Monday, July 24, 2006

Cell phones in Indian villages

Businessweek has this article about the growth of cell phones in rural India. Businessweek has a history of gushing over the latest fad in town and this article is part of the India, China series. Since I don't live in a cave I am well aware of the explosion of cellphones in urban India. The extent of this explosion can be gauged from this little statistic from the article.

“…India's mobile phone user base has exploded to 105 million today from 5 million in 2001…”

But the story, as always, had been different in rural India. Since the beginning of this year wireless circles have been abuzz with stories about the $4 billion BSNL mega contract. A chunk of the 60 million GSM lines that BSNL is planning to roll out are meant for underserved rural regions. According to this article other Indian wireless operators are also planning huge expansions.

"...Another major India telecom, Reliance Infocomm, is expected to invest around $550 million through the end of the decade, mainly outside of major urban centers.

Tata Teleservices will spend $214 million this year on infrastructure, network expansion, and transmission, according to CEO Darryl Green. On top of that, Bharti Airtel, India's largest wireless player, will devote $1.8 to $2 billion in 2007 on similar expansions...."

The good news is that call rates are so low in India (2 cents or 90 paise per minute) that wireless service will be within the reach of all but the extremely poor in rural India. Bad news is that handsets are not all that cheap.

"Nokia, for instance, sells about 45 models in India. Yet its biggest seller, accounting for 15% of sales in India, is the basic 1100 model for $44 that is turning heads in villages like Latur. Motorola will launch a handset for under $30 in October. "

Even $30 (Rs.1350) is not an insignificant amount of money. The monthly salaries of instructors at a school funded by DridSankalp are in the Rs.3000 range. So buying a cellphone even at these highly reduced prices would be equivalent to buying moderately expensive furtniture for an engineer in the US. Not something that can be bought on a whim. And these instructors would fall in the rural middle class category. For poorer people even a $30 handset would be extremely expensive. I hope some service provider will be smart and brave enough to provide phones on credit. I also wonder if it would be possible to recycle used handsets from Indian cities for around $10-15 dollars.

Ofcourse, having a cellphone or being able to make a call is not an end in itself. How beneficial will this access to communication be? Apart from the obvious benefit of being able to be in touch with friends and family, can this increased access give rise to new and novel applications completely unique to rural India?

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