NEW RESEARCH FINDINGS POINT TO HIGH RATES OF PHONE USE EVEN IN NO OR LOW SERVICE AREAS

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Teledensity figures are probably no longer a useful guide to the number of people actually making use of phone services. New research carried out by Gamos looks at the different patterns of use amongst rural and urban users. It raises important questions for both operators and policy-makers. In a nutshell, rural inhabitants and poorer urban users value phone services but do not use them very often compared to relatively more affluent users. In these circumstances, how will coverage of these areas pay its way? It puts the focus firmly on the need for asymmetrical charging where the city dwellers pays more than those in rural areas. Nigel Scott of Gamos looks at what the evidence seems to be saying at this point.

This article describes some characteristics of the use of telephones amongst rural and low income communities in a number of countries in Africa. Gamos Ltd and the Commonwealth Telecommunications Organisation (CTO) have recently completed a research project which was funded by the UK Department for International Development (DFID).

In you use teledensity as a measure, most countries in Africa are woefully served. For example, a teledensity figure of 33% in Botswana is highest of the three countries covered by this research ­ 3.7% and 2.3% for Ghana and Uganda respectively are much lower (2002 figures). Similar benchmarks in the developed world seem to show even more clearly the scale of the gap: 143% for the UK, or 113% for the USA. However, these comparisons are not very helpful in understanding the impact of telephones. You need to look at how many people actually use the limited number of phones that are available and why the calls are made.

Results from household surveys conducted by Gamos’ research partners (national universities) in rural districts of the each of the three countries show that around 80% of people use telephones, which is surprisingly high, given the low teledensity figures. Equally surprising is the degree of consistency of use between the countries surveyed; for example, the proportion of people using phones in Uganda (78%) is more or less the same as in Botswana, where teledensity is an order of magnitude higher. However two other factors need to be entered into consideration:

- what do we mean by ‘use’? People were asked how frequently they used phones in the last three months, so ‘regular use’ in this context simply means that people use phones at least once in three months; this does not reflect how often they use phones or how long they spend on the phone (which affect revenue). Nevertheless this is very similar yardstick to that used by some of the mobile operators themselves.

- What types of ‘rural districts’ were surveyed? Two or three nodes (zones) were selected in each country on the basis that these would represent a reasonable geographic spread across the country, and samples were then drawn from across the spectrum of communities - from urban centres (with good telecommunications service coverage) to remote villages (beyond the reach of coverage). The aim was not to represent the entire population of the country, nor was it to investigate the poorest and most remote communities of a country ­ it was more to represent ‘typical’ rural districts, in which the largest part of a country’s population reside.

Nevertheless, the fact that as much as 80% of people will make use of telephones where services are available has implications for operators, and for agencies concerned with rural and economic development.

It has been argued that telephones are a positive force for reducing poverty because they facilitate and improve income generating activities. Although this may be true, little empirical evidence is currently available. However if the phone user primarily sees it as an economic development tool, you might expect people with least disposable income to ‘invest’ in a call if they expected to gain some material ‘dividend’ from the call.

However, the evidence indicates that even in poor communities the greatest number of people use phones simply for chatting to friends and family. People were asked to indicate which types of calls they regularly make using phones ­ note that this does not reflect the actual number or frequency of calls made under each category. There are a number of aspects of communication with friends and family, such as urgent matters (e.g. funerals and festivals), financial matters (e.g. calling to family members working in cities to ask for money), and generally keeping in touch. Although the categories of calls were designed to try and identify the relative priorities of these issues, it is inevitable that all may come up at some point during a single conversation. Nevertheless, it is clear that chatting and keeping in touch is the most common use of phones.

The perceived value of keeping in touch is reinforced by another finding. Those in the most remote district of Uganda (furthest from the capital) made the highest proportion of these "keeping-in touch" calls from phone booths. This is hardly surprising as 80% have family members living in the capital for most users this is the main destination for their calls. Logically the value of keeping in touch increases the further one is from the capital as travel costs become more costly.

Whilst ‘keeping in touch’, ‘family well being’, and ‘chatting’ are clearly the most widespread use of phones in all three countries, second place is shared roughly equally between business and work related calls, and other family and friends categories e.g. financial matters. Taking a closer look at people making business calls, it is interesting to note that there is a gender bias in this category, with more men tending to use phones for business. However, when we look at the gender split on occupations, there are a greater number of women who are engaged as traders, and anecdotal evidence suggests that traders are a group whose activities stand to benefit greatly from improved communications. For example it is easier to keep track of your stock and search out cheaper prices. As the category of business calls covers not only traders but also salaried workers, the existing data is far from conclusive, but it would appear to suggest that local traders may not be using phones to their full potential.

Trends in types of calls made can also be distinguished between frequent users and occasional phone users. For example, a greater proportion of frequent users in Ghana make calls to friends, and business related calls. This reflects the relative wealth of more frequent users ­ they have more disposable income to spend on non-essential calls (e.g. to friends), and tend to have more high powered jobs which require the use of phones. What is more interesting to note is that the proportion of people making calls relating to ‘family ­ financial matters’ does not change significantly with frequency of use of phones; in other words there appears to be a ‘base line’ of "basic" demand. In other words, there is a given proportion of the population who will use phones to meet high priority communication needs.

The most urgent communication need given in all three countries was funerals. Families need to alert important family members and to disseminate details of the ceremony. Other social events mentioned include weddings and festivals ­ occasions on which families in rural districts want to summon friends and family to visit villages. Radio is often used to broadcast announcements on these matters, and whilst phones can be used to make arrangements, they now also play an intermediary role in getting messages to the local radio station. Radio still appears to be the most effective medium for transmitting information into rural areas, as over 80% of respondents regard it as an effective means of finding out information. However, when it comes to transmitting information from rural areas, letters and travelling in person were still the most common methods given.

Calls relating to remittances fall into the ‘friends and family ­ financial’ category of high priority calls. Remittances tend to be thought of in international terms with a family member in the international diaspora sending money home. Indeed many families have members living abroad (responses range from 24% in Uganda to 58% in Ghana). However, it is clear that phones play an major role in arranging remittances ‘nationally’. This is evident in the high proportion of families with members living in other cities (responses range from 79% in Uganda to 96% in Ghana), and the number of people making calls in the ‘friends and family ­ financial’ category. It is not clear at this point whether the use of phones actually increases the value of remittances, or whether it simply improves the management of remittances.

Calling to arrange for the payment of school fees is an example of this type of call. Families often struggle to pay fees when they are due, but they can use the phone to mobile funds from other family members, and those with children at boarding schools (which is much more common than in Europe) can phone the school to negotiate payment dates.

On the teledensity vs usage issue, the research had some interesting findings. Of those sampled living in areas with little or no service coverage, the proportion of those who make use of phones is 75% (the average across all three countries), only marginally less that for the sample as a whole. This clearly shows that people are prepared to travel to access phones. In order to gauge the monetary value associated with this travel, respondents were asked how much they spend on travel to access phones. Figures indicate that many people pay as much on travel as they do for the call, meaning that rural people without access to a local phone can effectively pay twice as much for a call.

So for example in Ghana 60% of those living in areas with no service coverage pay as much on travel as the cost of calls ­ the equivalent of 30 to 70 cents). Travelling to make a call obviously takes up money and time, but a further issue that was often raised was that of the risks associated with travel. No doubt this is one of the factors lying behind the strong gender differences in travel to access phones evident in Uganda ­ amongst rural residents, 53% of men pay to access services, but only 23% of women pay, demonstrating how a lack of local phones can provide a real barrier to access by women.

So if local phones are most important to rural people, in what ways can they be made more readily available? A previous article for Balancing Act (

Whilst some policy makers are still weighing up the mobile versus fixed line arguments, and their implications on licensing policy, it appears that rural consumers have already decided. If we consider Uganda as an example, private providers are clearly the most common means of public access, used by 63% of respondents (compared with 46% and 28% for booths and private handsets respectively). However, this group comprised not only telephone shops, but also friends and family, place of work, and private individuals with private handsets. Over 40% of respondents used mobile phones through friends and family and individuals. Although a further 24% of people used mobile phones through teleshops, they were not benefiting from the ‘mobile’ bit of the technology ­ their choice is based on the tariff structure ­ calls to the same network are cheaper, and in Uganda most people are on the mobile network. It should be noted, however, that the dominance of mobile technology in Uganda probably reflects availability (the second national operator chose to use GSM) as much as a preference for mobile phones. Nevertheless, one of the features that the research shows is a strong driver in phone use is the ability to make and receive calls anywhere using a mobile phone.

Beeping (also known as flicking, or flashing) is the practice of calling a number but hanging up before the call is answered in the hope that the other party will call back and shoulder the cost of the call ­ effectively using mobile phones as pagers. This is clearly an important mechanism for reducing the cost of communications amongst rural and low income communities, and is only commonly facilitated on mobile networks. However, the clearest indication of the preference for mobile phones can be seen in how people intend to use phones in the near future. People were asked how likely they were to use phones (and access points) within the next three months, and the proportion of respondents registering a positive intention to use phones was compared with the proportion of people actually using phones at present. The results from all three countries were quite striking and consistent, demonstrating a strong preference for mobile phones rather than fixed line phones, and a preference for private phones rather than public access points.

Given this preference for mobile service, especially in rural areas, the challenge for regulators and operators is to devise innovative ways of increasing the number of handsets available in remote rural areas ­ if phones are available, the evidence shows that people will use them. One of the conclusions is that rural service provision would appear to be more profitable than has previously been thought, so there is probably less need for subsidies to be made available through universal access schemes than has previously been thought. But can rural telephony really be profitable? Whilst technology continues to evolve (e.g. the cost of base stations is decreasing) the research also makes a number of suggestions of ways in which demand in rural areas can be stimulated:

- Network operators could conduct research into types of tariff packages that could be used to encourage high users of public access facilities to upgrade to personal phone ownership, thereby increasing the number of handsets available.

- Network operators should develop segmented approaches to developing rural markets. The research indicates that whilst some groups, particularly the well educated, are already familiar with the technology and making good use of phones as they wish, there are others amongst whom actual use does not correspond with potential demand (e.g. those of over 40 years old, and those with low levels of education) i.e. unmet demand exists.

- telephone shops provide an important point of public access, especially in communities where phones are not widespread. However, prices tend to be inflated in order to cover overheads and profits. Telecoms operators may find it beneficial to provide support to teleshops, for example through bulk discounts (provided these are passed on to end-users), business skills training, training in basic maintenance, etc.

- Some telephone shop owners charge a fee for incoming calls, but others can refuse to accept incoming calls, on the basis that they can only make money from outgoing calls. Telecoms operators should consider ways of sharing the revenue from calls terminating in telephone shops with local proprietors in order to encourage them to permit ‘beeping’ and similar arrangements for calls to be received at public access facilities.

- The research indicates that users are deterred by the need to queue, and a lack of privacy when using public access facilities; these are related not only to each other, but also to the presence of an attendant at booths and telephone shops. Service providers can take steps to make the calling environment more attractive by paying close attention to user preferences in the design of public access facilities e.g. number of phones, design of booths.

- Adopting the use of phones into the culture can be accelerated by stimulating an understanding of telephony, its advantages and costs. For example, campaigns to promote the advantages of phones, explain how they work and how much they cost would increase use, particularly in rural areas and amongst people with low education, low ICT awareness and those that have never used phones.

- Network operators should raise quality of service standards by taking action to improve network quality and call completion rates. Quality of service, particularly call failure, was cited as a barrier to use by respondents in all three countries. This may be a particular problem in rural areas, where networks may be less resilient

However, it is clear that potential traffic volumes are low in poor communities, and it remains to be seen just how far the private sector can push service provision profitably. The regulatory commission in Uganda have plans in place for a universal access programme to provide services to those areas that will not be covered by the national operators. A pilot phase is currently under way, so some interesting results should be available shortly.

As soon as any research on telecoms use is published, it is almost certain to be out of date, and this research upon which this article is based is no exception. For example, during field visits one of the operators was running a campaign targeting business users, but the analysis then identified social chatting as a more common use for phones; however, on the final country visit a poster campaign was running which showed two young women friends having a laugh with each other over the phone. This example shows how, given the right regulatory and commercial environment, operators can respond to consumers and local needs. Other examples include the arrangements for attended booths referred to earlier, and the emergence of text back information services.

Local entrepreneurs have also proven themselves able to adapt to changing market conditions. This can be seen in the informal ‘attendants’ at booths in Kampala who can offer you phone card units or a selection of mobile handsets to give you the best rate (or to give them the best profit), depending on which network you are calling. In villages with no electricity supply, entrepreneurs in trading centres (with electricity) have added the charging of mobile phones to the services they offer.

Ways in which the rural poor have themselves proven able to make the most of phone services available to them is probably of more importance. Beeping is a good example of this. Although this practice was evident in other countries, it was only in Uganda that its importance was repeatedly raised in various focus groups, so only here that related questions were included in the survey. Over a third of respondents in Uganda regularly ‘beep’, and the success rate is remarkably high, at around 40% i.e. 4 out of 10 beeps will successfully result in a returned call.

Beeping has become such a part of phone ‘culture’ in Uganda that it now appears to influence use of phones in general e.g. people who believe that beeping will allow them to communicate without being charged for a call will be more likely to use phones; similarly for those who believe that beeping enables people to get in touch in emergencies. Another example is the role of private individuals with mobile phones. When they provided the only means of access, people would pay a premium to make calls, but as soon as public phone booths were installed in the district (within travelling distance) and people could make calls at the nominal ‘rate’ the private mobile ‘market’ collapsed. It has been pointed out above that the use of private phones remains an important means of public access, but the difference is that this is no longer on a ‘for profit’ basis ­ it remains culturally acceptable to ask to use an individual’s mobile phone but this is now regarded more as a favour than a business transaction and the payment made by the user is only expected to cover the cost of the call.

A recent example of consumer innovation is the use of air time as currency. Although this was not picked up by the research, it has since been reported that people are starting to use phone cards as a means of payment. Where people in different locations conduct a transaction, the purchaser can buy phone cards to the value of the transaction, and then pass the numbers in the scratch off panel to the vendor, who can punch them in and add the credit to his/her mobile.

Findings from the research show what the poor have found out already ­ that telephones can be extremely useful. This is demonstrated by the remarkably high proportion of people who use of phones, even if only infrequently. It appears that infrequent users largely use phones for what can be termed ‘high priority’ calls, and whilst more intensive users also make these calls, the rest of their usage appears to be related to social (and business) matters.

From a rural development point of view, even the ability to make occasional calls may have the potential to make a significant positive impact on many aspects of livelihoods. At the moment, however, this claim is largely based on anecdotal evidence; for example, financial management (both domestic and business) can be improved by mobilising funds e.g. from other members living in cities; access to education and health can be improved by mobilising funds when needed; social networks can be strengthened by ‘keeping in touch’; access to services can be improved e.g. phoning the vet; quality of infrastructure can be improved e.g. by reporting faults in electricity networks.

Operating companies are aware of this potential, but it is unlikely that high priority calls alone would generate a commercial return on investment in service coverage. Donors and government ministries are aware of this potential, but decision makers repeatedly emphasised the need for further research to demonstrate the impact of telephones on rural poverty, and this is the subject of a current follow-up project, also being funded by the DFID. In the meantime, more and more of the poor will use phones as coverage continues to expand, and phones will become even more strongly embedded as part of local culture.

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