Adoption of Mobile Phones in Emerging Markets

Kas Kalba - International Journal of Communication (2008)

Abstract:

This paper offers an assessment of the drivers of mobile phone diffusion in emerging markets. It addresses both demand- and supply-side factors and provides an outlook on the diffusion process going forward, as two or three billion more mobile users are accommodated by mobile networks in addition to today’s 3.5 billion subscribers and users. The paper focuses on several specific issues, namely the relationship of mobile phone adoption to income levels and to fixed legacy phone service, as well as the key role of prepaid phones and asymmetrical interconnection fees in hastening mobile diffusion in emerging markets. Unlike the growing view that mobile adoption occurs where fixed connectivity is lowest, this paper shows that the two forms of adoption may be closely related. It also analyzes the impact of different levels of competition on mobile phone adoption, indicating that the diffusion benefits may recede as the number of operators increases. Finally, it provides explanations of several seeming anomalies, such as why mobile penetration has been higher in Eastern Europe (with an aged population) than in youthful Latin America, and why China continues to lead India in mobile penetration despite the strong surge in mobile phone usage in the latter market in recent years.

Looking forward, the paper addresses the major challenges the mobile industry faces in extending mobile networks to rural regions in Africa, Asia, Latin America, and elsewhere. The paper questions whether the market will be able to serve the last one or two billion potential subscribers, or whether subsidies will be required. It also notes the emerging use of infrastructure sharing and output-based subsidy schemes to foster rural network deployment and calls for research for mobile phone awareness and ability-to-pay levels among the world’s non- users and non-subscribers to help determine whether the recent 25% annual growth in worldwide mobile phone diffusion is sustainable. Inputs to the paper include a literature review, comparative databases, the author’s studies of mobile adoption in individual countries, and the comments of reviewers of earlier drafts.