I’ve been engaged recently in a recurrent discussion in different conferences or online forums concerning the role of mobile operators in services for social and economic development. I thought I should write my view in a post and get opinions. It is a recurrent theme, and I feel I will express opinions similar to to the post by White African or Mobile Industry review.

Unfortunately, it is a complex situation. It is a mix of what is the current situation, where we should go, and what the benefits are, from different stakeholders’ perspectives: mobile operators, NGOs, entrepreneurs, donors, regulators, etc.
First of all, there are roles and functions that only mobile operators are performing. It is important to identify these roles.

The primary and most important role is providing infrastructure: maintaining, expanding, upgrading infrastructure, and delivering relevant services to their customers (access to and use of infrastructure). The mobile operator is the only actor who is able to reach all the subscribers of its network at a scale and a cost that anyone else can. This is probably not very important for data services (though that might be critical for public services such as education), but it is critical for all other technologies such as SMS or voice technology. For SMS, there are alternatives for mid-size projects, like online bulk SMS services such as e.g. Bulksms. Such services allow independent service providers to get cheaper SMS easily. The operation of SMS services does not really need high capacity either (again for mid-size projects), and quite often a laptop or two with a couple of modems are enough. That said, direct contacts with operators are cheaper, more reliable, more scalable and often more handy for users (e.g. shortcodes). When it comes to voice applications, there are almost no such options to scale-up a service above a pilot phase and few (less than 5) users, given the required infrastructure to handle simultaneous calls under a same phone number.

This role is the most important one, IMHO, and if you look at Western countries, mobile operators are competing almost exclusively on this front* and on prices: better customer support, better coverage, etc.

The situation is slightly different in developing countries, where mobile operators have other critical roles to play, but are also very often trying to enter the content side, to provide services under their own branding such as weather forecast, agricultural prices, etc.
Let’s focus on the critical role, first: the ability for the operator to be the man-in-the-middle for payment. While, in the developed and smartphone world, app stores and alike bypass operators through credit card payments, this is not an option in the developing world, given the small number of people with a credit card. The only alternative is using mobile payments, or direct SIM top-up/payments that only operators can offer. This is, in most cases, an essential dimension when designing business models (how to collect money at little of no cost).

On the content side, it is getting quite obvious to me that operators in the developing world are following the same path as in the developed world. Voice revenues are now reaching a plateau, and opportunities are in value-added services (VAS). Operators started to look at VAS for customers from the middle and upper class, but now looking also at social services for the base of the pyramid. Sometimes content is seen as a differentiator (a way to attract new customers, or keep the current customers), sometimes as a pure commercial service that is profitable.

This is where it gets problematic. First of all, I feel we are repeating history again. More than ten years ago, when I started to work on Web access from mobile devices in Western countries, operators followed a very similar path. They were trying to develop their own little world of services and each content providers had to make deals with each operator (whose terms were always hidden behind NDAs). In Europe, it was called WAP, an operator-specific (aka walled garden) content portal. Each content provider had to make an individual deal with each operator to get into that portal, and browsing was limited to the portal only. This was a total failure in terms of  available content and in terms of users/usage/revenue. At the same time, in Japan, NTT Docomo had a completely different approach, offering something close to full Web access on mobile. That was called I-mode, and was the counter example compared to WAP. We know today what the resulting situation is, at least in Western countries, and who “won”. So my first question is: do we really need to waste 5 to 10 years in the developing world to reach the same results?

Why is such a situation is problematic, and for whom?

It is problematic mostly because it is a hard challenge to enter the walled-garden of operators. When you succeed you have full support, but otherwise you have almost no chance to be able to deploy and scale your service. In short, it is limiting the development and availability of services. I’m convinced that this is a problem for all actors, even for mobile operators themselves.

For NGOs or IT entrepreneurs wishing to develop services (based on delivering content such as agricultural prices for farmers, bible verses, etc.), it is major problem to have to deal with operators. First of all, convincing an operator to be including in its portal is a major challenge, and it is not accessible for small players (like small NGOs or individual entrepreneurs).Then, because of the competition between operators, it is very unlikely that a given service could be supported by more than one competing operator in a given place. As most of countries have mid-size operators (with no more than 30 to 40 percent of market share), it is making the availability of services to everybody in a given area impossible. Note that it is also important to mention the role of aggregators, a kind of intermediary between operators and small players. Aggregators play a vital role in such walled-garden approaches, but are yet another actor in the delivery chain to pay and integrate in the business model.

For governments, the limited opportunities for IT companies and software developers in the mobile domain is a missed opportunity for the development of the ICT sector in general, and the mobile ICT sector in particular. There is a general agreement, particularly among all the major organizations such as the World Bank that ICT has the potential to provide jobs to thousands of people worldwide, and to increase impact and opportunities for all the businesses in a given country. Any action that tend to limit or postpone the realization of the ICT opportunity is a missed opportunity for social and economic development.

For telecom regulators, this is a very interesting case of unfair competition. On the one hand, you have the mobile operator which is supposed to provide access to infrastructure to service and content providers, but on the other hand, it is competing with the same service and content providers. This causes a serious issue, and in all countries where we have ran mobile ICT assessment (see e.g. Ghana or Rwanda), many service providers have highlighted this aspect, and have mentioned the fact that operators sometimes “steal” ideas, rejecting proposals, and developing their own version later. Such situation are made possible because of this situation of being both a provider and a competitor. Some regulators, like in Rwanda or Tanzania are starting to think about addressing this issue and either forbid it or define a service provider license that have a set of rights over operators. This is not a perfect solution, but at least it means that the issue is treated seriously.

For donors, whose aim is to have a large-scale impact, the inability to deploy pilot projects across mobile operators in a given country has a major impact in their objective to change a given situation in a given domain (e.g. moving from 10 schools to 10,000 schools for an mlearning system). Funding projects that have the goal to partner with operators is hurting the domain, and their global objectives. It is also a limiting factor to ensure that small-size grantees are able to mainstream mobile technologies and applications in their work. Moreover, from a pure ethical perspective, it is questionable to force people to subscribe to a specific operator to get a development-oriented service. One of the best examples is mobile banking. While the potential of mobile money and mobile financial services has been largely underlined in many studies in the past couple of years, the fact that mobile financial services are operator specific, and does not work across operators is currently limiting the impact of such system in places where there are no leading operators. In places where there is a dominant one, like Safaricom in Kenya (holding more than 80% of market share), it is killing the competition for the exact same reason: as mobile banking is very important for your life, and as changing operator prevents you from accessing the service, there is no way to move to a competitor.

For mobile customers, because mobile in most developing countries is the only available ICT platform, it is important to have a growing portfolio of services that could solve different issues and provide a wide range of benefits in all sectors. Everybody worldwide is in demand of services that make their lives easier, funnier, etc. Limiting the supply really is a bad idea in that domain. Moreover, as mentioned above, the fact that customers can’t really change operators is a major problem for competition and price wars, as currently happening for SMS and airtime.

For mobile operators themselves, it is also a limiting factor for different reasons. First of all, innovation very rarely comes from big corporate players. There are very few examples of innovative services coming from well-established firms. At the opposite all the IT success stories in the past 20 years are based on small entrepreneurs having an idea and developing it in their garage (why does IT people always end up working in their garage???). Recognizing this, it is essential to enable those small players as much as possible.
In terms of business, it is also essential to develop traffic, usage and ARPU as much as possible at the largest possible scale. Having as much service providers and developers as possible, and therefore as much services as possible is likely to develop the usage.
Obviously, not all mobile operators have the view that walled gardens are the best way to go, and lots of them agree with the arguments I’m making here. For instance, Vodafone is funding our mobile entrepreneurs in Ghana project which is about empowering small entrepreneurs and we have a partnership with Orange on the VOICES project, but in general, in my experience, headquarters of big operators understand the longer term vision, and are more likely to work towards it right now, as opposed to their own local entities in specific countries which are focusing on their very short term margin.
Therefore I encourage all actors who are in power (headquarters of big operators, regulators, donors, governments) to push in the direction of preventing mobile operators to provide different treatments and inequalities between service developers. Mobile operators are great for infrastructure provision and payments, but should not be in the content world.

I would like to go one step further. If you have read this post till there, then you know that I recommend partnering with mobile operator for infrastructure access and for payment. But we need to go further. It is very difficult for small players, like individual entrepreneurs to discuss and partner with operators. Not only the small players don’t have the expertise for such discussions, but operators are also not setup to start many partnerships with small players. So this is definitely a limiting factor. At the other end, we cannot miss the incredible success stories of app stores. The app store model is great because it enables small players to make their applications available without needing to sign a contract and have discussion with operators. This is a model that we should develop further. For now, this model is based on purchase only (you pay to purchase) and an application for smartphone. I believe we could surely extend further this model to cover other technologies such as voice applications or even SMS applications. We could even extend the model to enable service developers to take advantage of mobile payment in their applications. Another example to copy here is e.g. Paypal which provide security and trust between buyer and seller. Service developer has a unique interface to integrate payment in their application, and buyers are (can feel?) safe as their payment is done through a trusted party.

I’m convinced that if there was an automatic way for (small-scale) service developers to integrate mobile money (and SIM charging) in their application without to have to discuss with operators, this will create new opportunities for small entrepreneurs to develop services and make business. All the stakeholders will benefit from this: operators will have more services more traffic and more revenues, entrepreneurs and NGOs will have easier way to test and release their applications, leading to new innovation, governments/countries will see their ICT sector growing as this will create more opportunities, donors will see projects reaching a more global scale and people will have a growing offer of services that can improve their live.
I think that the payment bottleneck should desserve a complete post to be developed further.

Steph

Ps: a big thanks to my colleagues Max and Franco who reviewed and commented this post.

(*): My colleague Franco made two interesting remarks:

• Operators seems to care about the ‘dumb pipe menace’. So their role of being infrastructure providers has been progressively complemented with other revenues. VAS was the first way (customisable ringtones, voicemail,…). Content, in the traditional sense (football results, horoscopes, the Indian ABC – astrology, bollywood, cricket,…) was the second wave. The third wave – the one we are now seeing – is more on the production of services (see Orange or Vodafone) , customer service tools, customised devices, or strange app-stores…. They started for their business clients, and then they extended for customer.
• Networks are too expensive for the operators in these days. Huawei, NSN and others are getting a bigger part of the revenue. So an MNO is more and more often just a customer-service veneer. Still a crucial one, but they are not in control of the network anymore. And sharing network is now more common. The role of being a network is a bit more complicated, and less appealing.