Monthly Archives: May 2012

Which comes first? Wealth or Broadband?

Posted on by
Reply
Image

Which graph is oriented correctly? The answer is probably both.

I had the good fortune to attend the launch of the Blackberry 9220 and 9320 in Cartagena Colombia last week as one of the speakers. The launch took place in the “convention center” of the Hotel Santa Clara which is in fact the ancient chapel of the convent-converted-into-hotel. Being a speaker meant I actually got to hear the presentations because the acoustics are terrible in the chapel. I have no idea how parishoners or the sisters followed the mass in past centuries. Maybe they were just as happy not to and so no one complained.

Diego Molano the Colombian ICT Minister was one of the speakers as well and he gave his excellent rendition of the government’s “Viva Digital” program, which plans to double broadband penetration over the 4 year term of President Juan Manuel Santos.

One of his charts however, made my antena pick up. He showed a graph of % of Population Below The Poverty Line versus % Broadband Penetration and it showed an almost perfect correlation — higher levels of broadband penetration are associated with lower levels of poverty. The curve is practically hyperbolic which means that even modest levels of broadband are associated with very low levels of poverty. For someone trying to sell his cabinet peers on the need to prioritize broadband, the graph is very powerful.

The problem with this graph and others like it — my favorite is shown above — is that we are never sure how to read it: does increasing broadband penetration reduce poverty or do richer countries have more surplus to spend on broadband?

My graph, or rather graphs, show GDP per Capita adjusted for Purchasing Power Parity (PPP – a common measure of wealth) versus the World Economic Forum (WEF) Network Readiness Index (a multi-dimensional measure of technological advancement). I prefer some of these multi-dimensional measures because they go beyond mere penetration to take into account the actual usage of technologies like broadband. These try to measure if advanced technologies are transforming economic activity which would in turn be expected to increase wealth, at least a broad-based measure of wealth like PPP GDP per Capita.

But then I’m not a politician and so can afford the luxury of using complex measures. If I were a politician like Minister Molano, I’d probably use simple graphs like his.

The graph on the left is the classic policy-wonk graph: higher levels of Network Readiness are associated with higher levels of PPP GDP per Capita. This graph is showing much the same thing as the Viva Digital graph of % Poverty and % Broadband.

The graph on the right might be called the cynic’s graph: richer countries are more technologically advanced.

To be clear, this is exactly the same data; it has just been displayed differently, the axis has been flipped.

As all learned in our introductory statistics class, correlation is not necessarily causation. Clearly wealth and technology are related. We just can’t tell if one drives the other, which one drives which, or if there is a third factor that drives both.

I recently created a graph of household Internet penetration versus household spending for the various municipalities of the city of Bogota. The correlation was very high: over 90%. Here I believe that at least the short-term causation is clear: richer households can afford PCs and households with PCs are the only ones likely to have Internet at home.

However I am sufficiently optimistic to believe that that the causation works both ways. Short-term — like in the Bogota household Internet example — it is undeniable that poorer households have less of a surplus over basic necessities to spend on things which are still luxuries like PCs and Internet connectivity. They may live in neighborhoods or in circumstances (like shared accommodation) where Internet connectivity is simply unavailable.

But I also believe that medium and long-term, increasing technology — especially broadband Internet connectivity — has a salutary effect on education, which is the undeniable driver of higher wealth and lower poverty.

If you repeat a lie often enough…

Posted on by
Reply

…it becomes the truth.

This morning Enrique Carrier (@enriquecarrier) tweets that he went to Buenos Aires’ premier modern art museum (MAMBA) and was invited to download their app — only for iPhone.

Enrique has a good grasp of the smartphone market since his firm CarrierYAssoc tracks local production and imports. He estimates that iPhone is only about 1% of the Argentine smartphone market.

So MAMBA went to the trouble of paying for an app — no doubt beautifully designed — and it is only useful for much less than 1% of the Argentine population. One could be elitist and say that those 1% represent the top socio-economic levels of Argentine society and so MAMBA’s target for things like donations, memberships and the purchase of hernia-inducing books in the gift shop. But that still would only be a small percentage of all those with smartphones and who came to the museum and so might be interested in a relationship — economic or otherwise — with the institution.

In some sense, how can we blame MAMBA?

They probably don’t subscribe to Enrique’s blog so they don’t have the facts. Instead they probably have to rely on their own staff — who like most art-oriented types are likely Apple aficionados — OR the popular press. And the popular press in Latin America either cribs from the US and European press (where iPhone IS the dominant smartphone platform) or makes this stuff up out of their own preferences.

This is very unfortunate for Blackberry / RIM which DOES have the largest smartphone share in most Latin American markets. In fact, Latin America is a bright spot for RIM in an otherwise relatively dismal market situation where the US press chants its demise with some frequency. It seems that Wall Street traders like iPhones and at the very least US reporters aspire to have iPhones so the whole world wants and indeed HAS iPhones.

I won’t get into whether the whole world WANTS iPhones but the data doesn’t support at all the assumption that the whole world has an iPhone. They don’t. For one thing they are way too expensive for perhaps 95% of the world’s population and in the particular case of MAMBA’s target audience, they are not manufactured locally in Argentina. With Argentina’s currently mad import controls, that means few or no iPhones even make into the market.

But the US market shows that the old adage I used to introduce this comment certainly holds: the press and Wall Street have combined to drive RIM into the lower reaches of the market share league tables and iPhone to the top.

I’m just not so sure that can ever happen in Latin America although it might. One of the reasons iPhones are accessible to a broad population in North America and Europe is the prevalence of subsidies in postpaid plans. The vast majority of mobile phone users outside these markets is in prepaid and phones are not subsidized. A top-of-the-line 64GB iPhone4S in Mexico costs over $1000 and I recently calculated that a minimum-wage earner would have to work 221 days — nearly a working year — to pay for it.

Bottom Line: RIM and Samsung (the top Android brand) need to better broadcast the real story so that content producers have the information they need to make the right platform decisions. Or in the words of Michael Jackson’s Billy Jean “a lie becomes the truth”.

Welcome to Macondo Telecom — A Latin American Telecom Blog

Posted on by
Reply

Why does the world need another LA Telecom Blog?

Certainly there are many good ones already out there. I recommend Enrique Carrier for insightful comments on the Argentine market.

There are a number of both free and paid newsites available. BusinessNewsAmericas is a very good paid site and as a free site, I use Teleco in Brazil frequently.

The reason I decided to start blogging is somewhat explained by my choice of title. For those not familiar with Latin American literature, Macondo is a mythical town in the tropical north of Colombia where Nobel-laureate Gabriel García Márquez set his major novels and short-stories. García Márquez is the most famous writer of a stream of literature known as “Magic Realism” where the absurd and the fantastic mix with the real and the common place.

Exactly like the current state of Latin American Telecom.

We are thrilled to have private companies increasing their investment in new technologies, but we don’t like the prices so we want price regulation — again.

We are thrilled to get service activated rapidly and have repairs within hours or at most days. But we don’t like the profits that private companies make so we yearn (again) for the state-owned companies that made such a mess of things in the last century.

In short we want world class technologies but we neither want to pay for them nor do we want anyone to make money on their investments.

I understand that managing a society is the art of balancing opposing needs and opposing forces. I understand that Alice in Wonderland thought “six impossible things before breakfast”. But it has to be an almost religious belief in the power of Magic to believe that we can overcome the Realism that investors must be paid and state-owned companies become bloated, inefficient bureaucracies.

Hence Macondo Telecom.

The range will be wider than my particular rant above but given how prevalent this them is, we will return to it time and again.

Hope you enjoy the journey.

Wally Swain, C3 Comunicaciones SAS