Economic Development by Telecom (ETE 521 L8)


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Economic Development by Telecom (ETE 521 L8)

  1. 1. ETE 521: TelecommunicationBusiness and ManagementLec 08: Economic Developmentand Telecommunication Services
  2. 2. Telecommunication andGlobalization of the ValueChain of the ServiceIndustry.
  3. 3.  Advances in telecommunicationstechnology have enabled adisruptive transformation of theglobal business services value-chain.
  4. 4. Perceived economic benefits oftelecom access at the Bottomof the Pyramid in emergingAsia
  5. 5.  Bangladesh is a widely cited example, wheretelecommunication is alleged to be particularly importantin contributing to incomes of many poor families whodepend on remittances from members working abroad.Richardson et al. (2000) found that the discussion offinancial matters is a very important use of the phoneamong the rural poor, thus enabling financial transactions.In addition, phones are used as direct income generatingdevices in rural Bangladeshi villages through the ‘resale of minutes’. Thishowever is done with the support of micro-loans to makethe initial purchase of the phone and subsidized call rates.Richardson et al. (2000) as well as Bayes et al. (1999)demonstrated the income benefits arising from this kind ofbusiness to be considerably large. However, these twophenomena are not commonly seen in other settings.
  6. 6.  Souter et al. (2005) assess the impact of telephoneson the livelihoods of low-income rural communities inMozambique, Tanzania and Gujarat (India). Impacts on financial capital are mixed, with most of itcoming from saving travel time and cost or postagecost, but little impact on income generation is seen. Only the better-off (in terms of wealth and education)see greater benefits in income generation. Impacts onsocial capital through networking, especially withinthe family are large.
  7. 7.  A small South African study of the use oftelecommunication showed that while as aproportion of calls, the majority of callsamong those studied were for socialpurposes, the social networks maintainedby the telephone were key to reinforcinglivelihoods, seeking information forexample about employment opportunities,securing remittances, finding housing etc.(Skuse & Cousins, 2008) Such socialnetworks are key where the informaleconomy predominates.
  8. 8.  The ‘social’ use of phones has also been seen in several otherstudies. Zainudeen, Samarajiva and Abeysuriya (2005), in astudy conducted among financially constrained users in severallocalities in India and Sri Lanka found that the large majorityof phone use was for ‘keeping in touch’ with family and friendsrather than instrumental uses such as business and financialtransactions. Bayes et al. (1999) also cite ‘social cohesion’ availed of bytelecom users, especially in the case of Bangladesh wheremany families have members working abroad. Such ‘social’use is not to be considered ‘frivolous’; as the mere ability offamilies to stay in touch contributes to better quality of life. Bayes et al (1999) also note the noneconomic benefits ofphone access in rural Bangladeshi villages, such as improvedlaw enforcement, disaster-communication, and increasedsocial kinship. 2006).
  9. 9. In general we find that the BOP valued highly thecontactability any time, anywhere that (particularly)mobile communication allows. In fact, the contactabilitybrought about through phones is one of the key reasonsthat was seen to be driving people to get their ownconnections.The ability to obtain information (any information) in aninstant was also highly valued. Some interesting findingsthat emerged from the Pakistani qualitative studies, theonly Muslim country where separation of men and womenwere relatively more pronounced, were that the malessupported the notion that mobiles have reduced thedependence of females on the males in running generalhome errands.
  10. 10.  The economic contribution of mobileservices in the Europe Union beforeits 2004 expansion 1 A report to the GSM Association, 2005
  11. 11.  The mobile services industry now makes amajor contribution to the GDP of the EU15region: • it generated €106 billion of GDP in 2004,1.1% of total GDP in the EU15 • in terms of GDP contribution it is bigger thanindustries such as mining and quarrying and isapproaching the same size as the agriculture,forestry and fisheries industry • it is larger than other ICT industries such asthe supply of end user hardware or softwareand is growing significantly
  12. 12.  The industry is also a major generator of high value addedjobs in the EU15: • the industry itself employs 423,000 staff, who are onaverage generate nearly 2.5 times as much GDP as theaverage EU 15 worker • a further 1.3 million jobs depend on the industry. Theseare of two kinds. 740,000 workers are employed inproviding the industry with support services of variouskinds while a further 600,000 jobs are generated whengovernments, shareholders and lenders spend the taxrevenues, dividends and interest payments generated bythe industry • a further one million jobs depend on expenditure in theeconomy created by the industry (the multiple
  13. 13.  What is the nature of valueaddition in Bangladesh’sTelecom Sector?
  14. 14.  India