lanka PhilippinesThailand Population (million) 1651, Target population of study (million) 77*2604**4115

definition Access Universal access Universal access Community access Community access Household access; universal service Household access; universal service ITU Maitland Commission (1998) ITU Maitland Commission (1998) In the developing world; within an hour’s walk In the developing world; within an hour’s walk More recent definitions; in 30 minutes walk More recent definitions; in 30 minutes walk

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Questions Questions

logic Telco access, poverty, inequality Lack of access  poverty Lack of access  poverty Theory: improved access  less poverty? Theory: improved access  less poverty? Telecom liberalization  improved access Telecom liberalization  improved access Less poverty; greater equality? Less poverty; greater equality? Less, same or more poverty; greater inequality? Less, same or more poverty; greater inequality? What, on the ground? What, on the ground?

Agenda Definition Definition Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Questions Questions

untruth, truth, what? Numbers we use… Sri Lanka Sri Lanka CBSL CFS : access 24.5% CBSL CFS : access 24.5% TRCSL (2006 June): teledensity 29.1% TRCSL (2006 June): teledensity 29.1% How meaningful? How meaningful?

untruth, truth, what? While ownership is low… PakistanIndiaSri LankaPhilippinesThailand Total number of phones per 100 population *57.80** Source: National regulatory agencies; * 2005, **2004

untruth, truth, what? …access is very high* South AsiaSouth East Asia PakistanIndia Sri Lanka Phils. Thailan d Accessibility (used a phone in the preceding 3 months) 98%94%92%93%95% Most (66%) can get to a phone in 5 minutes; much less than 1 hour…

untruth, truth, what? High reliance on commercial phones * Does it mean no access; or have access?

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Technical Technical Usage Usage Access and poverty reduction? Access and poverty reduction? Questions Questions

technical issues Overestimation?* Impact Impact Poverty reduced because access increased… Poverty reduced because access increased… Inequality increased because access is a more middle class thing… Inequality increased because access is a more middle class thing… Based on what access? Based on what access? Direct household access is normally used Direct household access is normally used Whereas indirect but actual access of 90 percent + Whereas indirect but actual access of 90 percent + How relevant is direct access? Is it the same as other infrastructure; electricity, piped water, sanitation?

user issues Affordability; tight purse…* PakistanIndiaSri LankaPhilippinesThailand Pre Paid99%95%92%99%96% Post Paid1%4%8%1%4% Owners only: mobile is almost all pre-paid; to control expenditure

user issues Affordability; only a few calls…* Source: Diary All users (owners or otherwise) on average one call a day

user issues Affordability; short calls…* Source: Diary However, average MOUs for owners are higher e.g: Sri Lanka: Prepaid: 120 MOU per month Source: Operators However, average MOUs for owners are higher e.g: Sri Lanka: Prepaid: 120 MOU per month Source: Operators >15 min.

user issues Affordability; abnormal pattern …* Source: Diary Sri Lanka Poverty premium

user issues Expenditure higher than ARPU* Ave. Monthly expenditure for users (USD) PakistanIndia Sri Lanka Phils.Thailand Pre-Paid85728 Post Paid Home Fixed Phone Poverty premium; those who use other peoples’ or public phones are being charged higher rates…

user issues Summary Have access Have access Use sparingly; essential calls only Use sparingly; essential calls only Speak for a short while Speak for a short while Pay premium Pay premium

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Macro numbers Macro numbers Household level Household level Action? Action?

benefit At the macro level; large? Contribution to GNP Contribution to GNP 2003 – 4% 2003 – 4% 2004 – 5% 2004 – 5% Every additional 10% increase in mobile teledensity  0.6% increase in annual GDP growth (Waverman et al., 2005) Every additional 10% increase in mobile teledensity  0.6% increase in annual GDP growth (Waverman et al., 2005) Access  poverty? inequality? Access  poverty? inequality? Evidence Evidence

benefit Access  less poverty? Direct income generation through the sale of telecom services Direct income generation through the sale of telecom services Grameen, Nobel prize… Grameen, Nobel prize… Indirect income generation; anecdotal Indirect income generation; anecdotal Auto-rickshaw driver to check hires Auto-rickshaw driver to check hires Farmer to check market prices Farmer to check market prices Parents looking for health and education information Parents looking for health and education information Cost savings made by making a call as opposed to taking a bus ride into town; anecdotal Cost savings made by making a call as opposed to taking a bus ride into town; anecdotal

benefit Access  Efficiency

benefit Efficiency  economic benefit? BOP does not see the benefit? BOP does not see the benefit? Except for in India, mean responses on efficiency of daily activities vs. ability to earn or save are significantly different at a 95 percent confidence interval Except for in India, mean responses on efficiency of daily activities vs. ability to earn or save are significantly different at a 95 percent confidence interval

benefit Possible reasons… Do people actually make that connection ? Do people actually make that connection ? Some do; services, trade, self employed… Some do; services, trade, self employed… What connection? What connection? May see gains in saving travel time and cost but if the cost of using the telephone is high May see gains in saving travel time and cost but if the cost of using the telephone is high Maybe no net benefit (RPP in LK?) Maybe no net benefit (RPP in LK?) In LK, 24% said direct access has worsened their financial situation In LK, 24% said direct access has worsened their financial situation Link may exist, but Link may exist, but Little business use; people prefer face-to-face interactions? Little business use; people prefer face-to-face interactions? Not enough content? Not enough content? Perception: time isn’t money? Perception: time isn’t money?

benefit Security and keeping in touch

benefit Keeping in touch Source: Diary

Agenda Definitions Definitions Logic Logic Untruth, truth, what? Untruth, truth, what? Issues Issues Access and poverty reduction? Access and poverty reduction? Questions Questions

questions Technical Are access numbers in the 20s or 90s? Are access numbers in the 20s or 90s? How important is it to define access? How important is it to define access? Are we massively overestimating impact of access on economic development? Are we massively overestimating impact of access on economic development? Are conclusions on improved access increasing inequality in Sri Lanka justified? Are conclusions on improved access increasing inequality in Sri Lanka justified?

questions Practical What is the link between access and poverty reduction? What is the link between access and poverty reduction? No empirical micro-level literature No empirical micro-level literature Is there one? Is it pure hype? Is there one? Is it pure hype? Is it a complex social networks based culturally sensitive mumbo jumbo nut no one’s cracked? Is it a complex social networks based culturally sensitive mumbo jumbo nut no one’s cracked? More likely, no silver bullet but one-of-many necessary conditions More likely, no silver bullet but one-of-many necessary conditions Lessons from India: access  usage  efficiency  economic benefit Lessons from India: access  usage  efficiency  economic benefit

questions Important How to increase usage? How to increase usage? Evidence of net economic benefits through lower prices Evidence of net economic benefits through lower prices Current scenario: low price elasticity of demand ≈ 0.5; consistent with low and essential use only Current scenario: low price elasticity of demand ≈ 0.5; consistent with low and essential use only Shift from Receiving Party Pays  Calling Party Pays Shift from Receiving Party Pays  Calling Party Pays Sri Lanka mobile: 120 MOU/mo (estimate) Sri Lanka mobile: 120 MOU/mo (estimate) India GSM mobile: 414 MOU/mo; tumbling prices India GSM mobile: 414 MOU/mo; tumbling prices Meaningful content Meaningful content Increase rural access: VG levy and disbursement mechanism specifically setup; but Government “squandering” money? Increase rural access: VG levy and disbursement mechanism specifically setup; but Government “squandering” money?

In conclusion Hypothesis is inequality in access to telecom is contributing to poverty Hypothesis is inequality in access to telecom is contributing to poverty But, people at the BOP have easy access to phones But, people at the BOP have easy access to phones Use sparingly and pay premium Use sparingly and pay premium Inequality in access; not so black and white Inequality in access; not so black and white Randomized evaluations Randomized evaluations Question is how to increase usage by making access more meaningful Question is how to increase usage by making access more meaningful Regulatory policy Regulatory policy Content; convergence Content; convergence

Thank you. Harsha de Silva and Ayesha Zainudeen