卦Trigram 2.0
Asian Snowcrash

So… the Spice phone, with no screen or non-voice call functions will cost the equivalent of RMB 141? With basic but full-featured phones available at RMB 199, or even RMB99, new - where’s the market, again?

RMB99: advert next to public newspaper board. These boards are still pretty common around Beijing, with the day’s paper there for passersby to read.

RMB 199, in the window of a phone shop at Wudaokou. With a constant influx of new students - Chinese, Western, and (in large numbers) Korean - the phone market is intensely competitive here. A cluster of shops make it a great place to look for that new phone, regardless of budget.

Mao Zedong’s famous dictum says that “the guerrilla lives amongst the people like a fish lives in water”. Without the people, the guerrilla cannot live.

To survive, a large-scale guerrilla movement, or insurgency, must have a message, a purpose, that resonates to at least some degree with the feelings and beliefs of the population in which it exists. There must be enough people who are broadly sympathetic, in order to supply recruits, shelter, and material support.

What does it take to turn the people against the guerrilla?

The people of Afghanistan know what the Taliban are like. The Taliban used to rule the country, and their treatment of women, their bans on popular culture, their public executions, and so on, were not enough to make the people turn against them and stand up to them.

After the American-led invasion, the Taliban were forced to retreat to their heartlands, and the areas of Pakistan where they had deep support. And yet, people there are suddenly prepared to stand up to the Taliban, with force if need be.

What happened?

The Taliban destroyed mobile phone masts.

Claiming that the Pakistani military, and Western armed forces, were tracking militants by locating their phones, the Taliban opted to take down the network - and provoked an immediate and forceful backlash from the ordinary people, for whom the mobile phone has been a life-changing technology. Even the Taliban’s own fighters are angry.

According to Afghanistan’s Minister of Telecommunications:

“The people said please … repair the infrastructure and we will guarantee the security of the tower,” Sangin said. “We believe that if the Taliban continue with these kinds of activities the hatred will increase against them, and as a result we are awaiting a change in their policy.”

Of course, mobile phones are no panacea. We’ve seen plenty of examples of their use to enable terror and death. However, this example clearly shows how the mobile phone is successfully improving the lives of impoverished communities in developing countries, and bringing them the benefits of integration with the wider world.

A little behind the pack, the IHT has run a feature today on the Spice phone (previously discussed by the Times and Reuters). Niti is worried about the phone, and is concerned that it is patronizing the poor.

I don’t think that’s the case. Niti’s points about the value of the screen, and of data services are all valid. However… let’s remember that the purpose of a company, a business, is not to offer goods or services that ought to exist, but to offer goods or services that will sell… That’s over-simplistic, of course, but it will serve for now.

So, will the Spice phone sell? I think so… but to whom? The people Niti has in mind are, I think, economically-active adults at the bottom of the pyramid. Even if it’s being billed as “the People’s phone”, I don’t think it’s intended for that niche. If it is, then maybe it’s a case of Spice spectacularly misunderstanding the market, rather than being patronising. This segment does need the data services and are more likely to buy a second-hand but more versatile phone for the same price - or so I would have thought, but let’s not underestimate people’s liking for “new and shiny” versus “second-hand and grimy”.

So who is a more likely market? The IHT article backs up and extends my musings when I wrote about this before - a rather more affluent segment, who want a call-only phone for:

• the older generation, eg my parents, who simply want a phone they can use just to keep in touch - usually with friends or family whose numbers they have memorised anyway, from long usage with a landline (or which, more likely, are stored in a battered old paper address book that they certainly are not going to painstakingly copy into a phone);
• parents, who want to give a phone to their school-age child for safety, or for general contact needs, but don’t want the child to get immersed in games, constant SMS exchanges with friends, etc…
• … and who else?

Of course, these markets extend far beyond India. And perhaps I’m wrong - perhaps even at the bottom of the pyramid there is a demand? After all, who exactly is making the enquiries from Africa, Indonesia, etc?

So, some options:

• There is no market at the BoP; Spice are patronising the poor, with the attitude “These people don’t need anything more”;
• There is a market at a slightly higher income bracket, but a niche one (caveat: People’s Phone does not necessarily mean “for the poor”; the original Volkswagen - ie People’s car - was, after all, designed for the aspirational working class/lower middle class. BTW, I invoke Godwin’s Law here: no mention of That Name, please.);
• There is a market at the BoP, and I’ve misjudged the needs of this segment.

As I said before, the proof of the pudding is in the eating. The phone hasn’t actually hit the market yet; let’s see how it sells…

Just to note this very interesting article in today’s IHT: Making next popular cellphone can be study in psychology. How do we design a phone to make it not just desirable, but also so that it adds maximum value to the user’s lifestyle? Through observation…  I like the point about noting that Chinese users were observed using the light from their phone to help unlock doors in unlit areas (but is this in any way unique to China? Doesn’t everyone do this?). It reminds me of something I read somewhere, now forgotten, saying that where rock fans once held their lighters in the air at concerts, they now hold up their mobile phones. Not something I would know from personal experience, but it makes me wonder what a phone designed for rock fans might be like!

Lots going on in the world of mobile telephony over the last few days…

The headlines seem to have been captured by India, where Mumbai-based company Spice - who, astonishingly, have no entry in Wikipedia (at least, not when I checked a few moments ago; no doubt one will appear in short order - have introduced the so-called “People’s Phone”. They’re targeting the bottom end of the market with a back-to-basics phone that does nothing but make calls. No screen, no SMS, no games, tools, calculator, nothing… just calls. According to the London Times, it’ll cost £10 - which, according to Yahoo! Finance means 27.83 Singapore dollars / 19.67 US dollars / 780 Indian Rupees / 141 RMB at today’s rates.

Reuters add more detail and insight. Spice will market the new phone “from Iraq to Indonesia“; apparently they believe that the key issue to breaking into the developing market, the bottom of the pyramid, is the price of the handset (my emphasis). Well, I’m sure they have done their research and know better than me - but that sounds very surprising to me. Cheap second-hand phones are already widely available through much of this market, it seems to me, and I’m fairly certain that an SMS culture is also well-established. That would suggest to me that the real barrier would be the cost of airtime, messaging, and other services. Well, the proof of the pudding is in the eating, and it will be interesting to see how well this “People’s Phone” sells after its introduction next month. (It also seems to be missing a market; I know plenty of Brits of my parents’ generation who would be delighted to get their hands on a really cheap phone that does nothing but calls!).

A contrasting approach comes from Singapore-based Jurong Technologies. They’ve partnered with Infineon Technologies, TJAT Systems, and Brightstar Corporation to introduce a budget Smart Entry Phone, featuring various instant messaging services (Yahoo!, MSN, ICQ) plus email. According to the Business Times, it will cost “around $50“. Looking at everything else on the same page, I see that the Business Times explicitly says “US$” in other articles; I therefore conclude that they mean 50 Singapore dollars. So, that’s: £17.98 / 35.35 US Dollars / 1,401 Rupees / 253 RMB. The consortium also see Asian developing markets, and India in particular, as their main focus. Same questions, though - how will the airtime and services be priced?

That creates a very narrow price band between ultra-basic at USD19.67 at the very bottom, and email- & chat-enabled at USD 35.5… Where will other models fit in? What other combinations of features and price would compete?

At any rate, these examples show that the price of a new handset is falling significantly and rapidly, for both basic and more highly-featured models. I’ll take a look at what’s happening in China after I get there; I remain convinced that for all the headlines about India, there is much more genuine innovation going on in China, which will at some point hit other markets…

As for service costs, it’s very good news that China is about to dramatically cut the costs of roaming charges for calls made between provinces- by between 54% and 73% according to China Daily, which gives fairly detailed examples. That will make calling more affordable for migrant workers… What barriers are there “from Iraq to Indonesia”? And, of course, why does nobody seem to be talking about Africa?

Interesting articles:

• For the rural poor, cellphones come calling (Heather Timmons, IHT, on India’s rural market for phones);
• Mobile phone usage in China;
• Mobile usage trends in Indonesia (as seen from China; a little dated).

Update Feb 16:

China Digital Times has an intriguing piece about one Chinese blogger’s ‘participation’ in the meeting regarding roaming charges.