Unplanned Obsolescence

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Hot Phones At Dhaka's Eastern Market, one floor is packed with vendors selling handsets, many of which have been smuggled into the country.

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• The Phone Ladies' Conundrum
  

One afternoon, at the crowded livestock market near Dhaka's Gabtoli Bus Terminal, I met with cattle dealer Taiyeb Ali. He told me he sells about 120 animals--three times his usual volume--during the week leading up to Eid al-Adha, the second most important festival in the Islamic calendar, when families in Bangladesh slaughter cows by the hundreds of thousands. For most of his 25 years in the business, Ali had to spend as long as a month away from home selecting and buying animals near the border with India, the source of many cattle in Bangladesh. Then he bought a cellular phone, and these days, he stays in Dhaka when al-Adha approaches, ordering over the air once he's seen what customers are buying. "If demand is high, I buy expensive animals; if it's low, I buy cheaper ones," he told me. "It's very simple: I save time with the phone, and I make more money."

The wireless industry likes to give itself at least partial credit for Bangladesh's recent economic gains, and that claim is supported by recent economic research (partly financed, as it happens, by the industry). The mobile industry created 237,900 jobs in Bangladesh in a single year, according to Ovum Consulting, which also concluded that most of the benefit of mobile communications had gone to the poor. A study led by the London Business School concluded that in developing countries, a 10% increase in the use of cellular telephony increases GDP per capita by six-tenths of a percent. And according to McKinsey & Co., the overall benefits of cellular telephony can be as high as 8% of a nation's GDP.

A day after meeting Ali, I ferried by skiff to Karail, a warren of corrugated-iron-and-bamboo hovels across Lake Gulshan from the well-guarded villas and high-rises of Dhaka's most expensive and fashionable neighborhood, and near a large, elaborate mosque donated by Saddam Hussein. An estimated 100,000 squatters live in Karail, the city's largest shantytown. Their shacks are without ovens; cooking is done over common scrap-wood fires. Toilets empty into the lake, where children swim. Water and electricity are bought from thieves who divert public sources.

Here, I found Noor Alam, a slight, earnest 28-year-old who operates a sewing machine in a garment factory. Although he earns only $1.20 a day, he had managed to save $45 to buy a Nokia cell phone a month earlier, because, he said, the economics were so compelling. Rather than signing on as subscribers for a specific period of time, most Bangladeshis engage in any number of programs that allow them simply to pay before phoning, spending an average of just 16 cents a day on calls.

Alam thinks of home as the village he came from, and he used to return frequently to visit his mother, father, and nephew--a trip that took two days by bus and cost $4.35 in fares, plus lost wages. To save money, he sent the new phone to his mother. He now calls her every other day by renting airtime at one of several phone shops in the slum. For calls his mother needs to make, Alam pays a phone-shop operator, who then credits his mother's account.

"Now," he says, "I can be a good son and save money, too."

In the taxonomy of business, the Village Phone Program is a shared access model--a term that in the history of consumer technologies has included party lines, pay phones, Internet kiosks, radio receivers, television sets, and video-game consoles. Like those earlier products and services, its evolution has been, in hindsight, predictable: As innovations diffuse, ownership displaces rental.

In the 1980s, the government of India established "public call offices," small businesses that rented wired telephones to customers, call by call. "For about a decade, it was highly profitable," says Ashok Jhunjhunwala, a professor of electrical engineering at the Indian Institute of Technology Madras in Chennai, who has long studied the effects of computer and communications technologies on poverty. "But as more people got phones the profits disappeared."

Likewise, in the face of cheaper phones, accessible calling plans, and low-cost infrastructure, the phone ladies didn't stand a chance. Dawn Hartley, who manages the economic development fund of the GSM Association in London, a trade group that includes most wireless carriers, observes, "The outcome [for the Village Phone Program] was always inevitable. The shared access model is a halfway house between no one owning a mobile phone and everyone owning a mobile phone. Shared access models are a great bridge, and in some areas they will last a very long time, but by and large, they have a shelf life."

Not that the Village Phone Program is being abandoned. Indeed, it continues to recruit more operators. Although the program has become a marginal business for the typical phone lady, it may still contribute to GrameenPhone's corporate net income--which is already robust. Despite peak rates that are among the world's lowest, less than two cents a minute, it earns operating margins of 42%.

The Village Phone Program no longer sustains its entrepreneurs -- yet Grameen continues to recruit operators.