Living Economics

Phone Power
Mobile phones that require less fixed investment and maintenance can extend telecommunications to areas that copper wires might have taken decades to reach.

Before Mr. Quadir went back to his native Bangladesh in 1996 to build a rural cellular network with Grameen Bank, the people who live in a village thirty miles from the capital Dhaka had to walk several miles to make a phone call. These people live on less than $1 a day, and the primary source of their income is selling their crops. Abida Sultana, referred as "phone lady" in the village, bought a Nokia 1610 for $360 with a loan from Grameen Bank (National Public Radio, 03/25/2000). For a fee, other people can use her cellular phone to call doctors, order supplies, and check the market prices for crops, etc. There are more than 2,800 villages connected by "phone ladies" (The New York Times, 01/19/2001). By calling and comparing market prices on the cell phones, they are able to sell the crops at the best price they could find. This kind of connection not only minimizes their chance of being cheated but also stimulates competition for the entire market.

Similarly, fishermen who work the waters off Cochin, in India's southern state of Kerala, are also using mobile phones to enhance their market advantage. Fish prices fluctuate throughout the day and can vary widely among the 17 landing spots around Cochin. Before mobile phones, deciding which would offer the best price was sheer guesswork. Now fishermen can call ahead to shop for the best price. Carrier boats, which take the catch to shore while the mother boat continues fishing, are now summoned only when there is something to deliver, conserving expensive fuel (The Economist, 03/03/2001).

Mobile phones appear to be an appropriate technology for the developing countries. New wireless technologies require less fixed investment and maintenance. Cellular phones can extend communications to areas that copper wires might have taken decades to reach (The Economist, 09/23/2001).

Commentators have worried about the widening digital divide between the rich and poor countries. Studies show that rich countries account for only 5% of the world's population but 90% of global IT investments and 80% of Internet users. The 2 billion people living in low-income economies have only 35 telephone lines and five personal computers for every 1,000 people, compared with 650 phone lines and 540 computers in America (The Economist, 09/23/2000). However computers, digital telecommunications, and the Internet have broken down geographical barriers and helped the developing countries to absorb new technology much faster. While the developed countries are devoting huge amount of resources into IT development to invent something new, others are following their footsteps and getting the technology at basement prices. Judiciously borrowed technology has allowed them to eliminate huge R&D investments and avoid costly mistakes.

Note:
  1. Editor's note: Originally published in now defunct ecomecon.com in 2001.
  2. Editor's note: Originally published in now defunct ecomecon.com in 2001.
References:
  • Arnold, Wayne. "Cell Phones for the World's Poor; Hook Up Rural Asia, Some Say, And Ease Poverty." The New York Times, 01/19/2001.
  • Conan, Neal. "Bangladeshi Bank Helping Rural Women by Granting Loans to Purchase Cell Phones." National Public Radio, 03/25/2000.
  • Schumacher, E. F. "Social and Economic Development Calling for the Development of Intermediate Technology," Small Is Beautiful. New York: Harper & Row, Publishers, 1975, pp. 159-177.
  • The Economist. "Another Kind of Net Work." 03/03/2001.
  • The Economist. "Falling Through the Net?" 09/23/2000.
Access Tools
• Advanced Search
• Browse Micro
Comparative advantage (14) Competitive strategy (27) Costs and opportunities (53) Entrepreneurship (3) Externality (28) Free Market Solutions (17) Free Ridership (3) Game Theory (22) Incentives (13) Income Distribution (25) Information (19) Labor Market (24) Marginal optimization (33) Market Demand (17) Market Entry (9) Market Exit (2) Market Intervention (12) Market Structure (29) Market supply (4) Material Flow (2) Miscellaneous (3) Price Discrimination (17) Pricing Strategy (46) Profit maximization (48) Property Rights (42) Regulation (16) Rent Seeking (2) Risk Taking (12) Scarcity (10) Tastes & Preferences (27) Taxes (7) Technology (9) Type of goods (31) What Price Means (27)
• Browse Macro
Boom and Bust (9) Budget Balance (12) Comparative advantage (13) Economic Development (1) Economic Indicators (6) Fiscal Policy (12) Incentives (1) Income and output (25) Income Distribution (5) Labor Market (6) Money and Credit (20) Regulation (5) Rent Seeking (1) Saving (6) Taxes (4) Technology (1) Trade and Foreign Exchange (30)
• Glossary
List All
Search

• Microeconomics Lectures • Macroeconomics Lectures
Instructor
• Instructor Log in • Sample TOC • Demo/Register • Video Tour
Student
• Student Log in
Close
Instructor Log in

Class
Close
Student Log in


Open Menu
Term
Definition