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What If Everyone Had Free 2G Mobile Internet Access?

By Steve Song on January 6, 2016

african-youth

Imagine a world where all phones were automatically connected to the Internet, at no charge. Is this an idle fantasy?

The current worldwide debate about Zero-Rating and Network Neutrality has brought the issue of affordable Internet access into sharp relief.  I recently came back from the Internet Governance Forum (IGF) in Brazil where there were no less than seven sessions on Zero Rating and Network Neutrality.

Internet.org, now renamed as Free Basics, continues to be a subject of often emotional debate as to whether it brings greater benefits or harms to those who use it.

This has got me thinking about how we value the Internet and how fast the Internet needs to be in order to qualify as ‘enough’.  In one of his sessions at the IGF, Vint Cerf pointed out that we use the word Internet as if it meant the same thing to everyone but this isn’t really true.

A feature-phone user browsing the Internet via Opera over a 3G connection does not have the same experience as the San Francisco-based developer on gigabit fibre staring at his/her dual 26 inch monitors.

Is All Data Bandwidth is Equally Valuable?

non-linear-broadband-value

The “all bits are created equal” debate in Network Neutrality doesn’t really take into account our varied experiences of Internet.  On a personal level, it is clear that some bits are more valuable to us than others.

A one or a zero that indicates whether your loved one is alive is worth infinitely more than four gigabytes of the latest Hollywood movie.

This leads me to question the assumption, implicit in most national broadband strategies, that the value of Internet increases more or less proportionately with increase in speed. The reality is that even very tiny amounts of data can be enormously valuable and that the value of access goes up dramatically with even a little access and then tapers off.

From a value maximisation perspective then one might conclude that it is more strategic to make a priority of ensuring that everyone has at least some connectivity as opposed to some percentage of the people getting fast Internet.

The Network Effect

This got me thinking about the spread of mobile telephony in sub-Saharan Africa.   The Pay-As-You-Go (PAYG) model implemented by mobile network operators (MNOs) meant that it didn’t cost any money to be part of the network.  All phones with a SIM card automatically register on the network and are callable on the network. A credit on the network is not required.

Why has this turned out to be a such a phenomenally successful model?  Because MNOs recognised that each and every person connected to the network added value to the network whether they made a call or not because they increased the size of the callable network, thereby increasing value to paying users.

This phenomenon is known as network effect and while it may have been a somewhat esoteric concept twenty years ago when the mobile industry started, it is now well understood by any Internet entrepreneur.

Registering and managing non-paying customers on the phone network is a significant operational and financial overhead for MNOs, especially now with mandatory SIM registration being more common. Connecting phones to the network for free has obviously proven to be worthwhile.  The increase in size of the overall network also helps to transform those non-paying users into paying ones as they see more and more value from the increased number of people to connect to.  It is a positive cycle.

What If All Low-Bitrate Bandwidth Were Free?

This brings me back to an approach I suggested last year: low-bitrate, generic zero-rating.  What if it were normal for all MNOs to offer low-bitrate, generic Internet access in the same manner that all MNOs connect phones to their network?

Let’s imagine that Internet data were enabled by default for free at GSM (2G) speeds of only 9.6kbps to all users.  Let’s also imagine that it is a best-effort service that might not always achieve that speed or may have terrible latency, a bit like real 2G service.

A million users consuming 2G at a modest 4.8kbps would consume about 4.8gbps per second of capacity.  Looking at the adult population of South Africa of roughly 35M people, if everyone were consuming that data on their phones at one time, it would amount to 168 gbps of capacity across the entire country.

Let’s put this in the context of South Africa’s undersea fibre optic cable capacity, which currently has an aggregate design capacity of 17 tbps, soon to reach 22 tbps when the ACE cable lands.  Free 2G data for all would consume less than 0.01% of the design capacity of the international submarine cables landing in South Africa.

That is a very rough and inevitably flawed calculation.  It doesn’t take into account whether the existing mobile networks could handle this capacity with their current spectrum allocations and technology.  It also doesn’t take into account backhaul limitations where terrestrial fibre is not available.

But we do know that MNOs are actively investing in upgrading their networks, which would make this amount of data an increasingly small percentage of their network traffic.  But the value to individuals would not diminish.

Generic low-speed zero-rating of mobile networks could have multiple impacts. It would:

  • Spur adoption of data services.  As Clay Shirky has so eloquently put it, “If things are expensive to try, people will hold back from trying them and they’ll spend all their time trying not to fail. If the cost of experimentation falls though, and I mean falls precipitously, then people will spend a lot of time experimenting, and instead of not failing, the goal becomes to fail informatively to learn something from the things you tried.”
  • Legitimise data as a means of government/civic communication.  If everyone can access basic data services just by having a feature/smartphone, then it is easier to justify government investment in e-services.
  • Decrease the digital divide.  Democratising access to data through free low-bitrate access would create a true on-ramp to the Internet and its vast diversity of services and interactions.
  • Open up vast new markets to data service providers.  The network-effects of millions of new data users would dramatically increase the value of data services in general.
  • Spur innovation in low data consumption applications.   If you know that you can reach *everyone* at a very low speed, it would spur both the public and private sector to develop applications that consume less bandwidth in order to reach more people.  Indeed Facebook is already doing this with their application development.

I’ve asked you to imagine a world where mobile phones connect to the Internet in the same way that they simply connect to the mobile phone network, where there are no data charges for very low data speeds.  On the surface at least it would seem that the benefits to both the public and private sector would dramatically outweigh the costs of doing this.

If we accept that the value of access is not directly proportional to speed of access and that there is huge value in even small amounts of data access, then perhaps a national strategy ought to focus on getting everyone connected at a modest, free rate as opposed to say 80% of the people at say 2Mbps?

It will take more detailed cost modelling to really dig into this idea but I cannot help but think of more consumer benefits at every turn.  Even for globe-trotting travellers.  Imagine being able to pick up basic text messages and emails as soon as you get off the plane in a new country without having to search for a WiFi hotspot or wonder whether you dare turn on roaming.  Always-on mobile data could open up new possibilities for mobile payment services.

Some operators like T-mobile in the US already offer 2G roaming but only for postpaid customers. What if it just made good social and economic sense to have basic rate Internet enabled for all mobile phones?

This post was first published as Zero-Rating: A Modest Proposal and was made possible in part through support from the Network Startup Resource Center

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I am the Founder of Village Telco, a social enterprise that builds low-cost WiFi mesh VoIP technologies to deliver affordable voice and Internet in underserviced areas. When I am not doing that I am a passionate advocate for cheaper, more pervasive access to communication infrastructure in Africa.
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6 Comments to “What If Everyone Had Free 2G Mobile Internet Access?”

  1. Adam Lane says:

    Hi Steve

    This is a really interesting idea – I like it. We’d need to address a few key issues though, for example:
    – 9.6 kps is so slow that it may be hard to get much actual benefit from it beyond what could already be achieved with SMS and consumers may then not be able to benfit much or be enticed into faster speeds/more internet. Maybe they’d actually be put off the internet?
    – consumers may have such a bad experience with such low speeds, it could put them off the internet?
    – consumers don’t understand what speeds or costs/data means, and this could make it worse leading to more frustrations linked to being unable to afford something that is desired, or being hit with big bills?

    The argument for MNOs to provide a 3G service for free, or a certain amount of time/MB at 3G for free is more interesting, whether the business model is to entice consumers to buy more, or an advertising funded model, or a “collect and sell data” funded model, or as a package (if you spend at least x amount on calls/SMS/mobile money transfers etc you get y data) or as a requirement of licenses/spectrum allocation. There is a lot of potential for innovation in business models.

    As you say if the government could subsequently rapidly expand service delivery as well as health or education information then the benefits and savings to the government would be huge so it could even be directly subsidized by the government much as they may subsidize food or other basic goods (and if they buy the data in bulk from an operator it would be very cheap). Fully valuing the benefits of conenctivity is important to this discussion. Just think of the benefits of collecting data or taxes if more transations were done digitally?

    Though it is a developed country approach, FreedomPop’s model takes this kind of approach and could be expanded in the developing world too.

    For more ideas around business model innovation and fully valuing the benefits of connectivity, check out Huawei’s (Free) white paper at http://www.huawei.com/minisite/digital-enablement.

    Regards
    Adam

  2. Adam says:

    Interesting idea, although a lot of countries are phasing out 2G to provide spectrum for faster Tech, such as Japan, Singapore and Australia. US will do so too in 2016.

    Would it make more sense to make low cost 3G handsets available, charge for 3G usage but give people the option to take a lower bandwidth service at very low cost rates; 3G is still likely to be viable most places for the next 20 years or so.

    It would be an interesting alternative case to look at over and above a 2g one, maybe a more palatable one for service providers who wouldn’t need to maintain backward compatible infrastructure in the future?

    Cheers
    Another Adam

  3. Steve Song says:

    @Adam Lane: Thanks for the link to FreedomPop, great example. The question of whether 2G would be fast enough to be useful is a minor one I think. If we establish the principle is a good one, then how fast can be worked out pragmatically balancing demand, utility, and network load. Reminds me of this very old joke. http://quoteinvestigator.com/2012/03/07/haggling/

    @Another Adam: I think there is a big difference between “very low cost” and “free”. Free means you are part of the network no matter what where as “very low cost” does not. I suspect there would be a big difference in value created.

  4. Adam says:

    Hi Steve

    I understand what you are saying, and I an see the value to the end user, although I’m wondering what value is it creating for the network provider? Would they see it as sustainable? How could they justify offering a decent service when the end user doesn’t pay? Setting up Telco networks isn’t free – they have to find a way to pay for the Base Stations & Backhaul Networks to support this extra service. Base Stations are also typically the biggest line item in their P&L.

    And like all listed companies, they would be concerned at giving away free services, that they wouldn’t make enough profits, then the share price falls, and company folds because it isn’t sustainable.

    I guess it’s the problem with Capitalism. It also explains why telcos are reluctant to build Base Stations in areas of low population density – the business case to payback the often doesn’t work.

    If the Telco moved to a 3G service, they could still get rid of their redundant 2G infrastructure. They could then offer various tiers of data plan to end users. They might see value in increasing their market share to users that couldn’t afford data plan with a very low cost service partially subsidized by the higher value users.

    That way the end user could still have very affordable access to the internet (and it’s near zero marginal cost access to information). The end user would also have the option to pay for higher bandwidth data services if they decided it was of justifiable value to them (creating possible revenue for the network provider). Telco would also have other revenue generating opportunities – they could even try and make the money back by offering advertising over the network connection (which would be a little annoying to the end user but better than no internet!)

    Ping me an email if you would like to discuss further because I find it very interesting, our organization may be able to help (at very low cost!!).

    🙂 Sorry couldn’t resist the joke – but I would be really interested to explore this if you fancy discussing it further.

  5. Steve Song says:

    Hi Adam,

    I am not proposing that free low-bitrate access be tied specifically to 2G networks specifically but rather that a minimum 2G-like speed be offered. As networks upgrade their infrastructure, 2G-like speeds would represent a decreasing percentage of the overall capacity while still delivering high utility.

    As for what is in it for the operators, I am arguing that the network effects will justify the cost to the operators. Right now if operators want to reach their customers, they have phone them or SMS them, which limits the ways in which they advertise to their customers. If they offer 2G data by default, then they are limited only by their imagination in terms of how to reach their customers. Not that I am a big fan of paying via advertising but it is one possibility.

    More importantly MNOs would stand to benefit because content providers would have access to millions more users. It would create more paying data customers for the MNOs and speed the inevitable transition to data as the primary revenue generator for MNOs.

    If we can make the case for voice users to be connected to the network for free, as we do with PAYG voice, then surely the same economics and logic applies to data?

    -Steve

  6. Alex Blum says:

    Steve,

    Thanks for this thoughtful article. For me, this raises questions about what the demand curve for data consumption looks like over time in rural areas. In developing projects, I wonder how quickly communities typically transition from using dumb phones for voice and text to smartphones/tablets/computers. How quickly will there be sufficient demand for 4G/LTE and how do we manage the transition? What factors in communities mediate how quickly they develop their data needs? Population size? Proximity to cities and roadways? GDP? Energy access? This also makes me how much of a role pricing plays in data demand.

    If I’m going to build out infrastructure in uncovered areas, it would be great to know how quickly I’m going to need to start replacing BTS units at scale.

    I can’t recall reading anything about this with a specific focus on emerging markets. Not sure if you have seen anything, but would be interested on your thoughts on the matter.

    Alex