05.02.2015

How is the mobile phone changing the global economy?

How is the mobile phone changing the global economy?

Image | WEF

Last January, the World Economic Forum took place in Davos. Every year, business leaders and politicians meet to discuss a series of issues that impact the region, each economic sector, and the broader community, including health, inequality, the environment, security, and international trading.

The future of the Internet is always a hot topic, but this year the spotlight was on a device that we talk a lot about on this site: the smartphone. Specifically, how global adoption of the smartphone and the dynamics of mobile phone economy are impacting the global economy at large. The vision of the forum, in essence, is to define the mobile phone as a fundamental element of modernity, not to get carried away by a whirlwind of facts and figures, but to work on ensuring that telephones, connections and solutions really do reach the corners of the globe.

How is the mobile phone changing the global economy?

These are the main points:

  • The industry is constantly growing (because the mobile industry is highly scalable). “The 4G networks currently operating in industrialized nations work at speeds 12,000 times faster than 2G networks (…) At the same time the download costs for every MB of data has fallen 99% from 2005 to 2013. Also, 40 dollar smartphones are now on the market”, Steve Mollenkopf, CEO of Qualcomm.

The rapid adoption of the technology, thanks to the fall in prices, is what the leaders at Davos see as the reason for the large change the mobile market has made to the economy. By 2020, according to figures from the Boston Consulting Group, there will be more than eight billion 4G connections.

  • Watch out for the emerging markets. It´s logical: If the disruptive influence of mobile isn’t only due to the technology itself, but also its tremendous adoption and scalability, it makes sense to look at emerging economies to understand the global impact.

The report we cited in the previous point looked at Germany, the United States, China, Brazil, South Korea and India. “The yearly value of the ´gross mobile product´ [what countries spend on the mobile market, be it on connections, general purchases or handsets] exceeds 1.2 trillion dollars”. The US market is the biggest, however Indian and Chinese consumers spend more than 40% of their annual incomes on the mobile market (on an aggregated level).

  • Is the mobile phone synonymous with Internet? “The numbers are impressive”, affirmed the executive of CISCO Tae Yoo before proceeding to dismantle them. In spite of their, apparent, large-scale adoption, Yoo believes that there remains a lot of work to be done as the technology is yet to reach a global majority of citizens.

For example: only two of the 24 countries studied by the PEW center (Kenya and Uganda) had a critical mass of mobile users and uses such as mobile payments or health information weren’t exactly popular. Only 11% – 15% of people surveyed mentioned these activities. Mobile phones are still “rare” in economies less developed than China or India. Obstacles include the absence of competition, infrastructure and the poverty of the general population. And, of course, Internet access is very expensive.

  • What are the main goals? Even though there are small communities in countries such as Kenya that have embraced innovative solutions (such as M-pesa’s mobile payments and Living Goods health and development projects), Yoo suggests that more co-ordinated work is necessary between manufactures, governments, NGOs and universities in order to create more useful tools for people and, above all, to achieve universal Internet access.

The desire for greater Internet coverage is a topic that unites everyone at Davos; it is something that has the potential to benefit the interests of each of the attendees. In this vein, the CEO of Qualcomm concluded: The policies that allow growth to take place will be allied with patent protection (so companies invest in innovation) and the standards of co-operation. “In order to bring companies together within the industry, solve complex technological problems and implement global solutions”.

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