Document(s) 5 of 21

INTRODUCTION

This chapter builds on the previous chapter, taking a closer look at how telephones are used at the bottom of the pyramid (BOP) in what are termed as 'strategic' ways intended to reduce costs of communication.¹ One would expect 'strategies'—such as giving 'missed calls' on a called party's mobile as a signal to call back, or using different modes for originating and receiving calls—to be used a great deal by people whose incomes are constrained. However, this study shows low use of such strategies.

This highlights three key issues. First, people have little discretion in the calls that they make, because they make relatively few calls. Second, most of these people do not own a telephone, and, therefore, have little opportunity to use 'strategies', as they have to make and receive their calls whenever and wherever they have access. Third, most of these users have only one mode of access; they do not have the freedom to alternate between modes strategically.

The nature of the strategies used at the BOP should be recognized and understood, because future growth will come from this market segment.

ARE USERS AT THE BOP STRATEGIC?

For the purpose of this study the 'strategic' use of telecom services includes the set of conscious decisions made about the use of these services in ways that minimize costs or improve utility. Such strategies may include placing calls at that time of the day when call rates are discounted, or the use of short message services (SMS), or 'text messaging'. These types of decisions are normally termed as strategies in common parlance, but may be more accurately described as 'tactics' because of their short-term nature.² This chapter looks at the use of such decisions or 'strategies' by telecom users.

There is limited empirical evidence on the use of strategies in telecom use. Judging by the income levels of the people in this study (those with monthly income below US Dollars [USD] 100), it is reasonable to assume that they might engage in strategic behavior in the use of not only telecom services, but also in the consumption of many other goods and services. As elucidated in an issue of the Nokia quarterly newsletter, 'Prospective mobile users in new growth markets…earn less, their income is irregular and they do not have much spending power. As such, they need to be very careful with their money' (Nokia, 2005, p. 3).

Various marketing strategies have been developed to serve the lower-end of the market in ways that take into account fluctuations in spending patterns over the month. A good example is the use of the prepaid mobile connection, where the user pays upfront for his or her use, after having purchased a phone connection for a one time fee. The user does not pay a monthly subscription, and does not have to deal with bill payments.³ Although per minute calling rates on prepaid packages may be higher than those on post-paid or monthly subscription connections, prepaid is more popular in many developing countries. Eighty three percent of mobile users in this study used prepaid connections.

Another facility which can help serve financially constrained users is the electronic credit refill facility on prepaid mobiles. In this system, a user can top-up his/her account by any desired amount (usually above a threshold), rather than a fixed denomination in a card. According to Nokia (2005):

Lower income consumers need low value top-ups of USD 1 or less and the opportunity to buy them anywhere. Electronic refill solutions (e-refill) meet both these needs. By replacing paper vouchers with text messages, operators can reduce the cost of the prepaid process by up to 70 percent.

Although cost per unit may in some cases be higher, this is the price that users pay for being able to buy small amounts. This logic is not limited to the telecom sector; it is commonly seen in fast moving consumer goods (FMCG) markets in the developing world. For example, in India and Sri Lanka, where it is not uncommon to find shampoo, toothpaste, hair gel and many other items being sold in single-use sachets at local shops; it is easier for a low-income consumer to buy a small sachet of shampoo, than to buy a larger bottle that is lower in price by volume, but higher in absolute terms (Kishore, 2003).

This survey reveals that 56 percent of the prepaid mobile owners at the BOP tended to purchase cards in the value range of USD 2 to 5. However, a significant percentage (41 percent in India and 24 percent in Sri Lanka) purchased cards of value greater than approximately USD 5. Surprisingly, and in contrast to Nokia's notions, a high proportion of the Sri Lankan prepaid mobile owners (69 percent) reported that they maintained 'plenty' of credit in their prepaid balance at any given time. This figure was 22 percent among Indian respondents.

Among prepaid mobile owners, 57 percent stated that one of the reasons that they decided to obtain a mobile phone was because of the immediate connection, while 37 percent stated that it was easier to obtain (for example, less paper work) than other kinds of phones; the absence of rental charges or deposits involved also played a role. The barrier of proving creditworthiness to operators, therefore, may be more significant than the connection charge for these low-end users. This suggests that the choice of prepaid packages by users may not be driven by the ability to pay upfront for the connection, but perhaps other reasons, such as the convenience of being able to get connected relatively easily, without having to produce proof of one's place of residence, for example. The drop in new prepaid connections in Bangladesh in 2006, following the introduction of legislation requiring new subscribers to provide personal details upon registration, is testament to this (Telegeography, March 22, 2006).

Donner (2005) documents a widespread phenomenon in Uganda, known as 'beeping', where the caller dials a mobile number and disconnects before the recipient picks up. The caller's number is recognized by the recipient's phone if it has been previously stored in it, and the recipient knows that the caller has sent a signal of some kind. The most common signals identified by Donner are requesting the recipient to call back, to convey a 'pre-negotiated instrumental message' such as 'pick me up now' or perhaps to simply convey that the beeper is thinking of the recipient. This system ensures communication without speaking or typing a single word, and most importantly, it costs nothing. One of the 'rules of beeping' is that 'the rich guy pays'.

The beeping phenomenon has become widespread in some African countries. For example, Mobitel Tanzania facilitates a free 'call-back beeping' service on its network, having realized that increasing number of users were going off the network as a result of high priced airtime.⁴ According to Donner, two key factors drive this beeping culture—first, a 'pervasive' prepaid environment, wherein people lack the credit to make a phone call, and second, a calling party pays (CPP) system that encourages the making of shorter calls and receiving longer ones.

Chakraborty (2004) also reports a 'missed call' culture in Sitakund, Bangladesh, resulting from the high cost of calls from mobiles, where users have devised systems where the number of times the caller allows the phone to ring before disconnection has a specific meaning (for example, one ring = 'I am at home, where are you?', two rings = 'I am at your house, where are you?', etc.). The Times of India Online (March 16, 2006) also reports of the growing popularity of a similar culture in India in an attempt to save money, despite call rates already being very low. This survey did not question the use of the 'missed call facility' as described above, where the call is not returned. However, the survey did look at some other similar strategies, as described ahead.

In an environment where incoming calls are charged (an RPP, or receiving party pays, environment like Sri Lanka), one may expect to see a lot of people seeking to control costs by finding ways to minimize incoming calls on their mobiles. People may do this by keeping incoming calls on a mobile short and calling back on a fixed phone, if the user has access to a fixed phone. Another way is by choosing to receive calls on fixed lines only, as they are free. This survey shows that of these kinds of 'multiple mode strategies', only returning calls received on a mobile through a fixed phone is being used by users at the BOP.⁵

Returning calls through a fixed line in response to messages received on a mobile was used by 19 percent of mobile users who have access to more than one mode. However, this relatively high number is due to the Sri Lankan samples, with 38 percent of eligible respondents using it, compared to only 4 percent in the Indian samples—perhaps a result of the differential between mobile and fixed call rates in Sri Lanka (the former being higher). It must be emphasized however, that this strategy is available only to those who have access to mobiles as well as one or more other modes. Such users constitute only 8 percent of the total sample.

The strategies, except for receiving a call on a mobile and returning it on a fixed phone, were more common in the Indian samples; this is peculiar, because in India RPP was replaced by CPP in 2003 (Malik, 2004). This kind of behavior is more appropriate for Sri Lanka, where most mobile users are on prepaid plans and face relatively high incoming call charges. At the time of the survey, a prepaid customer on Dialog Telekom (the largest mobile operator) faced charges of up to approximately USD 0.06 per minute on calls from other networks during peak hours, with only the first 30 seconds of the incoming calls free; this is in contrast to a post-paid customer who may get the first three minutes on an incoming call free.

Another strategy that may be expected in an RPP regime is the switching off of mobiles to avoid incoming calls. The phone is used more as a calling device, as opposed to a calling and receiving device. If widespread, this will reduce the efficiency of the network, where call attempts to switched-off phones cause costs but yield no revenue. Obviously, this degrades the utility of the service to the user and will, in addition, reduce the lifetime of the handset. Switching off to avoid incoming calls is seen as a negative feature of RPP (COAI, 2006; Dewenter and Kruse, 2005).

Of all mobile owners interviewed, 43 percent said that they switch their mobiles off at certain times, interestingly with no significant difference between respondents in Sri Lanka (RPP) and India (CPP). The key reasons for switching off, contrary to expectation, were mostly to conserve the battery of the mobile, according to 62 percent of mobile owners, as well as to avoid being disturbed (43 percent), rather than to minimize cost. Cost concerns appear to be secondary (29 percent).

Controlling communication costs was of greater concern in Sri Lankan localities than in Indian ones. However, interestingly, the incidence of switching off mobiles specifically to avoid incoming calls was larger in the Indian localities. This inverts what one may expect in a CPP/RPP comparison. One may speculate that the short experience with CPP has not been enough for Indian customers to shed behaviors associated with RPP.

The use of SMS, considered to be a cheaper substitute for a phone call, was also examined as a strategy to reduce costs. This was confirmed in the survey results: of those who use SMS (40 percent of mobile users), 88 percent described their use of SMS as a means to 'minimize communication expenditure', as seen in Figure 2.1.

Figure 2.1
Instances Where SMS is Used at the BOP

Respondents did not appear to be making a significant use of the calling rate differentials between 'peak' and 'off-peak' time bands (available in Sri Lanka on both fixed and mobile phones, but not on Indian mobiles) to economize. Respondents were asked about the time of day, as well as the days of the week that they typically make their calls on. Of the fixed users sampled, 81 percent indicated that they do not make their calls on any special day (weekends or public holidays rather than weekdays), while 77 percent indicated that they do not pay attention to the time of the day when making calls.

A similar trend was seen among mobile users in the Sri Lankan samples (there are no rate differentials on mobiles in India), but on a lower scale. Seventy-three percent of Sri Lankan respondents reported that they do not make their calls on any special day and 58 percent make no distinction in the time of the day when making their calls.

There was greater attention to the time of the day among the respondents in some of the Indian localities (Mumbai, Sivagangas, and Gorakhpur), as well as two of the Sri Lankan localities (Jaffna and Colombo), possibly as a result of greater international communication taking place in some of these regions (Mumbai, Sivaganga, Jaffna, and Colombo), in addition to other factors; care is perhaps taken to make calls to different time zones at more convenient times. There appeared to be more 'instrumental' use of phones in Gorakhpur, for example, 32 percent of public access users were undertaking and/or arranging financial transactions through the phone, significantly higher than all the other localities (at a 95 percent confidence interval); perhaps such activities can only be done during working hours, hence greater attention paid to the time of the day when making calls. Additionally, both Gorakhpur and Jaffna had a much higher public access use than the other localities studied; users need to ensure that calls are placed during the operational hours of such establishments.

Some other strategies that were explored included capping telecom use at a certain level of expenditure or call duration, restricting calls to a defined group of contacts, making calls to request another party to call back, and making calls only within the same network, among others. Among fixed phone and public-access owners, the most commonly used strategy was simply keeping calls short. There appears to be greater use of strategies in the use of mobile communication by owners, with similar concern for keeping calls short, as well as disconnecting the phone if a certain amount of call charges or time is exceeded. These cost saving strategies are the most straight forward ways to reduce costs.

Overall, the use of 'strategies' is considerably lower than one might expect, given the levels of income. Even among the lowest income users,⁶ significantly higher levels of strategic use are not displayed (at a 95 percent confidence interval). This is surprising, considering the relatively high levels of expenditure on telecommunications by these users, as seen in the previous chapter.

WHY ARE USERS AT THE BOP NOT STRATEGIC IN THEIR USE?

Even among the lowest income group, where the incentives to cut down on communications costs could be higher, strategic use is low. Such low use of strategies can be driven by several factors. To begin with, over half of those studied do not even own a phone, and, thus, have constrained access to any mode of communication. In addition, these users have little discretion in the few calls that they make. These factors collectively inhibit strategic behavior with regard to the use of telephones.

The Majority of Users at the BOP Do not Own Their Own Phones

Financially constrained people are willing to spend significant amounts on telecom and gain many benefits from such use (Bayes, von Braun and Akhter, 1999; Vodafone, 2005; World Bank, 1999). Many users of telephones do not own a phone, and rely heavily on public telephones, as seen in the findings of this study. Gillwald (2005) finds that in Africa, even in countries that have relatively high per capita incomes, there is still a great reliance on public phones. As indicated by the South African 2001 census figures, of just over 11 million households, only 12 percent of African-headed households had a fixed telephone in the home, as against the national total of 24 percent, while twice as many households had mobile phones (25 percent) as had fixed telephones; overall, only 42 percent of households had access to a telephone (fixed or mobile). In 2003, this figure had increased to 46.9 percent (Statistics South Africa, 2003).

Chapter 1 showed the heavy reliance on shared phones, either through public access phones or other people's phones, mostly fixed. Figure 2.2 shows the patterns of ownership found among users at the BOP in the Indian and Sri Lankan locations; on the whole, a total of 58 percent of all respondents surveyed in both countries did not own the phone that they used, hindering their ability to behave strategically. Those in this group have very limited opportunities to make strategic decisions with regard to telecom use, because non-owners cannot choose the time or the place from which to make a call. This is evident in the relatively higher levels of concern for the day of the week and the time of day of calls found among fixed phone owners; non-owners (fixed) were less likely to make their calls on a specific day of the week or time of the day. Those who have access to the phone all the time (that is, owners) have greater flexibility in deciding when to make a call, whereas those who do not own the phone do not have that luxury; whenever they can access a phone (for example, when they go to the town center to run other errands or when a visit to the neighbor is possible), they must make the call. Not owning a telephone gives them little flexibility when it comes to when, where and how to make or receive calls. The situation is even worse for lowest income respondents (monthly incomes below approximately USD 50), where phone ownership dropped to 23 and 24 percent in the Indian and Sri Lankan locations, respectively.

Figure 2.2
Phone Ownership at the BOP

Another factor that compounds the problem relates to constraints on the people who are being called. It is likely that the people who they call or are called by also do not own phones. For example, when one needs to talk to a relative who only has access to a phone while at work, then one can only do so during working hours, which generally coincide with peak calling times. So even if the caller has access to a phone during off-peak hours, he/she cannot call, because the recipient has limited or no access to a telephone during such time. In the same way, if the call is being made to a neighbor's house, it is unlikely that it will be made at night when the call is cheap because of the inconvenience caused to the phone-owner whose kindness is relied upon to complete the communication.

Most Users have Limited Options for Communication

Many telecom users do not have the opportunity to use strategies to benefit from differential rates or options available through different modes of access, as they only have one option to choose from, as seen by the size of non-intersecting areas of Figure 1.1 in the previous chapter. Only 31 percent (given by the intersecting areas) of those sampled had access to more than one mode. This immediately restricts the user's ability to use 'multiple mode' strategies as described in this chapter. Even among this group, only those with access to either fixed or public (assuming the public phone is a fixed phone itself) together with mobile will be able to make use of such strategies. The fixed location of fixed and public access phones prevents its strategic use. Mobile ownership is essential for strategic use, but is available only to 25 percent of multi-mode users.

Similarly, SMS—generally a cheaper alternative to a phone call—is only accessible to a subset of a subset; that is among those who have access to a mobile, those who are familiar with the Roman script. Though local language SMS is being gradually introduced,⁷ its use is not widespread as shown by the data, with only 3 percent stating that they used SMS in their local language. SMS use is higher in countries like the Philippines or Indonesia where the national languages use the Roman script.

Low Levels of Use Mean Low Levels of Discretion in the Calls that are Made

Financially constrained users make relatively few calls, many or all of which may be non-discretionary or unavoidable.⁸ This is evident in the larger use of strategies found among respondents in the South Indian samples, where usage patterns were found to be higher. South Indians were found to make a high number of calls and receive almost as many calls on an average per month, while the people in the North Indian and Sri Lankan samples made and received only half as many calls. South Indians make use of a variety of strategies, such as watching call duration, disconnecting the phone, restricting numbers that they can call or that can call them, or only using it at home or when traveling. On the other hand, North Indians and Sri Lankans use very limited strategies to curb their communication expenses. In general, higher use of a set of strategies was found among the 'heavier' users of telecom services (those who make and receive a total of more than 20 calls per month) on an average, in both Indian and Sri Lankan samples.

Overall, financially constrained users make and receive relatively fewer calls. When they do make calls, it is out of necessity; at this point they have very little opportunity to implement and exercise the many strategies that will help them control their communication expenses. However, if their use increases to include more discretionary calls, they may adopt cost-saving strategies like the South Indian respondents.

CONCLUDING REMARKS

Users at the BOP spend a relatively large proportion of their monthly income on telecom services and find them to be generally expensive. However, they do not appear to be making concerted efforts to economize. But the real issue is whether these people have the opportunity to be 'strategic' in their use. If callers (as well as the people they wish to call) only have access to a phone for a limited part of the day, and only at specific places, then they do not have the freedom to choose what kind of phone to use, where to use it and how to use it, nor do they have the freedom to 'mix and match' modes. The commonly talked about strategies are available to those who are already well endowed in terms of telecom access: to those who 'have', more options have been given.

It is possible that users at the BOP are in fact strategic in their behavior, but from a different angle, in terms of what could be defined as 'long-term' strategies, such as the choice to invest in a phone at all (versus use one's neighbor's) in order to curb communication costs. In this regard, a great number of those surveyed are in fact strategic in their long-term decision on how to communicate. Similarly, that a majority of mobile owners choose prepaid connections is also indicative. While the cost of mobile service was on the whole perceived as expensive by respondents in this study, Oestmann (2003) finds that mobile access is actually more affordable than fixed access, based on a minimal package for the marginal users with few outgoing calls. When the start-up costs and monthly recurring costs to stay connected are considered, mobile services were undoubtedly found to be more affordable than fixed services in many of the selected countries that were examined by Oestmann. The ability to control expenditure through a prepaid connection may be a key factor for low income users, despite higher airtime charges.

Therefore, the low use of strategies as discussed in this chapter may be a result of constrained opportunities, not a lack of cost consciousness; users at the BOP are cost conscious when it comes to longer term decisions, where they are able to exert some degree of strategy.

NOTES

¹ Further details on the study can be found in Appendix 1 of this book.

² Those strategies which could be classified as 'long-term' strategies (for example, relating to the overall decision to invest in a phone or not, and which mode to use) as defined in Zainudeen, Samarajiva and Abeysuriya (2006) are not looked at in this chapter. For a deeper analysis of such issues, see 'Telecom Use on a Shoestring: Strategic Use of Telecom Services by the Financially Constrained in South Asia,' A. Zainudeen, R. Samarajiva and A. Abeysuriya. Draft version 2.1 (February 2006) available at: http://www.lirneasia.net/projects/completed-projects/strategies-of-the-poor-telephone-usage/

³ It should be noted here that the advent of the prepaid phone has not only helped overcome problems related to affordability from the user's perspective, but has also alleviated the pervasive problem of high transaction costs of dealing with low-income and low-revenue consumers. This has contributed a great deal to the extension of telecom services to such marginal consumers. Chapter 5 deals with the transaction cost problem in more detail.

⁴ See http://www.mobitel.co.tz/Pages/faq's.html (retrieved September 2005).

⁵ 'Use' of a strategy is considered if the user states that he/she uses it more than 50 percent of the time.

⁶ 'Low income' being the groups of respondents with monthly household incomes below approximately USD 50 (that is, INR 2,500 for Indian respondents and LKR 5,000 for Sri Lankan respondents) and 'High income' being the groups of respondents with incomes between approximately USD 50 and USD 100 (that is, INR 2,500 to 5,000 for Indian respondents and LKR 5,000 to 10,000 for Sri Lankan respondents).

⁷ See, for example, http://www.lirneasia.net/2006/05/tamilnadu-adopts-tamil-sms-solution-developed-in-sri-lanka/

⁸ Based on the data collected; although the calling patterns recorded were based on recall of the respondent, the data can be treated as indicative.

REFERENCES

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Dewenter, R. and Kruse, J. (2005). Calling Party Pays or Receiving Party Pays? Discussion paper No. 43, November 2005, Department of Economics, University of the Federal Armed Forces, Hamburg.

Donner, Jonathan (2005). The rules of beeping: exchanging messages using missed calls on mobile phones in sub-Saharan Africa. Presented at the 55th Annual Conference of the International Communication Association, New York. Retrieved August 10, 2005, from http://www.columbia.edu/%7Ejd2210/donner-beeping.pdf

Gillwald, Alison (Ed.) (2005). Towards an African e-Index: Household and individual ICT access and usage across 10 African countries. Johannesburg, South Africa: Research ICT Africa!

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Malik, Payal (2004). Regulation and Investment: Case Study of the Indian Telecommunications Industry. In A.K. Mahan and W.H. Melody (Eds), Report on the World Dialogue on Regulation—Stimulating Investment in Network Development: Roles for Regulators (pp. 177–226). Lyngby, Denmark: WDR.

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Zainudeen, A., Samarajiva, R. and Abeysuriya, A. (2006). Telecom Use on a Shoestring: Strategic Use of Telecom Services by the Financially Constrained in South Asia. WDR Dialogue Theme 3rd cycle Discussion Paper WDR0604, Version 2.1. Retrieved October 14, 2007, from http://www.lirneasia.net/wp-content/uploads/2006/02/Zainudeen%20Samarajiva%20Abeysuriya%202006%20teleuse%20strategies.pdf

Document(s) 5 of 21