Elsevier

Telematics and Informatics

Volume 33, Issue 1, February 2016, Pages 187-204
Telematics and Informatics

Mobile Communication Price Parity and index: Making money off the poor

https://doi.org/10.1016/j.tele.2015.07.003Get rights and content

Highlights

  • A global index for measuring the price of mobile communication with 2G handsets.

  • The indices of 149 countries provides an overview of global communication prices.

  • A global map shows the diversity within continents and countries.

Abstract

The price for mobile services is the most important determinant in the way low-income households use mobile phones. Based on existing data on mobile communication prices, a global index for measuring the price of mobile communication with 2G handsets has been developed. This index allows the comparison of price levels in different countries. The first step involves defining a mobile communication basket, containing a specific amount of speech and short messaging per month. The definition of this basket is based on the OECD definition of a standard basket of monthly mobile communication consumption (OECD, 2010) and targets the consumption habits of low income users. Two different indices are proposed. A first calculation from the years 2009 to 2012 involving the indices of 149 countries provides a useful overview of the global mobile price landscape.

Introduction

The world seems to be saturated with mobile communication access. The annual statistics report of the International Telecommunication Union (ITU) states that 6.8 billion mobile-cellular subscriptions globally were reached by the end of 2013 (ITU, 2013a). This figure equals almost the number of people living on our planet. Although the coverage of the earth with mobile phone signals is impressive, a closer look at the distribution of mobile phone subscriptions shows that we are still far from an equal access to mobile communication. Estimations assume that only 3.2 billion subscribers own the 6.8 billion subscriptions reported (Page et al., 2013). The density of subscriptions per 100 inhabitants varies from region to region, with 63.5% in Africa, 126.5% in Europe and even 169.8% in the Commonwealth of Independent States (ITU, 2013a). Within the continents the variation can be very striking, for example in Africa, where the range varies from 179.47% in Gabon to 4.98% in Eritrea (ITU, 2013a, ITU, 2013b, ITU, 2013c).

The importance of mobile technology for developing countries and the relevance of mobile phones for poor people is widely recognized and has already led to an increasing number of research studies. In 2008, a literature review of about two hundred research articles about the impact of mobile phones in developing countries categorized the different research approaches to the mobile usage in developing countries (Donner, 2008). Donner mainly distinguished between studies about the determinants of mobile adoption and those about the impact of mobile phones on their users and finally identified a third category, which examined the interrelationships between mobile technology and the users (Donner 2008, p. 143). We do not go as far as Banks (Banks, 2013), who doubts that research and debate over ICT4D has progressed in the last ten years. Today, mobile for development (m4d) stands for different topics and leads to diverging research communities with different approaches, such as m-health, m-payments, m-learning, etc. Since the World Summit on the Information Society (WSIS) 2005, a tremendous number of indicators and data have been and are being highlighted and published (ITU, 2010).

With this diversity in mind we explored what could be a common denominator for a global approach to measuring the accessibility of mobile communication, especially for those people who are at the bottom of the income pyramid. We were looking for a simple and reliable parameter which would allow us to measure globally the accessibility of mobile communication in daily life. The parameter we chose was the price which has to be paid when using a mobile phone for a simple call or to send a text message.

We believe that this price is the most important determinant in the way low-income households use mobile phones. Discussions on the social, technological or cultural aspects of mobile phone usage are biased if they do not include reference to the price. Comparisons of different studies on the usage of mobile phones in different markets or along a time series are questionable if they do not normalize the data regarding the costs of mobile communication.

The price of mobile communication is part of the ICT Development Index (IDI), which is published yearly by the International Telecommunication Union (ITU, 2012). However, in this form, the data about mobile communication is not suitable as an independent variable because the index combines eleven indicators into one benchmark measure. The Mobile Communication Price Index (MCPI 2G), which is introduced and discussed in this paper, overcomes this limitation and offers a global benchmark for mobile development research.

Section snippets

Research questions

The global availability of mobile communication opens the unique possibility of research on the usage and the impact of mobile communication. We assume that, in contrast to the almost complete global coverage with mobile technology, the real accessibility of mobile communication is very diverse. One reason for this diversity is the relative price difference for the usage of mobile communication services. In this study we are developing methods for a global comparison of mobile communication

Mobile Communication Price Index 2G

For the purpose of measuring the cost of mobile communication for the poor we relied on the OECD 2009 methodology (OECD, 2010) with the 40 prepaid calls (see Fig. 1, Fig. 2). 2G refers to the fact that our index only covers the use of speech and text messages which are transmitted over 2G networks. In regard to the increase of 3G and 4G networks it will be important to distinguish between the 2G and broadband as completely different price plans apply for the latter. The following adaptations

Comparing prices for mobile communication

The Mobile Communication Price Parity (MCPP) can now be calculated by using the above MCPI basket which is comprehensive and comparable. The ITU database relies on the prices in the local currencies in each country. To obtain comparable data we choose two different approaches from the standard PPP theory. As data source for exchange rates, the GDP and PPP we used the Pen World Table (PWT) 7.1 (Heston et al., 2012). The PWT 7.1 provides economic data (exchange rates, PPP results) up to the year

Results

When answering research question one, we examined the globally available and comparable data for mobile communication prices. With the usage of prepaid 2G price schemes we were able to define a global mobile price basket with data of 149 countries. Literature research on existing methods and data showed that different, though quite similar, approaches already exist. In a first step we defined a mobile communication price basket. This basket is mainly based on the method of the OECD whereas the

Conclusion

This article describes a method for making global comparison of mobile communication prices with a first set of recent data which provides a fair assessment of its significance. We can summarize the result holistically with a glance at the MCPI 2G map in Fig. 11. We can therefore state that with mobile communication not only is a very important technology for development within the reach of almost everybody on earth but the low investment needed for mobile technology and the concept of

Further research

The MCPP 2G and MCPI 2G can contribute to normalizing existing data about price levels and indicate in which countries an improvement of the availability of mobile communication is still needed, especially for the low income population. Which of the two proposed forms of the Mobile Communication Price Index should be considered as more significant depends on its application. We consider the MCPI 2G accurate for any national survey on the development of price levels in a given time period. It

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