The Intel Factor

  The 350-page Information Economy Report landed on our desks this afternoon, courtesy of UNCTAD. Packed with data, tables and text, this is the latest in a series of worthy tomes which urges the ICT industry - and governments - to do more for the developing world.

Buried in all the facts and figures, however, are some interesting case studies. Take Costa Rica, for example. In 1985, 60% of its exports were perishable products and 3% were electronic products. By 2005, the share of perishable goods had dropped to 24% and electronics had jumped to 30%. The main reason? Intel had decided to make the country one of its main production sites.

In 2005, the direct and indirect effects of Intel accounted for 25% of GDP of the entire manufacturing industry and Intel now accounts for 20% of total exports. It’s also doing good things for wages. A study by the International Labour Organisation last year found that Intel pays its workers an average monthly wage of US$836 while employees in the general manufacturing sector earn an average of $491. 

Good stuff, Intel.

Orascom invades North Korea

Take a  look at this photo. It’s a from an official North Korean site and if you look closely, you’ll see that no one in this photo is using a mobile phone. That’s because no one in North Korea has one. Not yet, anyway. The North Koreans may be lacking in the basics, like food and fuel, but it appears that they will soon be able to buy a mobile - and a 3G phone to boot.

According to an announcement today from Orascom Telecom, the Egyptian group has been granted the first license to provide mobile services in the Democratic People’s Republic of Korea. The license is for providing a service using WCDMA (3G) technology.

Although not exactly. This access was, in fact, given to a new JV company, CHEO Technology, which is 75% controlled by Orascom and 25% owned by the state-owned Korea Post and Telecommunications Corp. The terms of the license will allow CHEO to offer services throughout the country. The duration of the license is 25 years with an exclusivity period of just four years.

Still, Orascom says it will spend up to US$400m in network infrastructure and fees over the first three years in order to build a network which will offer voice, data and value added services at “accessible prices to the Korean people”.  Given that North Korea’s GDP per capita in US$1400 a person, those are going to have to be mighty low prices.

In case you were wondering, there are 23m North Koreans. While Orascom is no stranger to difficult markets - it has operations in Algeria, Pakistan, and Bangladesh - it pulled out of a license battle in Iraq at the end of last year. Now we know why.

Broadband blues

AT&T and Verizon may have provided early  evidence that an economic slump is having a knock-on effect on the telecoms sector. Despite posting pretty stellar results, on the whole, both reported weaker broadband growth than expected. AT&T saw a rise in access line losses during December, and a fall in the rate of broadband adoption. And Verizon, which announced its quarterly results today, witnessed virtually no DSL growth at all, according to bankers at JP Morgan.

 

As a household service, broadband was always going to be vulnerable to a slowdown in the housing market. Luckily for AT&T, only 18% of revenues come from consumer wireline, and other parts of its business seem to be holding up well, including wireless. It seems perfectly reasonable to expect continued growth here. Cell phones have fast become a necessity in developed and emerging markets. The economic setback will probably just accelerate the trend of fixed-mobile substitution, whereby customers ditch their fixed-line phones to save money and rely even more on their mobiles.

 

It’s all bad news for companies dependent on broadband growth for their long-term prosperity. Operators without a wireless business look very exposed in the current climate.

The iPhone divide

Apple was in typical self-congratulatory spirits this week, boasting sales of 4m iPhones since they hit the stores last summer. Having surpassed all expectations, CEO Steve Jobs will no doubt feel satisfied to have proved his detractors wrong.

Before he gets too carried away, though, he might reflect on just how lopsided those sales look. Around 3.4m went to AT&T customers in the US, leaving just 600,000 to split between O2 UK, France Telecom and Germany’s T-Mobile, the European distributors.

Sure, the iPhone was introduced to the US four months before it went on sale in Europe. And yes, the US is more populous than the UK, France and Germany combined. No one could realistically expect parity. But the gulf between the two regions seems to have widened over the Christmas period.

It’s no surprise, really. Americans are used to splurging their savings on the latest gizmos. Europeans, on the other hand, are used to getting the newest and most stylish handsets at heavy discounts. Chances are most can’t quite believe how much their service providers want for the iPhone.

That’s not all. The iPhone has had a lot of bad press because it doesn’t work on Europe’s fastest mobile networks. Customers have to use WiFi – a short-range wireless technology – to get maximum value from it, and WiFi coverage is not pervasive. The alternative is frustratingly slow and costly.

This is no different in the US, but AT&T’s highest-speed mobile network is unavailable across much of the country. Most customers don’t miss it because they’ve never used it, and so they’re happier to make do with the occasional bout of WiFi.

Of course, the quicker development of mobile technology in Europe also means the region has more iPhone rivals. Vodafone UK launched some new handsets over the Christmas period that allow fast web surfing and data downloads across most of the country. SFR did the same in France. Both providers are offering competitive monthly deals, charging for mobile data usage at flat rates.

Amusingly, the Financial Times, a UK newspaper, recently published a letter from a disgruntled iPhone customer that lampooned some of O2’s optimism about the device:

“I would dearly love to use my phone more for surfing the internet away from WiFi,” wrote the customer, “but frankly the current costs are prohibitive. From O2’s point of view, I am afraid the iPhone is nothing more than a temporary blip in the usage charts.”

Clearly, an iPhone that works on the fastest, most cost-efficient mobile networks is needed essentially on one side of the Atlantic. Apple should provide more guidance on when this will become available. But other measures need to be taken. Apple should drop its pompous claim to a share of airtime revenues – which turns the whole net neutrality argument on its head – and give its European partners the financial freedom to subsidise handsets. Only then will it realise the true international potential of the iPhone.

And in third place…

In the bitterly competitive world of PCs, Taiwan’s Acer is suddenly rising up the ranks. According to Gartner, it has squeaked past Lenovo to claim third place behind Hewlett-Packard and Dell, with more than 8% of the global PC market in the third quarter of 2007. And that’s before the sales of newly-acquired Gateway are figured in.

What’s more, the company told a third quarter investors’ conference in Taipei that Acer could secure a 12% share of the global PC market in 2008, putting it within striking distance of Dell, the number two player. I guess the question for 2008 is whether Dell can get its mojo back before it gets aced.

The Big Divide - phones vs the web

The chart above, courtesy of the ITU, shows mobile penetration rates worldwide and for developed and developing regions, between 1994 and 2006. The divide between rich and poor countries is measurably narrowing, which is good news for emerging economies. Take a look at the same data for internet penetration:

The difference is telling. By the end of 2006, just over 10 percent of the world’s population in developing countries were using the Internet, compared to close to 60 percent in the developed world.

Could the key be cheap smart phones with web access?

Holy ringtones

Saudi Arabia has a split personality when it comes to mobile phones. On the one hand, nearly everyone has one - ownership has shot up from 61.4% in 2005 to 96.8% this year. On the other hand, not everyone is happy with how they are used. A Saudi court, we’ve learned, recently banned the use of Qur’anic verses on mobile phones for recreational purposes, such as ringtones. 

A recent poll by the Saudi Gazette showed that Saudis themselves are split by the ruling. Some agree that a phone can go off in disrespectful places - such as a bathroom - and thus the ban is a good idea. Others say the holy ringtones should be allowed if owners remain careful about where they take their phones.

How about allowing the ringtones but instructing the faithful to switch their phones to  silent when entering a less than holy spot?

Y’ello in Africa

Three miles south of Johannesburg’s wealthiest neighbourhoods is the township of Alexandra, one of the city’s poorest communities. The disparity between the two is huge. But, as you can see above, good things are happening. This is a  Y’ello Zone , part of the  MTNaccess project, a nationwide scheme to bring broadband and computing to low-income townships and providing a platform for entrepreneurship. Backed by MTN and the GSM Assocation’s development fund, the Alexandra site just one of seven such pilot projects and hopefully, a sign of better things to come.

But elsewhere in Africa, things are going in exactly the opposite direction. Gabriel Solomon, a director at the GSM Association, recently told Total Telecom Magazine that the new Benin government has suspended the mobile networks of MTN and Atlantique Telecom after they refused to pay US$50m in a one-off fee for a new contract, replacing the one they had paid two years earlier to a previous government. This was a 500% rise from the earlier payment and clearly extortion. 

Despite this kind of despotic behaviour, mobile tariffs in Africa in 2006 were, on average, on a par with other regions, according to the ITU. Just under US$25/month for 100 minutes. When broadband price comparisons look the same, things will really be looking up for Africa.

Africa’s Internet access, mired by politics

It was only a few weeks ago when things were looking up, with talks being held to discuss how to get up to 80% of the continent’s people connected to the Net. But then politics got involved…

A story in South Africa’s Business Day newspaper reports that the government might block Eassy, one of the several pipeline projects, because of its “commercial nature”. As the story runs:

The 10000km Eassy cable will be 27% owned by Telkom, Neotel and MTN, and is designed to provide desperately needed cheap bandwidth to 21 African countries. But SA’s communications department has taken umbrage at what it sees as the commercial nature of the enterprise, and intends to withhold landing rights.

Instead, the government will use taxpayers’ money to roll out two rival cables heading east and west, jointly known as the Nepad Broadband Infrastructure Network.

Unfortunately, the government misses the point. Consumers everywhere want cheap, reliable Internet access. Until the market is opened up to competition, that won’t come. And we know all to well what relying on a state-run telco does for access costs.

Digital divide: the cost of access

There’s a few strands to the debate about a digital divide, primarily looking at whether people have access to computers or not. But even for those that do, another obstacle awaits: the cost of Internet access.

Tucked away in this article on TreeHugger about bandwidth is a comment about the access costs in Kazakhstan–an astonishing US$3,355 a month for basic DSL broadband (excluding modem). As this article in ars technica explains:

An unlimited dial-up plan costs about €82 ($111) in a country where the average monthly wage is €292 ($399). As for DSL, an unlimited 1.5Mbps connection costs €2,458 ($3,355) a month, and doesn’t even included the required ADSL modem. Want a 6Mbps cable connection? It’ll cost you, to the tune of €16,144 ($22,032) a month. As the OSCE report drily notes, this is more than a thousand times the price of such a connection in Western Europe.

By contrast, there is a promotion by one provider in the UK at the moment, promoting a 2mb broadband package for just £4.50 a month. Digital divide indeed.