Mobile operators killing SMS revolution

Profiteering by carriers is hurting developers and stopping the wave of mass consumer adoption of innovative services.

It would be easy to conclude that Africa is entering the golden age of mobile innovation. In Kenya, M-Pesa, a Safaricom service, allows users to send money anywhere in the country via mobile phone at very low rates.

Next door in Uganda, rural users out of reach of the Internet can now use a new SMS-based service from MTN, Grameen Foundation, and Google to trade goods, search the Internet, and query local reproductive health and agriculture information.

These services, however, represent a trickle of innovation where there should be a downpour. The source of this sluggishness is the “non-generative” structure of mobile phone networks.

In The Future of the Internet and How To Stop It, Harvard Law Professor Jonathan Zittrain defines generativity as the ability for entrepreneurs anywhere, driven by any social or economic motivation, to quickly and cheaply create, test and deploy applications.

Zittrain says that generativity is the key to the Internet’s rapid growth, and he worries that new web-based appliances, such as the iPhone, that can only be modified with the manufacturer’s consent, threaten this fundamental character.

In other words, Zittrain fears that the Internet as a network is becoming more like the mobile phone: costly and closed.

Mobile networks are costly because the price of sending an SMS is kept high by a combination of high taxes, interconnection fees, and network provider choice; mobile networks are closed because no one can deploy a new application without the network operator expressly adding it to a consumer package.

Rare to grant a discount
In Uganda, for example, the cost of a user-to-user message is five US cents and a premium message (any message not sent from a single user to another) is 10 US cents, despite high levels of competition and low cost.

Since it’s rare for a mobile network to grant a discount to a premium service provider, entrepreneurs must attempt to scale in an environment where, according to ResearchICTAfrica, the average Kenyan already spends over 50 per cent of her disposable income on communication.

This is not a promising environment for innovation. This non-generativity means that many new innovations will never reach the market, not because of engineering challenges, but because of the underlying cost structure of SMS.

What are we missing out on? In Kenya, txteagle, an application developed by MIT researcher Nathan Eagle, allows companies to crowd source translation tasks to users via SMS.

In Uganda, Appfrica Labs, a local software company, is creating status.ug, a mobile social network to connect the six million Ugandans using mobile phones (full disclosure: I am currently an Appfrica Labs Fellow).

The high price, coupled with the fact that entrepreneurs must spend time lobbying mobile providers for partnerships, means that applications like these face difficulty scaling.

Reason for hope
Entrepreneurs, mercifully, have reason for hope. Mobile companies and regulators around the developing world are recognising the “economics of abundance”— that more users at lower prices will result in more revenue.

In the Philippines, for example, according to telecom expert Steve Song, mobile providers charge less than one US cent per SMS on average. What is striking about this is that they manage to generate three times the revenue per capita from SMS traffic as compared with South Africa where the average SMS costs over nine US cents.

Also, in Uganda, for the first time in the telecom industry’s history, MTN agreed to lower the price of a premium SMS to 5 US cents for Farmers Friend, one of the newly launched Grameen and Google services, aimed at poor farmers.

Whether this is the exception or the new rule is difficult to tell, but what is clear is that network providers must choose whether they want to benefit from a downpour of mobile innovation, or will be satisfied with only a trickle.

The writer is a technology consultant and writer living in New York City. He blogs at inanafricanminute.blogspot.com