A few weeks ago, Google, Grameen Foundation and MTN Uganda launched a premium SMS service aimed at delivering health tips and critical agriculture tips to the poor. A debate erupted when it was mistakenly thought that MTN was charging users 220UGX to use this service.
nota bene: In Uganda, sending a person-to-person SMS costs 110ugx. Sending a premium SMS (primarily when businesses target potential customers) costs at least 220ugx.
When it was clarified that the service costs only 110Ugx, the debate turned to whether network providers are fixing prices artificially high, and if so, whether the government should set a price ceiling in order to both stimulate innovation and lower the prices for the poor.
Two thoughts:
(i) This is the lowest price ever for a premium SMS service in Uganda.
I was talking about this debate to a director of one of most prominent software companies in Uganda. He reminded me that this is the first time in the industry’s history that a premium service has gone for less than 220UGX. This is a good first step, but most likely not a deal that anyone besides Google could get immediately. Many of the premium SMS services [usually targeting the rich] are adding their own fee (usually around 60UGX) onto the 220UGX base and making a killing
(ii) What kind of pressure would it take to get network providers to lower SMS rates voluntarily?
In Uganda, the best things are done without government intervention. Think about how amazing it is that an NGO, an Internet company and mobile company got together to launch this program without government intervention (contra programs run by, say, USAID or UNDP). Often when the public pressures an industry to reform, the industry comes together to create voluntary restrictions. This recently happened when the Internet industry came under fire for violating human rights in China. Is this concievable with the mobile industry in Uganda? If so, it would have to start with pressure from companies that are innovating in the SMS information space.
I asked Steve Song, of the fantastic Many Possibilities blog, what it would take to get providers to lower prices? He answered with the ‘economics of abundance’ argument, where carriers earn more by having more users at lower costs. This is a familiar and powerful argument in the telecom policy world. Steve explains how the argument worked in Phillipines, resulting in 1 cent SMSs (the global average is 10 cents):
Regarding what sort of pressure it would take to get operators to voluntarily drop their SMS rates, I think they need to be convinced of the economics of abundance. They need to believe that if they halved their SMS rates, that their SMS traffic would more than double. I have given the example of the Philippines where they send roughly a billion SMSes a day as compared to roughly 25 thousand per day sent in South Africa. The cost of an SMS in the Philippines is less than 1 US cent as compared to 7.5 US cents in South Africa. If you double South Africa’s population (and resulting SMS revenue) to roughly match the Philippines, they are still generating more than 3 times the revenue at less than 1/7th of the price.
Amassing evidence that lower pricing leads to more revenue is the first step. The second step is finding someone in the Kenyan or Ugandan telecom sector with the gravitas and positioning to make the argument to the network providers.
cross-posted on inanafricanminute.blogspot.com
About the author: Joshua Goldstein is a technology consultant and writer living in New York. While completing his masters degree at the Fletcher School, Tufts University, he interned with Google and Harvard's Berkman Center. He is currently a consultant for UNICEF Innovations group and an Appfrica Labs Fellow. He blogs at inanafricanminute.blogspot.com
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Should Government Force Mobile Carriers to Lower SMS Prices?
A few weeks ago, Google, Grameen Foundation and MTN Uganda launched a premium SMS service aimed at delivering health tips and critical agriculture tips to the poor. A debate erupted when it was mistakenly thought that MTN was charging users 220UGX to use this service.
nota bene: In Uganda, sending a person-to-person SMS costs 110ugx. Sending a premium SMS (primarily when businesses target potential customers) costs at least 220ugx.
When it was clarified that the service costs only 110Ugx, the debate turned to whether network providers are fixing prices artificially high, and if so, whether the government should set a price ceiling in order to both stimulate innovation and lower the prices for the poor.
Two thoughts:
(i) This is the lowest price ever for a premium SMS service in Uganda.
I was talking about this debate to a director of one of most prominent software companies in Uganda. He reminded me that this is the first time in the industry’s history that a premium service has gone for less than 220UGX. This is a good first step, but most likely not a deal that anyone besides Google could get immediately. Many of the premium SMS services [usually targeting the rich] are adding their own fee (usually around 60UGX) onto the 220UGX base and making a killing
(ii) What kind of pressure would it take to get network providers to lower SMS rates voluntarily?
In Uganda, the best things are done without government intervention. Think about how amazing it is that an NGO, an Internet company and mobile company got together to launch this program without government intervention (contra programs run by, say, USAID or UNDP). Often when the public pressures an industry to reform, the industry comes together to create voluntary restrictions. This recently happened when the Internet industry came under fire for violating human rights in China. Is this concievable with the mobile industry in Uganda? If so, it would have to start with pressure from companies that are innovating in the SMS information space.
I asked Steve Song, of the fantastic Many Possibilities blog, what it would take to get providers to lower prices? He answered with the ‘economics of abundance’ argument, where carriers earn more by having more users at lower costs. This is a familiar and powerful argument in the telecom policy world. Steve explains how the argument worked in Phillipines, resulting in 1 cent SMSs (the global average is 10 cents):
Amassing evidence that lower pricing leads to more revenue is the first step. The second step is finding someone in the Kenyan or Ugandan telecom sector with the gravitas and positioning to make the argument to the network providers.
cross-posted on inanafricanminute.blogspot.com