Economic benefits of more advanced mobile phone technology in PNG

 

Access to innovative technologies is gradually changing the social fabric of Papua New Guinea by creating a platform whereby users can gain access to knowledge, share ideas and develop business initiatives. With its diverse terrain of mountains and heavy forests, the adoption of mobile phone technology presents huge advantages to the overall business climate in a country like PNG.

From a communication perspective, it has allowed rural families to connect with urban dwellers and improved business-to-business (B2B) interactions. From a technology point, the increase in smartphone users has improved access to internet and is easing PNG’s transition into the digital age.

According to the National Information and Communications Technology Authority (NICTA), mobile penetration was at 54.2% at the end of 2016, with a total of 3.96m SIM cards circulating in a market of 10m, representing an increase of 11.2% in 12 months. In terms of mobile market share, Digicel, Bmobile and Telikom PNG had shares of 94.2%, 4.8% and 1%, respectively, in November 2016, according to NICTA. While smartphones have seen internet penetration rates skyrocket across the globe, PNG is still catching up. In 2008, shortly after the initial rollout of Digicel’s network, smartphones were rare, and by 2016 accounted for only 16% of all mobile users, or approximately 633,000 handsets.

In comparison, 24% of all handsets in Solomon Islands were smartphones, the figure was 20% in Vanuatu and 21% in Fiji, according to the GSMA, an industry trade group. While 16% is not an impressive figure, adoption rates are expected to rise significantly in the short term, with the GSMA, predicting them it to reach 55% by 2020.

Pipeline

Given the current economic climate, the continued expansion of the mobile market is one of the leading opportunities for growth in PNG. While the country has a lot of catching up to do, there is significant potential to use technology to accelerate economic development. In a decade the country has gone from having a virtually non-existent mobile network, particularly in rural areas, to one that now spreads across the majority of the country. Today, in an effort to harness the benefits that communication technology can bring to a developing economy, the government, the private sector and multiple donors are ramping up efforts to increase mobile penetration rates and the advantages that smart-phone technology can bring.

Arguably, in terms of future rate cuts, the biggest success story for the ICT industry may well be considered the planned expansion of the National Transmission Network (NTN), specifically the government’s decision to invest heavily in a fibre backbone (see analysis), which will accommodate 70% of the nation’s data traffic.

The appointment of Huawei Marine to build the nations fibre backbone will eventually lead to a much more stable international connection and cheaper costs for the end user. Likewise, 4G network expansions and satellite initiatives are set to reduce costs and increase penetration rates.

Give Away

In a first of its kind for PNG, Digicel launched a programme that allows users of its service to purchase a smartphone from any outlet nationwide and receive six months of free data. In addition, those who already own a smartphone could also participate by simply purchasing a 4G-enabled Digicel SIM card, provided it was the first time the phone had been used with a Digicel SIM.

According to local press, the offer amounted to 1GB of free data valued at PGK250 ($78.80) and can only be redeemed once every six months per SIM card. Not to be outdone by this move, Telikom PNG has also been on the give away marketing path throughout 2017. Its 4G LTE mobile “SIM swap” promotion showed there intent to increase the number of smartphones on the market. Under the SWAP promotion, customers received a new smartphone with their 4G LTE SIM card to replace their old Citifon, Telekom PNG’s mobile service, SIMs and devices. Those that missed out on the devices were able to purchase SIMs ranging from PGK5 ($1.59) to PGK20 ($6.34), with the latter offering 5 GB worth of data.

The marketing campaigns employed by both telecoms firms comes after both have invested in a 4G LTE network that will enable data hungry customers to consume more megabytes at a faster rate. As would be expected, the initial launches were targeted at business hubs, where penetration and average revenue per user are highest. While it is the first time Telikom has offered 4G services, Digicel initially began offering a limited 4G service in 2014, which it has since significantly increased.

Barriers

From a logistics point of view, PNG presents a host of challenges that continue to disrupt the expansion of network coverage and thus the adoption rate of mobile phones. This in turn translates into less coverage in hard-to-reach rural areas, equating to one of the lowest mobile penetration rates in the South Pacific region.

Broadly speaking, various logistical constraints have led to greater operating costs and thus a higher fee for the end user. With the vast majority of the population surviving by means of self-sufficiency farming, access to extra income for luxury items is limited. While the arrival of cheap handsets coupled with operator promotions and falling data charges has led to an uptick in mobile phone purchases, many are still unable to afford a mobile device.

A shortage of roads across a mountainous terrain means that operators in the country have had to employ different modes of transportation to deliver vital infrastructure equipment to sites, with the use of planes and boats a widespread, but costly practice. In addition, infrastructure projects are hindered by the lack of access to foreign exchange and a neglected national power grid.

With a lack of a manufacturing, base operators are forced to import most of their IT requirements, which is a challenge given the current economic conditions and foreign exchange limitations. While the lack of a stable power supply has led to an increase in operating costs, with most sites having to be supported by backup generators.

Impact

While it will take time for the majority of citizens in PNG to be able to afford a smartphone, multiple studies have proven the economic benefits between mobile penetration and economic development. It is difficult to quantify exactly how much a country benefits from increased penetration rates, though various studies have been able to measure economic advantages.

According to a recent study by Vodafone and Accenture, continued growth in mobile phone adoption in emerging economies could create a shared value of $38bn worldwide by 2020. Similarly, mobile research by the GSMA in developing nations has indicated that 10 more phones per 100 people would increase GDP per capita by as much as 1.2%.

As has been the case with more developed nations, access to telecoms services and markets through mobile phones has led to a reduction of basic business costs. Likewise, mobile phones have enabled business owners and assisted a great deal in income generation. These rewards are set to escalate as penetration rates rise, which will give farmers better access to markets, enabling them to coordinate deliveries and improve sales.

The social framework of PNG is already reaping the rewards, with both the education and health sectors being able to address long-standing issues with great ease. Phones serve as an indispensable internet portal for many students, with a growing number going online to seek education. Meanwhile health care professionals have been able to address medical issues in hard-to-reach rural communities through the dispensing of medicine after receiving photos of patients’ symptoms taken by smartphones. These are just a few examples that illustrate how mobile phones are being used in supportive roles for both education and health care in PNG.

The vision to increase mobile usage is a sound one, and will help bring more of the country online while promoting business efficiency and social development. However, it remains to be seen how much of what has been planned will be implemented, at least in the near future. If policy makers and private sector players continue to invest in PNG’s connectivity revolution, they will be able to address some of the major issues facing the country. These include social development challenges and persistent business issues. A major benefit of the technology leapfrog is that PNG does not need to reinvent the wheel, it simply needs to learn from other countries, which have gone through the same stage of development and employ their own local mix of solutions.

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The Report: Papua New Guinea 2017

ICT chapter from The Report: Papua New Guinea 2017

Cover of The Report: Papua New Guinea 2017

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