Super-Saturated Cellular?

5:40 PM -- As I've traveled the world of wireless this decade one of the odder conventional wisdoms of wireless has been spouted like a mantra for years. That is, countries such as the U.S. or Canada are so behind in wireless because their mobile penetration is less than 100 percent, and our country of [insert country here] is so advanced because our mobile penetration is “120 percent."

Never mind that other countries that have post-paid dominant subscriber bases -- like Japan and South Korea, only the most advanced mobile markets in the world -- have mobile penetration levels below 100 percent; somehow many operators smugly state that their “120 percent” penetration level is something to tout. I would posit that a five-year-old child is just as likely or unlikely to have a phone in South Korea or France, and that "real" penetration rates aren't that much different in Japan vis-a-vis Italy, once you factor out some of the strangeness I'll discuss below.

However, the good news is that, as distorted many of the "120 percent" penetration metrics are today, we could see real penetration rates of 300 percent and more in the next 10 years.

As I mentioned in a prior post, I would suggest that folks examine massive "penetration rates" not as a success metric, but yet another example of the lengths that consumers and businesses need to go through to rationalize their usage in the face of sometimes bizarre disincentives for use. The “high” penetration rates cited are almost always due to the ratios of pre-paid (pay-as-you-go) vs. post-paid (monthly) subscribers -- the more pre-paid subscribers, the higher the penetration rates. The rates are almost always due to pricing dynamics distorting users behavior and almost never a reflection of real market penetration differences or differences in user behavior.

Real life example: Last year, I traveled the world with my family for four months. We traveled the globe with two unlocked GSM/UMTS phones and would purchase new pre-paid SIMs in each country, as roaming costs were prohibitive. I purchased SIMs in Indonesia, Thailand, Singapore, Italy, Switzerland, and France. Am I seven subscribers? Am I a population sample of “700 percent usage”? No, I was just reacting to the fact that if I used my U.S. carrier's service, that I would have been paying several dollars a minute to make a phone call, either in the country I was traveling in, or for calling back to the U.S. There were pleasant surprises though, most notably Indonesia, where it was less than $0.20 cents a minute to call the U.S. (on a prepaid SIM!), or a few cents a minute to call domestically in Indonesia and Singapore where both domestic Singapore calls and international calls (both the U.S. and Asia) were quite reasonable.

The most wacky tariffing was in Europe, where in one country purchasing a prepaid SIM was simple, but calls in Europe were over €1 a minute, calling the US was more than that, and SMS were 0.60 eurocents! I spent almost three weeks in Italy... Does that mean the €100 or so I spent made me a €25 or €33 a month subscriber for the three or four months that I may have been on the books of that operator? Did I, and millions of other tourists, “add” realistically to the mobile penetration rate of Italy? If you talk to folks in Europe or parts of Asia, they invariably tell you that they carry multiple SIMs if they travel, or even multiple SIMs in their country if there are strange tariffing mechanisms they are trying to circumvent. Now, regulators in Europe are looking at forcing the operators to make a change, and I do NOT think that is a good solution.

Operators need to recognize that they need to provide incentives for people to use their services more frequently, more deeply, on more devices, everywhere. When pre-paid rates are insanely high, when traveling roamers are pissed off every time they make a call or send/receive an SMS, when crossing a border means that mobile tariffs triple or quadruple, when data costs go to 10x, the operators are TRAINING users not to use their services. We all understand the ways that other parts of the mobile ecosystem, the Web 2.0 guys, certain handset vendors, and the VOIP folks are all trying to disaggregate the service provider as it is, so I believe that in many cases service providers need to wake up and stop disaggregating themselves.

There is a solution. What I'll call the 300 percent solution. Two weeks ago, I was in New York. Coming in from the airport, I was in a taxi. Of course, the taxi driver had a mobile phone (Bluetooth headset -- good thing the way the guy was driving). He had a wireless-enabled PDA. There was a GPS device that at some point should be "smart" and mobile broadband connected. He had a taxi meter that also should be connected to the network, along with the taxi itself (for diagnostics, maintenance, safety, etc.). In the back of the cab was a built-in TVwith a touch screen that was showing local content. That will be mobile broadband connected at some point, as well as connected to a multicast network such as DVB-H, ISDB-T, or MediaFLO. And he will have a laptop and/or mobile Internet device that is mobile broadband connected. That's seven devices for one user -- seven real applications, real use, as opposed to touting numbers that flout the industry's strange desire to keep their users contorting their behavior to circumvent wacky tariffing.

I see no reason where the core high revenue customers in developed countries should not have two (mobile handset, laptop), three (mobile handset, Mobile Internet Device (MID), laptop), or even four or more (add more specialized use mobile phones and devices). If they have a car, add yet another real mobile connected device to the last. And that's not even touching the machine-to-machine (M2M) environment, which can end up with as massive a penetration rate as we humans have. 120 percent is just a number today, but 300 percent mobile penetration can be real.

— Jeff Belk is a principal at ICT168 Capital LLC, focused on developing and guiding global growth opportunities in the Information and Communication Technology space. Special to Unstrung

Be the first to post a comment regarding this story.