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Creative destruction: izi killed the public phones June 15, 2007

Posted by François in africa, appropriation, co-opt, cycle, re-make.
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Senegal’s télécentres are disappearing and it seems “izi” and “seddo”, the new micro-recharge services from operators Tigo and Orange, are to blame. These télécentres are not what we typically think of as “telecenters” –roomfulls of public access computers. In fact, “the majority of them would more rightly be described as telephone kiosks or phone shops.” This unfolding story of creative destruction is very significant because over the past 10 years, such public phones have been key to economic development and information access throughout the developing world (recall Grameen’s village phones.) The disappearance of Sénégal’s télécentres fits a broader pattern currently emerging in several parts of Africa. It also maps very nicely onto our appropriation cycle and illustrates the related tug-of-war between suppliers and users, that drives innovation.

The often-told story goes like this:

  • Step 1 (roll-out): mobile phones were introduced, but were too expensive for many people to afford.
  • Step 2 (re-make): entreprising individuals get a phone and offer ‘fractional phone service’ to others by reselling their minutes on street corners. These ‘public phones’ come in many flavors: some are just individuals looking for extra cash, others may be informal micro-enterprises or more substantial ventures.
  • Step 3 (re-claim): phone companies (and others, like Grameen) co-opt this practice with micro-loans, enhanced public phone booths, accounting features to help manage the public phones, etc.
  • Step 4 (new roll-out): a changed business ecology supports multiple avenues for the provision of phone service: personal or shared, bought directly from the phone company or re-sold through intermediaries.

But now comes this new African twist:

Step 3-bis (“assertive” re-claim): Phone companies (like Tigo in Senegal), seeing that there is a market for small increments of phone credit and shared phones, introduce much more granular offers. For example in Senegal, Tigo offers billing-by-the-second (10 seconds for 20 Francs CFA, or $0.02), electronic recharges (“izi”, in Tigo’s Senegalese franglais) as low as 100FCFA ($0.20), and free unit transfers between consumers (available on the “Tigo Jeune” plan).

All of a sudden, users don’t need the ‘public phones’ any more. In Senegal most of these télécentres have gone out of business. Bassirou Cissé, the general secretary of Unetts(*) says that “In 2000, there were 18,000 télécentres in Sénégal, accounting for 33% of the Senegalese operators’ revenues and 30,000 jobs. Today, most of them have closed down.”

Any guesses as to what “Step 4” will now look like?

(*) Unetts is the Union nationale des exploitants de télécentres et des téléservices du Sénégal. The ‘public phone’ business may be informal at times, but certainly not dis-organized.

Recommended reading: Olivier Sagna’s Batik newsletter, a great source of information on African ICTs (in French.) I ran into this article while poking around OSIRIS (Observatoire sur les Systèmes d’Information, les Réseaux, et les Inforoutes au Sénégal), where Batik is hosted. No RSS yet, but Olivier tells me this is coming soon.

Comments»

1. Rohan Samarajiva - June 17, 2007

In our work, we have been thinking about three telecom futures:
1. The one most prevalent in OECD countries and among telecom vendors, is centered around a big fat pipe (most likely fiber) coming into homes, enabling inform retrieval including entertainment retrieval, publishing, transactions and communication.
2. A variation on this (not necessarily explicitly connected) has the rest of the world which cannot afford to lay big pipes into homes, satisfying their communication and information needs from telecenters.
3. The one that we think is emerging in our parts of the world is one centered on the multiple capabilities of the mobile handset: what we call mobile multiple play.

How all this plays out in terms of telecenters was discussed (with supporting evidence) last May in columns published in Sri Lanka and in Bangladesh. The LK version is at: http://www.lirneasia.net/2007/05/world-telecom-and-information-society-day-2007/

2. NG - June 18, 2007

Of course, as you note, this drives innovation, and users are better off with the new flexibility. I wonder how many of the former telecentre operators are now the ones selling phone units, and what this has done to their income.

3. Amy Mahan - June 18, 2007

Hola – what a good question – and what a great website.

DIRSI (www.dirsi.net) is currently undertaking a large survey across eight Latin American and Caribbean countries to better understand and document how mobile telephony is used by the very poor. As the post above also documents, this is a moving target and we need to also look for trends and cycles of use and technology/services offerings.

Maybe it is useful to separate the strands of creative destruction of 1) a particular business model and evolution to smaller increments packages; and 2) the technology appropriation of personal use mobile telephony handsets.

Thus, for Step 4 in the cycle, there are two possible paths – new service offerings or new (or enhanced) handsets. For the first, the next cycle will likely start with a new service to improve ARPU.

For the latter, the next cycle has probably already begun. Mobile handsets incur costs simply to own them (purchase cost and recharging) in addition to the call costs. Step two will likely involve improvements on the functioning of handsets – or a reduction in cost for the actual use of handset such as for recharging batteries, battery reconditionning, etc.

4. Amy Mahan - June 18, 2007

Or… is the cost of handsets and their functioning now mainly irrelevant?

5. Laurent Elder - June 18, 2007

A lot must have changed in Senegal since I’ve left, since in 2004 telecentres were still quite prevalent, Of course Senegal is a much documented oddity as they used the word “télécentre” to basically mean a phone booth (rather than an internet accessible centre, as many understand the word “telecentre”). Sonatel used a privately subsidised entrepreneurial model to meet some of its universal access obligations. Although I’m certain mobile phones and new payments schemes have eaten into the market share of telecentres, I suspect something else may be happening here. The telecentre Union (another seemingly unique Senegalese characteristic) has often been screaming to all who would listen that thousands of jobs could be lost if Senegal’s market isn’t more efficiently regulated, notably through ensuring Sonatel lowers the unit cost to telecentre managers. Hence, reports of the demise of telecentres may be greatly exaggerated..for the sake of political lobbying. At the very least I wouldn’t be surprised if traditional telecentres are simply losing out to cyber-cafés that offer VOIP services, but that isn’t based on any kind of evidence.

As for the future, i tend to think that we will see broadband connections through (ever more sophisticated) mobiles with a monthly fee and free voice, although many segments of the population will still use public access points such as telecentres.

6. François - June 26, 2007

Thanks for all the great comments! Laurent, you are right about Sénégal’s télécentres. I have invited Olivier to come by and give us more details on what’s really going on (he said he would take pictures…) Also, Araba’s new report on <a href=”https://abaporu.wordpress.com/2007/06/21/%e2%80%9cright-now-the-business-has-spoil%e2%80%9d/” rel=”nofollow”>public phones slow-down</a> in Ghana confirms the Sénégal stories.
I find it fascinating to speculate about where the combination of fractional billing + granular e-recharge + tradable credit can lead. One clear direction, emerging for example in the Philippines with <a href=”http://www.smart.com.ph/SMART/Value+Added+Services/Smart+Money/” rel=”nofollow”>Smart </a>and South Africa with <a href=”http://www.wizzit.co.za/” rel=”nofollow”>Wizzit</a>, is m-banking: phone ‘credit’ becomes a currency. That raises a number of interesting questions about the new step 4 roll-out: what will be the transaction costs? How do the handsets change to accommodate this? and when the phones are shared, do they hold multiple wallets, like the <a href=”https://abaporu.wordpress.com/2007/05/15/nokias-handset-re-configuration/” rel=”nofollow”>multiple address-books in Nokia’s entry market phones</a>? What happens when you send money to the wrong number? etc.
And if this catches on, there are complex socio-economic implications: just think about how m-banking would make visible (and taxable) transactions that were thus-far informal and untraceable… I can’t wait to see how users re-make this one.

7. Alberta Preston - October 16, 2007

Please anyone give me some information on calling to dakar senegal,
is their anyway to communicate via/internet or mobile to this location.
I have not been able to communicate since Friday, October 12, 2007.

8. Olivier Sagna - October 10, 2009

I invite those who read French and are interested by private telecenters in Senegal to read my paper at the following address : http://www.osiris.sn/article4873.html

9. oyun - August 11, 2010

Thanks for all the great comments! Laurent, you are right about Sénégal’s télécentres. I have invited Olivier to come by and give us more details on what’s really going on (he said he would take pictures…

10. muhabbet - August 11, 2010

Thanks for all the great comments! Laurent, you are right about Sénégal’s télécentres. I have invited Olivier to come by and give us more details on what’s really going on (he said he would take pictures…) Also,

11. sikiş - September 26, 2010

This could spell disaster for the hundreds of individuals who have invested or are being encouraged to invest their limited funds in payphone ventures. Some payphone operators have branched into providing unit transfers, but most are unable to. At the moment, unit transfer operators are mainly new entrants who had sufficient funds to cover the high cost of initial investment.

12. tek taş - June 30, 2014

Please anyone give me some information on calling to dakar senegal,
is their anyway to communicate via/internet or mobile to this location.

13. web tasarım - June 30, 2014

I wonder how many of the former telecentre operators are now the ones selling phone units, and what this has done to their income.


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