卦Trigram 2.0
Asian Snowcrash

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…

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.