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Strategic telecom use on a shoestring 2.0 for comment

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rdWDR Dialogue Theme 3 cycle Discussion Paper WDR0604 Telecom Use on a Shoestring: Strategic Use of Telecom Services by the Financially Constrained in South Asia Version 2.0, February 2006 Ayesha Zainudeen, Rohan Samarajiva & Ayoma Abeysuriya Comments invited, please post them to the author or online at: http://www.lirneasia.net/2006/02/strategic-use-of-telecom-services-on-a-shoestring/ The World Dialogue on Regulation for Network Economies (WDR) The WDR project was initiated by infoDev, which provides foundation funding. Additional foundation support is provided by the International Development Research Centre (IDRC – Canada), and the LIRNE.NET universities: the Center for Information and Communication Technologies (CICT), Technical University of Denmark; the Economics of Infrastructures Section (EI), Delft University of Technology, The Netherlands; the LINK Centre at the University of Witwatersrand, South Africa; and the Media@LSE Programme at the London School of Economics, United Kingdom. The WDR Project is managed by the Learning Initiatives on Reforms for Network Economies (LIRNE.NET), an international consortium of research and training centres, administered at the Center for Information and Communication Technologies (CICT), Technical University of Denmark. Members include the Technical University of Denmark; the ...
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W D R D i a l o g u e T h e m e 3r d c y c l e D i s c u s s i o n P a p e r W D R 0 6 0 4
Telecom Use on a Shoestring:
Strategic Use of Telecom Services by the Financially Constrained in South Asia V e r s i o n 2 . 0 , F e b r u a r y 2 0 0 6 A y e s h a Z a i n u d e e n , R o h a n S a m a r a j i v a & A y o m a A b e y s u r i y a Comments invited, please post them to the author or online at: http://www.lirneasia.net/2006/02/strategic-use-of-telecom-services-on-a-shoestring/
The World Dialogue on Regulation for Network Economies (WDR) The WDR project was initiated byinfoDev, which provides foundation funding. Additional foundation support is provided by the International Development Research Centre (IDRC  Canada), and the LIRNE.NET universities: the Center for Information and Communication Technologies (CICT), Technical University of Denmark; the Economics of Infrastructures Section (EI), Delft University of Technology, The Netherlands; the LINK Centre at the University of Witwatersrand, South Africa; and the Media@LSE Programme at the London School of Economics, United Kingdom. The WDR Project is managed by the Learning Initiatives on Reforms for Network Economies (LIRNE.NET), an international consortium of research and training centres, administered at the Center for Information and Communication Technologies (CICT), Technical University of Denmark. Members include the Technical University of Denmark; the Delft University of Technology, the Netherlands; the London School of Economics, UK; the University of Witwatersrand, South Africa; LIRNEasia, Sri Lanka; and Comunica, Uruguay. The World Dialogue on Regulation for Network Economies (WDR) facilitates an international dialogue to generate and disseminate new knowledge on frontier issues in regulation and governance to support the development of network economies.Contact: WDR Project, LIRNE.NET Center for Information and Communication Technologies Technical University of Denmark, Building 371 DK 2800 Lyngby, DENMARK Phone: +45 4525 5178 Fax: +45 4596 3171 Email: info@regulateonline.org WDR Project Coordinator Merete Aagaard Henriksen: henriksen@lirne.net. WDR <www.regulateonline.org> LIRNE.NET <www.lirne.net> © 2006 The World Dialogue on Regulation for Network Economies (WDR)
LIRNEasiaLIRNEasia is the Asian affiliate of LIRNE.NET. It is a regional ICT [information and communication technologies] policy and regulation capacity building organization, incorporated as a non-profit organization under section 21 of the Companies Act, No. 17 of 1982 of Sri Lanka in 2004 and funded at present by the IDRC and infoDev, a unit of the World Bank. Its primary functions are research, training and informed intervention in policy and regulatory processes. Its current projects include research in South as well as South East Asia. LIRNEasia aims to improve the lives the people of Asia  by making it easier to make use of the information and communication technologies by facilitating the changing of laws, policies and regulations to enable those uses; by building Asia-based human capacity through research, training, consulting and advocacy. Contact: LIRNEasia 12 Balcombe Place Colombo 08 SRI LANKA Phone : +94 11 493 9992 Fax: 94 11 4940290 + Email : asia@lirne.net <www.lirneasia.net >
Telecom Use on a Shoestring: Strategic Use of Telecom Services by the Financially Constrained in South AsiaVersion 2.0, February 1, 2006 AUTHORS:Draft for comment
Ayesha Zainudeen, Researcher, LIRNEasia.12 Balcombe Place, Colombo 08, Sri Lanka. Fax : +94 11 452 7648, Tel: +94 77 3133 945 zainudeen@lirne.netRohan Samarajiva, Executive Director, LIRNEasia. 12 Balcombe Place, Colombo 08, Sri Lanka. Fax : +94 11 452 7648, Tel: +94 77 735 2361 rne.netaramslia@ivajAyoma Abeysuriya, Project Director, TNS Lanka. 32/4 Narahenpita Road, Nawala, Sri Lanka. Tel: +94 11 280 8018, ayoma.abeysuriya@tns-global.com
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ABSTRACT:When one talks of a shoestring budget, it is understood that reference is being made to constrained finances, where individuals make attempts to cut costs through various methods without harming utility. This paper looks at the use of strategies by such shoestring users to reduce their communication costs. While the use of long-term strategies, relating to the investment in a phone, is evident, that of short-term strategies, relating to everyday use are looked at is found to be low. It is concluded that this is a result of a series of constraints on users, rather than a lack of a concern for controlling spending on telecoms. ACKNOWLEDGEMENTS:This research was supported by the International Development Research Centre (IDRC) of Canada. The authors would like to acknowledge the helpful comments and contributions of Tahani Iqbal, Sriganesh Lokanathan and Payal Malik of LIRNEasia, William Melody of LIRNE.NET and Claire Milne of Antelope Consulting in the compilation of this paper. The idea of studying the telecom strategies of the poor originated with Randy Spence of IDRC, whose input and support are fully acknowledged. The input of all those who helped shape the research is also gratefully acknowledged: Harsha de Silva, Divakar Goswami and Malathy Knight-Johnof LIRNEasia,Chanuka Wattegama of UNDP APDIP (Colombo) and Rajesh Kumar of TNS Lanka. ABBREVIATED TITLE: Telecom Strategies on a Shoestring
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1.0 Introduction This paper looks at what is termed strategic use of telecom services amongst the financially constrained in South Asia. What is meant by strategic use are the conscious decisions about use of telecom services in such a way as to minimize costs or improve utility; this could include what are termed long-term strategies, relating to the overall decision to invest in a phone or not, and which mode to use, as well as what are termed short-term strategies, or tactics, relating to the everyday use of the telephone. There is a growing body of research that suggests that demand for telecom services in developing countries is greater than generally thought, especially amongst low income earners. Research is demonstrating that low-income earners are willing to spend significant amounts of their monthly incomes on telecom. Estimates of the share of monthly income spent by financially constrained groups on telecom services in developing countries are in the range of 10 per cent (Intelecon, 2005; Gillwald, 2005; Souter et al., 2005) much higher than the 2-3 per cent rule-of-thumb regularly used in the telecom sector.1clearly underlines the importance that these peopleThis place on such services in their lives. Such realizations, in line with Prahalads (2004) notion of fortune at the bottom of the pyramid, are leading the worlds biggest GSM handset manufacturers to embark on initiatives to address the cost barrier to low-income earners bringing the cost of a mobile handset to below USD30, effectively creating a new low cost market segment (GSMA, 2005. p.4).
1 Commonly it is estimated that on average, around the world, people spend about 2-3
percent of their income on telecommunication (Intven, 2000. p6.6).
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It is becoming increasingly clear that poor people are willing to spend significant amounts on telecom and there are many benefits they gain from such use (See Bayes, von Braun & Akhter, 1999; Vodafone, 2005; World Bank, 1999). However, this does not mean that everyone who uses telecom services owns a phone; many users of telephones do not even own a phone, and rely heavily on public telephones, as seen in the findings of this study. In Africa, there is still a great reliance on public payphones, even in countries that have relatively high per capita incomes (Gillwald, 2005). Souter et al. (2005) have pointed out that telephone ownership is rapidly growing in developing countries. In a study of the impacts of telecom on rural livelihoods and poverty in India, Mozambique and Tanzania, it was found that almost half of those who owned a phone only acquired it within the preceding year and a third of those without a phone indicated that they wanted to acquire one within the next year. Similarly, in the present study, 22 per cent of fixed phone owners obtained their connection within the last year, while the corresponding figure for mobile owners was 59 per cent. Souter et al. point out however, that those benefiting from greater access to handsets are the higher status groups within the study populations; this disparity is evident in the current study, with, only a quarter of low income earners owning a phone, while close to half the high-income earners own one. Although the literature and empirical evidence on the use of short-term strategies in telecom use is limited, judging by the income levels of the people studied, that is, those with monthly incomesbelowapproximately USD100, it seems reasonable to assume that such financially constrained people would engage in strategic behavior in the use of not just telecom services, but also in the consumption of many other goods and services. As pointed out in an issue of the NOKIA quarterly newsletter Prospective mobile users in new growth marketsearn less, their income is irregular
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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 the volatility in spending patterns over the month, where a user may spend as much or as little as he or she is able to at any given point. A good example is prepaid mobile electronic credit refill facilities, where a user can add any amount (usually above a threshold) to her account. According to NOKIA (2005), Lower income consumers need low value top-ups of 1 USD 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%. Although per unit costs may in some cases be higher, this is the price that users pay for being able to buy small amounts.2telecom sector, it is commonly seen in fastThis logic is not limited to the moving consumer goods (FMCG) markets in the developing world, for example in India and Sri Lanka it is not uncommon to find shampoo, toothpaste, hair gel and many other items being sold in sachets at local shops; it is easier for a consumer to buy a small sachet of shampoo when disposable income is available, than buy a larger bottle that is lower in price per unit (Kishore, 2003). Donner (2005) documents a widespread phenomenon in Uganda, known as beeping where a person dials a mobile number and disconnects the call before the 2 preliminary research by LIRNE However,asia has indicated that prepaid mobile is in
fact cheaper than postpaid in Sri Lanka and India, contrary to conventional wisdom. A
modified OECD basket methodology which takes into account calling charges as well as SMS
charges, connection charges, and rental components yields this result.
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callee picks up the call. 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 to request the recipient to call back, to convey a pre-negotiated instrumental message such as pick me up now or to simply convey that the beeper is thinking of the recipient. This system ensures communication without speaking or typing a single word. Most importantly, it costs nothing to the beeper. One of the rules of beeping according to Donner is the rich guy pays. The beeping phenomenon has become quite 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 air because of high priced airtime (http://www.mobitel.co.tz/Pages/faq's.html). According to Donner, two key factors drive this beeping culture, firstly a pervasive prepaid card system, where often people lack the credit to make a phone call, and secondly, a calling party pays system which encourages people to make shorter calls but receive longer ones. Chakraborty (2004) also reports of a missed call culture in Sitakund, Bangladesh, arising as a response to the high cost of calls from mobiles, where users have similarly devised systems where the number of times the caller allows the phone to ring before he/she disconnects the line has a specific signal (e.g., one ring = I am at home, where are you? two rings = Im at your house, where are you? etc.) Section 2 of this paper outlines the background and the methodology used in this study; Section 3 presents the findings, exploring both the use of long term and short-term strategies in the use of telecom services by the financially constrained; and the final section, Section 4 provides concluding remarks.
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2.0 Background and MethodologyThis paper is based on a subset of findings of a larger knowledge, attitude and practice study of the telecom usage patterns and behaviors of a sample of financially constrained users in 11 localities in India and Sri Lanka, entitledTelecom use on a shoestring: A study of financially constrained people in South Asia. Face-to-face interviews were conducted in both countries with a total of 3,199 respondents (India: 2,099; Sri Lanka: 1,100) in April and May of 2005. Seven localities were surveyed in India and four in Sri Lanka (Table 1). With the exception of Colombo (Sri Lanka), interviewees were spread across urban and rural areas of each locality. The questionnaire was translated into, and conducted in, five local languages (Hindi, Malayalam, Oriya, Sinhala and Tamil). Table 1: Distribution of respondents amongst centers studied
Country Localities (State/Province): Urban/rural IndiaMumbai (Maharashtra) : Urban, Rural Kasargod (Kerala) : Urban, Rural Sivaganga (Tamil Nadu) : Urban, Rural Gorakhpur (Uttar Pradesh): Urban, Rural Cuttack (Orissa): Urban, Rural Dehradoon (Uttaranchal) : Urban, Rural Neemuch (Madhya Pradesh) : Urban, Rural Sri LankaColombo (Western Province) : Urban Jaffna (Northern Province) : Urban, Rural Hambantota (Southern Province): Urban, Rural Badulla (Uva Province): Urban, Rural
Total
Number of respondents 304 300 300 300 300 295 300 206 282 301 311 3199
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For the purposes of this study, the financially constrained were defined by two  fir3 parameters; st, those with household income levels of approximately USD 100; second, socio-economic levels. In Sri Lanka those belonging to socio-economic classification4 (SEC) groups B, C, D or E were included in the sample. In the Indian sample, a different, but comparable socio-economic classification was used. Socio-economic classification of the financially constrained in India according to the natural distribution of population is divided among urban and rural settings, each consisting of different SEC groups. In urban India the financially constrained can be classified as SEC B, C, D and E, while rural financially constrained in India can be classified as R1, R2, R3 and R4 based on the profession and type of dwelling of the chief wage earner (pucca and kuchha house). In this study, this division was followed for the socio-economic classification of Indian users. Respondents were selected within selected households5 on KISH sampling based techniques6 ensure random  tosampling as well as adequate representation of gender and age groups as in their actually existing ratios7. 3 INR 5,000 in India and LKR 10,000 in Sri Lanka
4 A standard classification, based on occupation and education level of the chief wage
earner
5 A maximum of five households were selected starting from one starting household
that was randomly selected from the electoral list.
6  The KISH grid is a random sampling technique to select one respondent from many
eligible respondents in a household. In this case, names, gender and ages of all household
members using phones (in the preceding 3 months) were recorded (in descending order of
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