Economic Impact of Telecom penetration


There have been various evidence and research studies that measure the economic impact of mobile phones directly. One example is the analysis of fish prices in coastal Kerala, India. Economists from Harvard measured the historical price as mobile-coverage was extended from 1997 and 2001. Fisherman would call several markets from the sea to decide whether to sell or not and more importantly where to sell and thus, were able to control the prices and reduce waste. They increased their profits by 8% and brought the price of the produce down by 4%.

On more macro terms a study by economists at the World Bank examined the impact of various telecommunication modes on GDP of 120 developed and developing countries.

The main highlights of the report suggested:

  1. An increase in 10% points in mobile-phone penetration (adding 10 new users per 100 people) increased the GDP per person by 0.8% points.
  2. Increase in mobile-phone penetration was more effective than fixed line but less effective than Internet penetration (Dial-up increased GDP of developing countries by 1.1%-points and Broadband boosted it by 1.4%-points)
  3. As mobile-phones have the highest penetration, the aggregate impact of mobile-phones is the highest.

Growth effects of ICT, percentage points

Economy Impact Telecom penetration

Among other country specific studies one conducted by Vodafone concentrates more on how different states in India were impacted by growth in wireless subscribers.

Few key conclusions of the report are:

  1. Indian states with higher mobile penetration can be expected to grow faster, for every 10% increase in the mobile penetration, rate the growth rate is expected to be 1.2%-points higher
  1. At a threshold of 25% mobile penetration there is a significant impact on economic growth of the state. As of March 2010 all the Indian states had a wireless penetration above 25% with Delhi having the highest at 174% and Bihar the lowest at 26%.
  1. It is the level of telecom penetration, and not the growth, which contributes to economic growth. Even though India has the highest growth rate but it still lags behind most comparator countries in terms of teledensity (56% in India).

In all, every telecom technology promotes growth more effectively in the developing world. Perhaps the biggest reason for such a result is that people in developing world are being connected through telecommunications for the first time, compared to developed world where these technologies are just an addition to existing telecom infrastructure.

It’s not incremental, it’s revolutionary here! Whats your take?

  1. surya says

    hey ravi thank u very much for wht i ws looking for i got everything in ur article to counter 2G i have more correspondence on that issue in future coz i av some ques regarding compnies.

  2. Ravi says

    Thanks Viral!

  3. Viral says

    Hello Ravi,

    I liked the crisp example that you’ve provided at the start regarding how fish prices were lowered on account of saving heralded by the communication costs.

    Nice one !! :)

Leave A Reply

Your email address will not be published.

who's online