The Impact of Mobile Technology on Emerging Economies

Mobile technologies have become incredibly popular in global markets in recent years. Over in Southeast Asia, Singapore and Malaysia are two of only five regions in the world where smartphone usage exceeds desktop computer use; Thailand also currently enjoys a smartphone adoption rate of 36 percent, an increase 16 percent in just one year. The quick rise of Africa’s middle class, expected to expand by 25 million households within 15 years, is a big reason why the number of mobile subscriptions in that continent are expected to approach one billion in 2015.

Over the course of a few years, subscription rates in developing countries have risen to 59 per 100 people from only 2 per 100 people. As it has permeated these regions of the world, mobile technologies have had an interesting effect on poor and rural populations. Instant access to market information, lower fees for money transfers and quicker disaster response are a few of the major ways that access to Internet-connected mobile technologies can impact areas with poor infrastructure. About 60 percent of the world’s population currently has no Internet access, however, reducing the beneficial impact that mobile technology may have on their lives.

The ongoing Mobile Economy Project being pursued by the Brookings Institution of Washington, DC, has already published papers on the subject of mobile technology’s impact on disaster relief, global entrepreneurship and health care systems. On Wednesday, December 10th, the Brookings Institution’s Center for Technology Innovation hosted two panels on global mobile tech issues and successes. The event, titled Mobile Technology’s Impact on Emerging Economies and Global Opportunity, featured discussions on the barriers preventing mobile tech from becoming more widely used across the world as well as the role of intellectual property in this emerging economic sector.

Benefits to Rural Economies from Mobile Technologies & the Role of IP

Access to and use of mobile tech has a beneficial impact on underdeveloped, underserved areas. Specific instances of this were discussed in the first panel session by William Bold, a senior VP of government affairs at Qualcomm (a regular part of our Companies We Follow series). Many of his speaking points brought up projects in which Qualcomm was engaged as part of its Wireless Reach initiative, which sponsors over 100 mobile tech projects in 40 countries worldwide.

Speaking about the economic prospects of rural regions, Bold stated that “mobile broadband lifts the floor for all of these communities across the world.” An early point of his was that mobile technologies instantly open the pathway for more investment in a community through access to financial tools and other resources over the Internet. Bold cited a project established in cooperation with the Grameen Foundation and the entrepreneurial tech service Ruma to provide telecom access to Indonesian communities by providing village phone operators with a mobile tech microbusiness through which they can sell voice and data access and other services. Often, these services include local job boards and weather forecast information. Bold later remarked that one of the most popular apps currently used in the Philippines is used to transfer money between the Philippines and the United States. Both of these facts support the idea that financial progress for individuals, and not social networking, is a leading reason behind the adoption of mobile tech.

In order for mobile technology to provide the data and services that rural communities need, a wireless spectrum for commercial use must be put in place. Issues regarding wireless spectrum came up a few times throughout the first panel, both from questioner Brooks Boliek of Politico as well as from audience questions. Bold, a representative of Qualcomm, declined to speak about the American wireless spectrum auction administered by the U.S. Federal Commission, which began in the middle of November. However, he did state that countries taking a stand to free up more spectrum for commercial use were the ones showing the most economic gains from mobile technology. “Spectrum is the real estate that [the mobile tech] industry is built on,” Bold said. “The countries that make the tough decision to free up spectrum, those are the countries that get the investment… and the ones that, quite frankly, are doing better.”

In his role with government affairs at Qualcomm, Bold has seen widely differing mindsets from governments on how wireless spectrum should be treated. In Japan, the government doesn’t have the legal authority to auction its wireless spectrum, which Bold called mind-blowing. “It stifles innovation,” he said. Latin America has had some mixed successes, although Brazil stands out as a successful exception. Industry forecasts released by the Brazilian Electrical and Electronics Industry Association (ABINEE) predicts that more than 52 million smartphones will be sold in that country in 2014, an increase of 16 million over 2013. Bold also lauded steps made in Mexico to increase regulation of telecommunication in that country, notably through Mexico’s 2013 establishment of the Federal Telecommunications Institute, or IFETEL. The organization is separate from the country’s executive and legislative branches and functions as the sole anti-trust agency for the telecommunications sector.

Without the strength of a patent system like the one enjoyed in the United States, it becomes very hard for American businesses to compete globally with mobile tech developers and Bold wondered aloud whether we’ve taken the patent system in our country for granted. “You have to realize that it’s not just the patent system but the preservation of the free and fair market for intellectual properties,” Bold said. “The fact that companies like ours can make massive million-dollar bets on speculative technologies that might not work is because there’s a market where we can recoup that investment.” Bold went so far as to suggest that should some patent reforms recently suggested in U.S. Congress were to take effect back in 1985, Qualcomm may never have been able to get off of the ground.

Patent regulations can be invoked to rein in issues presented by patent trolls and other problems, Bold said, but he urges caution on behalf of lawmakers to ensure that patent rights are maintained. On the issue of patent trolls, Bold was very blunt: “I would honestly like to see real evidence that the patent troll problem is an actual drag on the economy.” Bold also doesn’t take issue with the increased numbers of patent applications coming from China and other Asian countries as long as the U.S. maintains its patent system strength. “We’ve benefitted from market system competition,” Bold said. “It makes us get up a little earlier, work a little harder to stay ahead.”

Recent Developments in the Global Mobile Ecosystem

The second part of the Brookings Institution panel event focused on actual ways that mobile technologies were being utilized in developing economies all over the world. Speaking as part of this panel were Darrell West, founding director of Brookings’ Center for Technology Innovation; Sanjay Puri, founder and president of the Alliance for U.S. India Business (AUSIB); and Kishor Nagula, senior manager at Caribou Digital, an emerging markets digital economies developer.

The increase of mobile tech in India has greatly improved the opportunities for small businesses in that region, according to Puri. “It’s a great time to be an entrepreneur in India,” he said. Mobile technologies can tap into rural economies, which Puri noted was approximately 70 percent of the country’s total economy. As Nagula noted, the ability to connect rural populations around the world to Internet services has led to incredible advances in the financial situations of those who are able to open bank accounts and build credit scores for the first time. “For the first time, there’s a new, viable economy based on services offered on a mobile phone,” Nagula said.

Challenges facing adoption of mobile technologies in these region mainly surround the infrastructure available to mobile users in these countries. India currently offers 3G spectrum and is contemplating adding more 4G connectivity, but 3G networks connect only about 15 percent of Africa. The availability of seed capital and the presence of those with the technical skills and business acumen necessary to build support for mobile tech were other barriers brought up by Nagula.

Global misunderstandings about intellectual property rights have been another stumbling block slowing the progress of mobile tech. “IP is a huge concern for building up a digital economy,” Nagula said. Puri also noted that the issue isn’t isolated to mobile. Disagreements and controversies surrounding pharmaceutical IP have created some mistrust in international IP agreements. What Nagula referred to as a “fungible” rule of law existing between different markets makes it difficult to deliver products to consumers.

Connection to the global economy is a major part of the push to bring mobile tech to rural areas worldwide, but the ability to grow local economies should also be a component of increased mobile tech use, according to both panelists. Local content standards in Indonesia requiring locally-developed content to be used on national mobile systems were derided by Bold in the first panel. However, Nagula maintained that enabling mobile consumers to learn how to publish their own content helps to build infrastructure from the bottom-up and encourages people to want to obtain Internet-connected mobile products. Puri also noted how within certain countries like India, geographically diverse regions have their own languages, cultures and systems. “Mobile is a unifying force, but localization within that area is also important,” Puri said.

There have been successes mixed with failures in regards to programs designed to encourage mobile tech use in rural areas. Mobile technologies have provided a platform for an explosion in new financial accounts opened by consumers in India but Puri noted that about three-quarters of those accounts have zero balances and aren’t being used. “The push now is to get people to use those accounts and not just have them as a symbol,” he said and noted that it may take a generational shift to overcome some reticence among populations in using these technologies.

Mobile tech has the potential to be incredibly disruptive in rural communities situated within developing countries. Landline infrastructure for many of these regions were never heavily developed, so the implementation of smartphones utilizing wireless networks essential skips an entire generation of technology. Even with effective government leadership to regulate and auction wireless spectrum, consumer education and marketing campaigns will also be required to encourage consumers in these areas to see the potential benefits of using mobile tech. A stronger sense of entrepreneurship among rural community members must also be developed. “Failure is not an option for most but with money flowing in, it’s going to happen,” Puri noted. “Failures need to be accepted.”

Connecting rural communities to the Internet through smartphones and other mobile tech also connects these regions with an access to capital and trade on a scale they’ve never before experienced. Access to important market information allows consumers to make better purchase decisions and can improve production efficacy for industries ranging from agriculture to manufacturing. Establishing a global market for mobile technologies has had its challenges but growing consumer demand in these countries will likely spur increased commercialization of wireless spectrum in order to support the exploding growth of mobile subscribers worldwide.