How to Make Internet-Enabled Phones More Affordable in Low- and Middle-Income Countries

This article was originally?published ?on?GT Perspectives.

According to a?report ?published by the GSMA, "Owning an internet-enabled handset can be life changing. Yet, for many living in low- and middle-income countries (LMICs), they are still unaffordable. For the 3.4 billion people who live in areas with mobile broadband coverage but are not using mobile internet, affordability is a key barrier."

The GSMA explains that its "report provides an overview of approaches and business models that are improving the affordability of handsets for various underserved populations in LMICs. It explores some of the nuances among these groups, considerations for meeting their different needs and variations between markets in Sub-Saharan Africa and South Asia." Moreover, the report "also provides practical recommendations for stakeholders to make internet-enabled devices more affordable and an analysis of how the policy environment can contribute."

The report is structured into four chapters. The first one aims at defining handset affordability. The second and third chapters discuss the two key supply-side levers to deliver more affordable handsets: reducing the price of a handset through efficiency gains and cost savings in the value chain and improving customer access to financing. In the final chapter, the GSMA provides eight policy considerations, highlighting the importance of strengthening the enabling environment to improve handset affordability.

Below are the report's key findings:

1. The affordability barrier is not just about the economic cost of purchasing a handset relative to income.?"It is just as important to consider the cost of a handset in relation to a person's needs, preferences, and perceived value to their life. Non-income-related constraints also have an influence, such as awareness of mobile internet, digital skills, mobile-related safety and security and the social norms that constrain certain groups from accessing and using mobile and mobile internet, recognizing that some of these constraints disproportionately impact on certain groups of the population, including women."

2. New technologies have emerged, disrupting the market and offering new opportunities to make handsets more affordable.?"Over the past few years, two main innovations have driven down the cost of handsets: the development of lightweight operating systems (OS) and remote handset locking technologies. Lightweight OS have enabled the development of handsets that are less costly to manufacture, particularly smart feature phones and ultra-low-cost smartphones. This has narrowed the price differential between a basic 2G phone and a 3G or 4G handset. Similarly, the emergence of remote handset locking technologies has enabled a wider range of providers to offer financing with no or limited credit scoring by using the handset as collateral."

3. Lower prices can be offered by providing customized smartphones that meet local needs.?"Several mobile operators, manufacturers and PAYG solar companies have been designing smartphones that are customized to the needs of end users in a specific market or region while simultaneously optimizing the costs of smartphone components."

4. Procurement, distribution and marketing should not be overlooked when lowering handset costs.?"It is possible to reduce handset costs by passing on the savings from more efficient procurement, distribution and marketing. The convergence of commercial interests to increase the availability and affordability of internet-enabled handsets has created new opportunities for partnerships, for instance, between the mobile industry and organizations that have developed last-mile distribution networks. Marketing partnerships can not only help reduce costs, but also reach a wider audience and raise awareness of the availability of affordable handsets and finance schemes."

5. The emergence of refurbished phone business models not only opens access to quality phones at a reduced price, but also helps the planet.?"Keeping handsets in use for longer or giving them a 'second life' can improve affordability. Those selling their handset receive money in exchange, thereby increasing their buying power. Those purchasing a refurbished handset can benefit from 10 per cent to 80 per cent discounts compared to buying one new."

6. Innovative finance schemes and payment models better suited to the livelihoods of people in LMICs are being developed.?"There are context-specific factors to consider when developing an appropriate inclusive handset finance business model. Finance schemes that use alternative data for credit assessments or accept a handset as collateral allow customers to repay the handset in instalments, thereby reducing the upfront cost. Offering flexible payment terms, such as daily micro-repayments, are particularly well-suited to those who earn income on a daily basis."

7. Strengthening the enabling environment is key to improve handset affordability.?"This report provides eight key policy considerations to improve access to internet-enabled handsets ownership for underserved populations. This includes reducing sector-specific taxes, providing subsidies to target user groups, developing public-private partnerships to de-risk handset financing, and stimulating demand by increasing awareness and willingness to pay."

8. There is no one-size-fits-all solution. Implementers should be mindful of the context in which they are operating and who they are aiming to reach.?"Depending on the region or country, some solutions may be easier to implement than others. For example, a thriving mobile money ecosystem makes it easier to offer handset finance and good infrastructure is necessary for the collection of used phones in a refurbishment business model. Meanwhile, regulations such as high taxes on imported handsets and laws forbidding device locking inhibit innovation."

Referencing the 2021 GSMA Consumer Survey, the report notes that "the affordability of handsets remains the top-reported barrier to mobile ownership in LMICs and a key barrier to mobile internet adoption, particularly for women and rural populations. Ensuring that handsets are affordable for different underserved segments of the population is critical to enable access to mobile broadband and close the digital inclusion gap."

What is more, "Mobile internet connectivity has a strong macroeconomic impact; an increase of 10 percent in mobile internet penetration results in an increase in 1.8 percent of GDP in middle income countries and 2 percent in low-income countries. However, without a compatible device to access mobile internet, millions of people cannot reap the potential benefits mobile internet has to offer."

Lastly, the report importantly points out that "[m]ost of the unconnected live in LMICs and certain groups are more excluded than others, including women and those living in rural areas. Although smartphone adoption continues to increase across LMICs, penetration varies significantly by country and region. For example, in Sub-Saharan Africa, smartphones account for less than half of total connections while in South Asia they account for just over 60 percent."

Do you support the report's findings? What are you recommendations for making internet-enabled phones more affordable in low- and middle-income countries?

Aaron Rose ?is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of?GT Perspectives , an online forum focused on turning perspective into opportunity.