The Economist

July 7 2005

This article argues that the mobile phone, rather than the personal computer, offers the greatest potential for bridging the digital divide. Mobile phones, according to the author, offer a useful communication opportunity in places where other forms of communication are limited. Furthermore, the article cites research indicating a .6% increase in GDP growth for every increase of 10 mobile phones per 100 people.

Despite the benefits, the article notes that handset costs have kept individual ownership levels around 5% in both India and sub-Saharan Africa. In response, the GSM Association (GSMA) and operators from a number of developing countries accepted bids on a contract to produce 6 million relatively inexpensive handsets. The contract was won by Motorola and the less expensive (US$40 compared to US$200) handsets are expected to be delivered in January 2006.

Another barrier cited as limiting growth in this area is the high taxation and duties on both handsets and services. The article describes production efforts in Brazil designed to avoid import duties by producing phones in-country. However, it is noted that smaller, poorer countries rely on black market acquisitions to avoid taxation and duty costs. The authors note that "there is anecdotal evidence that reducing taxes on handsets can boost government revenues. People would rather pay a small tax on a legal handset than no tax on a smuggled one that cannot be returned if it goes wrong." It is hoped that a GMSA study underway at the time of writing will support the argument for reducing taxes on mobile phones.

Bytes for All Readers listserv, July 11 2005.