This third  “What Google Should Do In Africa” post could be subtitled “Grow some balls”.  Why, oh why, is it that Google, so unafraid to tackle telco and broadcast market behemoths in the United States, behaves like a timid NGO in Africa?

Although this post has been in the queue for a while, the timing now could not be better as two days ago Google launched innovative new SMS-based services in Uganda in partnership with the Grameen Foundation and MTN.  This provoked a response from Katrin Verclas (@mobileactive) in which she queried the apparently high costs of the premium SMS charges being levied.  This was riposted by Erik Hersman (@whiteafrican) who rephrased Katrin’s post as the question “If you provide services to the poor, should you make a profit?”.

For me the problem is not whether the poor should pay for services.  I don’t think anyone engaged in this discussion believe the poor shouldn’t pay for services that are of value to them.  It is not even whether they should pay a premium rate for services.  The problem for me is the base rate itself of SMS charges.  Google and Grameen have correctly identified the tremendous potential power of SMS as a technology that can effectively provide data services to the poor.  However, this transformative technology, whose marginal cost of deployment is effectively zero, is being throttled by mobile operators charging a disproportionately high price for the service.  Mobile operators in Africa still embrace the economics of scarcity.

In his post, Erik makes a provocative statement.  He says,

If there’s a problem with collusion and price fixing in an industry (like there sometimes seems to be with SMS services in a country), that’s something beyond the scope of individuals and needs to be tackled separately by regulation.

If only it were that simple.  Telecoms regulation in Africa is in a parlous state.  With few exceptions (Nigeria being a notable one) communications regulators in Africa are under-resourced and often insufficiently independent from governments who maintain a substantial investment stake in the incumbent fixed-line and mobile operators.

So what happens in practice?  Regulators often start out well.  They issue a call for public input on issue X,  be it interconnection, local-loop unbundling, carrier pre-select, spectrum licensing or what have you.  Who responds to these calls for input?  Right now in most African countries the only organisations effectively lobbying the regulator are fixed-line incumbents and mobile operators…. with PREDICTABLE RESULTS.  The old joke about a telecom company being a law firm with an antenna stuck on top is actually not that funny in Africa. Incumbent operators are experts at both influencing policy and regulation development and at stalling any efforts to reform unfair practices.

For the rest of us, lawyers are notoriously expensive and there are few civil society organisations with the resources to actually draft the kind of input that regulators need in order for there to be a balanced debate.  There is a desperate need for organisations like Google who have a vested interest in seeing more data traffic to help lobby for more competition, for lower barriers to entrepreneurship in the telecom sector, and for cheaper access for all.

So when I see the company that wagered billions in the 700MHz spectrum auction in the U.S. to effectively arm-wrestle Verizon into OpenAccess conditions, the company that has made countless submissions to the FCC to lobby for unlicensed access to television white spaces spectrum, announce that they have “partnered” with a single mobile operator in Uganda to deliver SMS services, you will understand me if I seem a little let down.  The new SMS services for Uganda ARE innovative and I believe they have been well-conceived.  Kudos to the Grameen Foundation for developing them and to Google for supporting them.  Am I wrong to want more from one of the most innovative companies in the world?

Imagine the innovation in services that might be unleashed if SMSes were priced so that Africans didn’t have to think twice about sending them.  Imagine the economics of abundance being applied to the telecoms sector in Africa.  Sadly, voices calling for this on the continent are not nearly loud enough.  Google, which represents that principle so well, disappoints by failing to stand up for it.

It’s not sexy, it’s not whizz-bang, but it is true that Google could have a more profound effect in Africa by hiring a few lawyers, lobbyists, etc who can help level the playing field for the regulators on the continent than a dozen SMS services.

Ironically, Chris Anderson’s new book that explores the economics of abundance quotes Google CEO Eric Schmidt on the cover. Schmidt says:

“With the cost of distribution relentlessly driving towards zero, Chris Anderson, has once again identified the next big thing”

If he really believes that, why not Africa too?

If you provide services to poor people, should you make a profit?
image_pdfimage_print

Posted by Steve Song

@stevesong local telco policy activist. social entrepreneur. founder of @villagetelco
#africa #telecoms #opensource #privacy #wireless #spectrum #data

  • Sam Lampert

    Steve – Nice post. I’ve been enjoying this series (and your blog).

    Another thing that google could do would be to stand up a SMS gateway that operates like the Google AppEngine, providing free hosting and a framework for developing advanced web applications. This would help lower the costs for developers to create new, innovative SMS services.

    Lowering SMS costs is important, but it would be even better if there were more services that supported SMS as a means of accessing information.

  • Steve.

    I support your quest to have cheaper sms, data and even voice call rates. Obviously cheap rates would lead to greater volumes which may actually turn out to be more profitable for the Telcos. However if Google actually went into the legislative making process in Africa it may start getting hurt by he dangerous political forces that govern Africa. It may antagonize some powerful and vested interests. Now this is actually a good thing but it could end up hurting google. This idea could work though for Soth Africa and Kenya becoz the two countries have some developed legislatures but it couldn’t possibly work everywhere in Africa.

  • I wonder if this is the same Google that invested in Mobile Planet, the SMS company which has had a near-complete lock on value-added services (VAS) to Safaricom’s millions of subscribers in Kenya, arguably delaying the growth of a healthy and diverse Kenyan mobile VAS industry?

    http://google-africa.blogspot.com/2008/08/announcing-new-investment-in-kenya.html

  • Well said Steve. This point goes beyond the idea of making money by providing services to the poor. Your thoughts are particularly relevant regarding Google’s overall strategy of how to implement their services in Uganda (and by extension the rest of Africa as they start growing them).

    First of all, it’s too bad that they aren’t trying to do this across multiple networks. Second, it is disappointing that they don’t put more of their sizable corporate muscle to work in the same way in Africa as they do in other regions of the world – lobbying regulators and governments directly.

    I think your money quote is this, “It’s not sexy, it’s not whizz-bang, but it is true that Google could have a more profound effect in Africa by hiring a few lawyers, lobbyists, etc who can help level the playing field for the regulators on the continent than a dozen SMS services.”

    My understanding is that they have been doing a lot of work on the policy side. However, how much is in question, and is it relatively proportional to what they do in the US and Europe? Probably not, if it were we would have seen more changes by now. That being said, as you pointed out, many of the African leadership class and business class are one and the same. The ability to change things going through those networks is not the same as in the West either.

    Here’s an interesting thought. How many lawyers would it take to really make a change in SMS services in just one country in Africa? A small one, like Uganda.

  • I’d love to hear from Andrew McLauglin on this. He works in the White House now, but he used to be Google’s head of lobbying in DC and he did a lot of work in Africa, so no one else really has the breadth of knowledge and experience as he does in this space at Google.

  • Steve Song

    And coincidentally he was also Google’s champion for Television White Spaces spectrum. Bring him back!

  • Steve Song

    To some degree it depends on how sympathetic the regulator is. The Ugandan regulator is pretty progressive. I think a single competent, well-informed lawyer could make a big difference.

  • There’s the macro, long-term game of changing the mobile operator’s SMS norms, and then there’s what we can do right now. That’s always the crux of things, as it’s easy to sit back and talk about making foundational change happen, but its a lot harder to put into practice. So, while the current play by Google might not be the ultimate that we would ask for, we do have to ask ourselves is something (anything) better than nothing?

  • Steve Song

    Fair point Erik. It is easy to be a critic and is much more challenging to actually do something. Although I am not entirely an armchair critic. You can hold me in the crucible later this year when the Village Telco Mesh Potatoes are in distribution.

    I don’t want Google to stop offering services such as they have just launched but rather to also leverage the considerable influence and goodwill they enjoy on the continent to catalyse change. Is it too greedy to have a both/and scenario?

  • I apologize if that came off wrong Steve, it wasn’t a comment directed at you specifically, or anyone else in particular. I’m guilty of it myself, and want to be aware that it’s easy for me to sit back and talk about big changes and ideas (and this needs to happen), but the practical *right now* projects also need to take place. Sometimes they don’t live up to my/our standards, but it’s a good thing that something is happening none-the-less.

  • Steve Song

    Not at all Erik! I think it is a totally fair point. Talk has to be balanced with action. I made similar comments about all the instant OLPC experts/critics that came out of the woodwork earlier this year. However, the OLPC gets loads of scrutiny but I don’t see much critical thought around Google’s initiatives in Africa. Hence this series of posts.

  • Hello,
    Very interesting post and discussion! Although I am hardly knowledgable on regulation, I’d like to pitch in my two cents and summarize how I see the situation.

    The Google services launched in Uganda are certainly innovative. They do seem to be backed up by lots of money and plenty of good intentions. They do have the drawback of not being mobile operator agnostic. The link to MTN ties into Steve’s qualm about the price of SMS. Since SMS services have been unreasonably priced, then mobile users i.e. consumers, especially poor ones, should be entitled to some regulatory protection. I think in Africa improvements in the regulation of data transfer in general, not only SMS are needed. At the end of the day, regardless how popular SMS services are, they are bound to become more advanced. The reasons behind the actions, or lack thereof, of regulators border on thorny and uncomfortable political issues. These include lobby interests and uneven levels of human capital in the public and private sectors.

  • Taha

    Hi,

    A great post and discussion point. I’d like to add to it and say that we’re facing the same issues of overly priced communication services (Voice, Data, SMS) in Tanzania.

    Any technology entrepreneurs with ideas about providing SMS services in Tanzania have to think twice about it because pricing short code contract are all dictated by carriers. The government regulators are also at fault because they apply excessive taxes to these services.

    One thing that might help, at least with SMS services is if an NGO or the regulators themselves controlled the process of obtaining and allotting short codes (as in the US). This would allow the use of the same short code across carriers (currently not available) and also hopefully simplify the application process.

    Would love to hear your thoughts on this.

  • Steve Song

    @Taha I think you are on exactly the right track. What is desireable is Open Access which means competition and choice at every layer of the communications infrastructure. Separating the assignment of short codes from the operators reduces the likelihood of vendor lock-in. I see the regulator in India has made a similar proposition.

  • Love this site. Two thoughts, cross-posted at http://is.gd/1mhKk:

    (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.

  • Steve Song

    Thanks Josh. Food for thought.

    In retrospect I wish I hadn’t linked my commentary on Google lobbying for lower SMS charges to the announcement of their Ugandan SMS service. It’s a very innovative and, I think, well thought out service. In some respects I regret being seen to rain a little on their parade. Having said that, I think most of the kudos goes to the Grameen Foundation who established the relationship with MTN some years ago when they went into partnership with them on the Village Phone in Uganda. Grameen have also been working on the mobile services concept since at least 2006, prior to Google arriving in Africa. I’ll be a little more parsimonious in my praise of MTN who risk little with initiatives like these and only stand to entrench their market share further through them. For me it is different for Google than for the others. Google have been so remarkable in taking on the un-thought-off, breaking moulds, challenging conventional wisdom, that it is a little disappointing to see that this is all they can get up to in Africa. Probably a bit unfair of me. I feel like the dad whose kid came home with straight ‘A’s, who says, “is that the best you could do?” In Google’s case, usually it isn’t.

    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.

    Now to be fair, even matching populations, we are not comparing eggs with eggs as the population density in the Philippines is substantially higher than in South Africa resulting in significantly lower network CAPEX but I think the result is still convincing. If MTN were to dramatically drop the price of SMSes and simultaneously invest in companies delivering SMS-based services, I wager that the resulting overall increase in traffic would generate more revenue for them than the current comparatively SMS-based regime. Gathering examples from the rest of the world would help a lot.

    The alternative would be to have some industry insider reveal just how little it actually costs them to deliver SMS services and take the case to the regulator and have them force the operators to drop their SMS charges. That is what has happened in the Philippines.

  • I often wonder at what hand Google is trying to play. While they do wield a massive amount of power and money, they often play the hand that they’re just powerless when it comes to mobile. Such was the case when (I believe) it was Eric Schmidt who wrote the open letter to the mobile operators in the US to get a clue on their data plans and charge reasonable rates to speed up adoption. I think that they’re so dedicated to trying to get in to the mobile market that they’re willing to make less than ideal arrangements with single mobile operators to make that happen. Down the road I suppose they’re figuring that if mobile adoption takes off more, these prices will drop.

    As far as SMS cost, did you see this article? While it isn’t originally for the African market, a lot of it holds true, although it doesn’t take in to account an initial expenditure of the SMS gateways, which I’m told are quite pricey.

  • Steve Song

    Hi Miquel. I think the reality is that Google are only modestly interested in Africa. Interested enough to deliver minor innovations but not interested enough to think in the way they have thought in the U.S. market about how they could bring about systemic change.

    The Gthing article is great. I came across it when I was researching my initial article on SMS costs a few months ago.

  • Steve, you write, “Imagine the innovation in services that might be unleashed if SMSes were priced so that Africans didn’t have to think twice about sending them. Imagine the economics of abundance being applied to the telecoms sector in Africa.”

    But I wonder if we are focusing too much on price as a barrier. Certainly it is one, but as you know, innovation is far more of an ecosystem with other factors often standing in the way (education, access, regulation, etc.).

    In countries/regions with lower prices (India, Phillipines?), is there quantifiable evidence of higher innovation in mobile based services? Can that be conclusively tied to lower prices?

    I think you make an important point (and one where Google has a lot of leverage), but I want to make sure it isn’t a white elephant.

  • Steve Song

    Hi Kevin, Dave Snowden has a great saying about the complexity of knowledge flow. He says, “we only know what we need to know when we need to know it.” This means that designing information systems to serve the “needs” of people is really hard. Having said that, the great thing about networks is that once they reach a certain size, the chance that someone out there knows what you need to know is pretty high. Clay Shirky uses the birthday paradox to talk about this in Here Comes Everybody.

    The challenge then is to be able to find the right person, the right resource when you need to know it. In other words, serendipity. Part of the answer is designing for serendipity such as Grameen/Google have done with Google trader. But the other part of that is user innovation. It’s not just having access to Google search but also the thousands of searches you have done before that build tacit knowledge about how the search engine works that allow you to make the right kind of searches. It is not just twitter but the freedom to play around with twitter to develop @ addressing, hashtags, etc, etc that has made twitter the phenomenon it has become.

    I believe that freedom to tinker with a technology is key to innovation. What we have with SMS in Africa is an impressively pervasive technology that has the potential to be very, very cheap. We need to drive down the cost so that we can begin to see the kind of user experimentation that led to innovations such as “beeping”. I believe that it is no coincidence that “beeping” is a zero-cost innovation.

    I don’t have direct evidence of user innovation from India or the Philippines but I haven’t specifically gone looking. I will now. I think the evidence by analogy of services like twitter does make the case for what happens when you have a zero-cost network environment in which people feel no constraint in tinkering with how they use it. In a complex environment, you need to design for emergence. Communications that are cheap enough for you not to have to think before you send/call is a necessary condition for that.

    Sorry, this is just a few paragraphs about something that could consume hours of conversation. I may try and put this more elegantly in a post.

  • Steve frm berlin (ugandan)

    I do really enjoy this insightful discussion. My thinking is that , lets give google and mtn a chance to start ” a journey of 1000 miles begins with a step”

  • Agreed. And we also shouldn’t forget the psychological effects of pricing (Ariely speaks about these in Predictably Irrational).

    However, Twitter innovation is different from SMS innovation due to the generativity of the ‘net. I may be wrong, but I think beeping is the exception rather than the rule. Twitter’s openness, interoperability and general “Internet ethic” means that hastags and @ replies are the rule.

    I know I’m preaching to the choir about the importance of a read/write generativity, but think it deserves saying. (After all, YouTube wasn’t a zero-cost innovation, but it was possible due to a structure of generativity (including net neutrality).)

  • Steve Song

    Completely agree about Ariely and mobile pricing.

    Not sure how it is that you see SMS infrastructure as non-generative. I see SMS infrastructure ideally as an extension of the Internet, with lots of potentially interesting additional features such as mobile banking, geo-aware functionality, QRcodes, etc, etc.

  • @Steve I stand corrected 😉

  • It is really nice that Google has launched innovative SMS service in Uganda. But I think the service cost should be such that a middle class people can also afford it.

  • Pingback: Facebook Zero Helps Ideas at the Bottom of the Pyramid Have Sex «Many Possibilities()