卦Trigram 2.0
Asian Snowcrash

Are we heading for a global recession? All of the signs are that the US economy is now in recession. The next thing we find out is how much knock-on damage this will cause in developing markets. Are the Asian markets sufficiently decoupled from the US economy for India-China trade to keep everyone here afloat? We’ll find out in the next few months.

This recession, which was sparked off by the US housing bubble and compounded by bankers’ recklessness, has been a long time coming. Steven Roach at Morgan Stanley was warning about it even before I took my MBA, so it’s not as if we haven’t seen it coming.

What has come up swiftly and without much warning, and may yet bite us hard, is the shortage of food staples - rice, especially. With a number of media sources warning of food riots and social instability as a consequence, this is likely to be tough all around.

The people who are going to suffer the most are the ones Niti is investigating at the bottom of the pyramid - and this is going to be very different from anything we’ve seen before.

I remember, as a child, seeing the pictures of the famine in Cambodia, and the appeals for public donations. I helped to organize a Blue Peter Bring & Buy sale at my primary school to contribute. Soon afterwards, the focus shifted to Ethiopia. Here I oversimplify horribly, of course, but in essence the famine victims here had to be essentially passive, waiting for external food aid to arrive.

In a lesser case of food shortage, citizens in the old Soviet Union had to opportunistically join queues as soon as they saw one forming, hoping it meant that a delivery of food or other scarce goods had just arrived - even when (famously) they often didn’t know what they were waiting for until they reached the head of the queue. This would just be luck of the draw.

What difference will it make when the poor, who are most desperately affected by food shortages, all have mobile phones? Will governments and aid agencies use it to inform people of deliveries, and in this way alleviate anxiety? Will be see spontaneous, SMS-directed “hunger mobs” flash-forming on the rumour of food availability (either delivery, storage or hoarding)? And what will it mean for us when instead of seeing appeals for donations on TV, the hungry millions are calling us for help personally?

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.

The days have mostly been lovely and sunny, with clear blue skies.

Internet connection:

• David at Silicon Hutong suggests that I am not alone in experiencing a really draggy net connection lately.
• (A different?) David at tech86 reminds us that WiMax Beijing is coming soon…
• Kaiser Kuo at Ogilvy Digital Watch mentions that China’s trans-Pacific internet pipe is being upgraded.
• Another possible explanation for why websites keep timing out on me…

Most popular phones suggested to me in shops in the student area of Wudaokou (I’m looking for a camera phone):

• Nokia N6300 @ RMB 1980
• Samsung Anycall G608 @ RMB 5000
• SamsungAnycall D908i @ RMB 2550
• Nokia N95 @ RMB 5880
• Nokia N73 @ RMB 2680

On Chinese phone companies’ design approach:

• CECT offer a phone that doubles as a heart monitor….
• … and HEDY present us with a waterproof, washable phone (possibly inspired by unfortunate events at public toilets in China, which are often slits above a pit?)

From the link to the CECT ‘heart’ phone above, I note with interest this quote from CECT parent company Qiao Xing Mobile’s Chairman, Wu Zhi Yang:

“We dedicate a large amount of resources to our efforts to develop highly differentiated handsets. The C7000A is a result of these efforts. It represents a breakthrough in the use of mobile handset technology. No longer are handsets only tools for entertainment and communication. We have been able to incorporate a piece of advanced medical technology that could possibly save lives. It is this kind of differentiating handset feature that we continually strive to offer to our customers in China.”

Note that they’re only making a few hundred of this model. VERY exclusive… but without doubt something that could easily find a worldwide market. And I suspect that a washable phone might find a ready market in developing countries… Just another couple of example of phone design innovation in China… I’m going to try to track down more about that washable phone.

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.

The IHT has a good piece today on Nokia. The Finns are roaring ahead, dominating the handphone market, and in particular are being very successful at penetrating developing markets.

This is particularly important for them because this is where adults are buying their first ever phone, and mindshare is established. That’s a valuable asset; in a recent catchup with Niti, I found myself noting that “I speak Nokia” - which is to say that because I started off with a Nokia I now find their interfaces intuitive, and Moto and Sony-Ericsson (for example) are now slightly less so. Of course, consumers are pretty sophisticated, and will choose according to their specific needs, but that “mental lock-in” isn’t to be dismissed. That’s especially relevant in the developing markets where a new phone may be a significant investment, and someone who finds a brand reliable may well stick with it faithfully rather than experiment.

However… as the article suggests, Nokia can’t rest on their laurels. There are lots of hungry competitors out there. The IHT mentions Korea’s LG, and uses Shenzhen-based ZTE as an example of the many Chinese phone manufacturers who are innovating like crazy.

Nokia, and the other phone companies, have two ways forward - more innovative design, and mobile services. This is why Jan Chipchase’s work is so fascinating - to go into the rough, developing parts of the world, look at how people live, and sift out insights into how phones and services might fit in. A research lab on its own is no longer enough, mixing it up with the people is needed - perhaps phone R&D will develop into an anthropological/sociological discipline of its own, like something from a William Gibson novel…

Jan gave a fascinating talk at the TED conference, at which he shared some of what he’s learned. His slides from this presentation are available on his personal website.

Another example of Nokia’s approach to R&D was given at the recent LIFT08 conference in Turin, where Younghee Jung (is she a member of Jan’s team, or working elsewhere in Nokia? I think so, but I’m not sure…) gave a presentation on a design project Nokia ran with communities in the developing world.

Both videos are worth spending a bit of your time on.

What, I wonder, are the ZTEs and Meizus doing along these lines? And if they’re not, why not?

When I was working in the mountains of Lesotho, many moons ago, keeping in touch with people was a major undertaking. For example, my parents were concerned about my welfare - me being 17 at the time, and South Africa not being the most stable country then… and of course, this was before the time of cheap flights, so southern Africa was mentally much further away than it is in these days of mass air travel.

In order to speak to my folks, I had to wait for our truck to leave on its weekly supply run. Assuming that the bridges weren’t out, we would get to the nearest town, Hlotse (usually called Leribe), and then cross the border into the South African town of Ficksburg. I would have to go to the main post office, wait for the one official with an international line in her office to be free, go to her office to make a collect call to my parents, and then wait for them to call back. I could then talk, while the post office lady listened in. Luckily, she was very nice!

Getting a landline - or even a fax or telex - to our base up in the mountains was a dream - I have no idea whether or not they ever got one!

On another personal note, I remember the joy I experienced when I first got access to the internet back in 1994. Coming from a small country town, where information and knowledge were hard to come by. The Net changed all that. Suddenly, I was able to find things out without making a trip to the library in the nearest city; I was able to talk to people on the other side of the world who shared my interests.

The arrival of mobile telephony in developing countries is freeing hundreds of millions of people from the need to make the kind of trips that I had to make, and presenting them with the same kind of liberation that I experienced. What difference will it make to them?

I’m going to be looking at this a lot, particularly with reference to Africa and China. Pointers to more information are welcome!

First of all is this very interesting piece at worldchanging: Africa Calling - SND MNY 2 YR MBL. It’s a very good primer on how mobile banking via handphones is making life much easier for the poor, via services such as MTN Banking. It points out the similarity of this venture to similar successes in South Asia, and Bangladesh’s Grameen Phone in particular. This is the sort of thing that Niti is very interested in… Are there similar services in China? If so, who? If not, why not? What are the design needs for this kind of service? Watch this space for answers to these questions!