The 2 Big Points

So I have submitted a draft of my paper to my faculty adviser. I'm not going to post it just now, but I'll lay out gist of it.

Situation:

People are concerned about the "digital divide" - that is they worry that the poor who can't afford internet access will be excluded from the new information economy.

Wireless broadband (WiMAX) can help provide access for the poor in the developing world because it solves the last mile problem (the expensive last mile of wire infrastructure that must be built to connect users the communication infrastructure backbone.) This is exactly what happened a few years ago when cell phones leapfrogged wireline phone infrastructure in the developing world.

Telecoms don't seem to be interested in doing this because they claim you can't make money selling data service to poor people.

The U.N. and governments are doing studies and making recommendations on how to increase demand to sweeten the business proposition for telecos.

My analysis:

WiMAX is a lot different business proposition than cell phones were for a couple reasons. Cell phone service providers were able to do some creative pricing things they won't be able to recreate as easily (calling party pays, no-contract pre-paid minutes) with WiMAX. Without those tools at their disposal, providers will have less incentive to provide broadband access in the developing world.

Also, even with access, the poor in the developing nations don't have much reason to use the technology in its current state (they don't have computers, they have less general education, they speak less English etc.) This means low demand for service and hence low revenues.

So governments can engage in programs to encourage computer ownership, improve education etc. That's great, but there are other ways to spur demand. What WiMAX and the Internet in the developing world really need is a killer app. Something that makes using the Internet (especially the mobile Internet) and easier and more valuable experience for people in the developing world.

Wrong thinking on ICT diffusion

I've been reading a lot about ICT (Information Communication Technology) diffusion lately. Thinkers everywhere from universities to consulting companies to the U.N. have tried to identify the variables that that drive diffusion. I think, they have been largely successful in this pursuit.

The drivers (and this is not a big shock) seem to be:

1. Economy/Income - ICT diffuses faster in areas where people have more $$
2. Education - ICT diffuses faster in areas where people are better educated. This includes specific technical training on using ICT.
3. Prices/Regulation - relative prices of ICT also determine diffusion, because so much ICT operates in imperfect (controlled) markets. Because of this, government regulation has a large influence on price and hence diffusion.
4. Political Rights/Openness - ICT diffuses faster in areas with greater political "openness"

The U.N. combines many of these variables in its Human Development Index and claims that ICT can be a valuable tool in improving a country's HDI. It follows, argue many of these experts, that policy makers need to address these root causes. Assuming everything is already being done to improve the economy governments should, subsidize ICT hardware to lower prices, provide computer/technical education to stimulate demand, lower regulatory barriers that could slow ICT diffusion.

This is all well and good - I agree that governments should take those steps, but there's something missing here (notice the title of my blog post is misleading - I'm not saying the thinking is wrong, just that there might me more to the story - sue me. It's a blog and I'm supposed to be extra dramatic.) If people have a hard time using ICT because of low levels of education, we can solve that problem by educating them, or . . . by designing ICT to be more easily used by people with little education. Imagine you are trying to sell a new product to a market. Well, if that market has some characteristics/preferences that interfere with product usability you can do two things: 1) try to change market preferences (EXPENSIVE) or 2) you can try to develop the product to better address the needs of the market. I would argue that #2 is usually the better option, yet that has not been the focus of policy recommendations.

Full disclosure: I'm biased. I go to Kellogg. I've spent the last 18 months focusing on how to think like a marketer - and I'm definitely looking at this problem like a product manager. Also, the whole reason I got interested in this project is that I lived in a small Nicaraguan village in 2004 when the first internet cafe opened up there. I watched as people who had never had a home phone came and set up hotmail and IM accounts - especially IM. I saw first-hand how a group (who according to the variables identified above) who should not have adopted the technology, embraced it. They did so, because there was a compelling value proposition. They could quickly and cheaply communicate with friends around the world. This worked because IM was so simple (users need only be literate or even semi-literate) and it worked well despite the slow slow slow (definitely non-broadband) connection we had in the village (Condega.) OK, UN, you want people to adopt broadband? Give them a reason to adopt broadband. We need a broadband application like IM (which does not require broadband.) Something that offers value to consumers. Something that has a very simple user interface.

I think I could gather data on the adoption of simple cell phones and IM (simple, useful technology) and compare it to adoption of more complex technology. This could prove (or disprove) that when there is a useful technology, that is simple for people to use, consumers in developing economies are very likely to adopt it. Now, I just need to get some data on diffusion of IM in LATM (cell phones I have) . . .