[Op-Ed]: Free mobile phones for the rural poor - let's call it “Wireless Welfare”

The idea popped when I was reading this NY Times article on a federally funded program in the US where wireless carriers receive a subsidy to provide people under welfare with a mobile phone and 68 minutes of talk time each month! The subsidy program started in 1984 with a goal of providing landline telephone access to the poor. A decade ago, the program was extended to include mobile telephony. 1.4 million Americans benefit from the program.While mobile phones are an important asset for poor living everywhere, there has been considerable positive buzz recently on the role of cell-phones in the lives of the poor in the developing world. There was an extensive NY Times piece back in April, 2008 aptly titled Can the Cellphone Help End Global Poverty?. The Economist pointed out some pretty cool research by a couple of Harvard economists where fishermen in Kerala were able to get better prices with the help of, yes, mobile phones (here is the link to a nice presentation by Robert Jensen, the study’s co-author, on the methodology and findings). Bottom line, I think we all can agree that mobile phones could have a remarkable impact on the lives of the poor and we are probably just scratching the surface in terms of what is possible.

Although prices of mobile handsets have dropped significantly in recent years, investing $30-40 in buying a handset is still a significant investment for people living in less than $2 a day. So mobile phone penetration will continue to grow in most parts of the developing world, and yet a large percentage of the poor will continue to be in the fringe, largely missing out on this revolution.

According to the Telecom Regulatory Authority of India, tele-density in country (measure of mobile + landline penetration) as of February 2009, was 32% (China: 50%, Brazil: 64%). This is only part of the story – a closer look at the data reveals that rural tele-density is only 14%, which substantiates the point I made above – most people living in rural areas, especially the poor, are missing the mobile telephony revolution.

Answer: Free mobile phones for the poor. A government funded “Wireless Welfare” program.

I know subsidies can be a bad word – especially with regard to mobile phones, which are seen as the rare instance of a rapidly growing market-based band-aid on poverty. Let’s not distort this market and stunt its growth by bringing in subsidies, right? But, putting mobile phones on the hands of poor will remove the information barriers and will improve the efficiency of the markets. In fact, Robert Jensen, the pr0-market Harvard economist himself says, “Information helps the markets and markets help the poor.” Thus, free mobile phones to the poor and the poorest, is exactly what we need to make pro-poor markets work better – it’s a smart “smart subsidy.”

If anyone should be worried about market distortion due to mobile phone subsidies, it is probably going to be the manufacturers and the wireless providers. But guess what, the Indian Cellular Association (includes Nokia, Motorola, Sony Ericsson etc) recently requested the Government of India to allocate Rs. 5000 crores from the Universal Services Obligation fund to provide free mobile phones to 50 million families. Even better, such an infusion of public funds would enable them to bring down the cost of mobile handsets, making it cheaper for everyone.

The Central Government in India and the state Governments run a plethora of welfare/asset-transfer programs – free land to the poor, waiver 55,000 crores in agricultural loans, providing 100 days of employment through NREGA and ever free color TV’s . The pros and cons of these welfare measures are always debatable and some of these subsidies are short-term, election-friendly measures. But why not free mobile phones? If India can successfully launch a free mobile phone pilot initiative for the poor, it will become a global pioneer in developing a cutting-edge welfare program, one which actively involves the private sector, bridges the information gap and eventually makes markets work for the poor. Is it really that obvious, or am I missing something here?

[Photo Courtesy: phonereview.co.uk]