September 25, 2005
Gordana’s lifeline is a pre-paid mobile phone. It is the one thing she trusts.
It is her link with the outside world, her banking system, it allows her to map her route into Ireland and it is the only way of circumventing the endemic corruption that blights her homeland.
It allows her to time travel, to dream, to plan and to develop. More than anything, it allows her to communicate with her mates in Cork, checkout the job situation and see whether there is a spare room in the Ballincollig flat.
We underestimate the enormous impact that prepaid mobile phones have had on the world. Initially, prepaid was developed by T-mobile of Italy to allow Italian teenagers to be in constant contact with their overprotective parents.
However, the innovation’s major impact has been felt by the mobile, expectant young workers of central Europe’s poorer countries. For over 100 million people, prepaid mobiles have contributed more to individual autonomy than the effect of joining the EU or any other big political initiative.
In countries where the fixed-line system is inefficient and expensive, where the upfront costs of getting a post-paid phone are exorbitant, where the credit system does not exist, where cash is king and where the banking system will not entertain extending credit to individuals at rates under 20 per cent, the prepaid phone is irreplaceable.
At the beep of a text, expectant emigrants can pack their bags and leave or head home. Migration by text is something that we have to get used to, and it has been made possible by the prepaid mobile.
Assessing the real-life impact of innovations like the prepaid mobile is fraught with danger, not least because there is a natural tendency for humans to overestimate the changes that technology affords.
For example, when I was a kid, everyone in our street wanted to be an astronaut. This was driven by the early 1970s fascination with travelling to the moon inspired by the lunar landings. Magazines, David Bowie albums and Stanley Kubrick movies were full of references to men living on the moon by 2001. This miscalculation is an example of how we can get carried away by the ï¿½white heat of technology’. So let’s be careful.
However, as a concrete example of how communication technology is affecting everything, just look at the impact the prepaid mobile and the internet have had on the Irish rental market.
It is now a well-accepted fact that the rental market in Ireland is dependent on at least 30,000 to 40,000 immigrants arriving each year. It is dependent on these immigrants talking to each other, sharing rooms and keeping rents firm.
To get an idea of how this works, I write this article from a city centre internet cafe. If you want to see the future for the rental market, and particularly the foreign component that will drive it, spend a few hours in one of these internet cafes.
A Polish couple and a South African bloke beside me are looking for a flat. A few minutes ago, they were on the net – on the wonderful www.daft.ie website.
They were looking for a two-bed, but couldn’t find value. The Polish girl suggested that she had a mate in Krakow who was considering moving to Dublin.
She texted her. Within three minutes the answer had come back. Yes.
They logged on again, took the three-bed flat, topped up their credit and left.
Instantaneous transaction driven by prepaid mobiles.
Now think about this transaction 10 years ago. It would have taken ages.
There would have been an estate agent in the middle taking his cut. But most importantly, the decision to move from Poland to here would have been framed in the slower world of fixed lines or no real communication at all.
When you can text someone in Poland as you text someone in Wicklow, distance dies – or at least the perception of distance dies. As a consequence, the idea of popping over to Ireland on a discount airline at an unpopular time of day, just to check things out, becomes the norm.
The reduced cost of communication has in itself accelerated the process and in so doing has kept a floor on Irish rents.
Now let’s look at the next big thing in communications – Skype. Last weekend, a friend advised me to log onto www.skype.com. He was rhapsodising about this technology that allows you to call anywhere in the world for free from your computer. And indeed it is true!
Within five minutes I had downloaded a package that – for the McWilliams household at least – spells the end of Eircom.
Yes I will use Eircom to make local calls, but for anything else, Skype will get my business. As you can also call people who do not have computers for half nothing using Skype, it is flexible. For this service you have to pay a small amount, ï¿½10 for 10 hours of foreign calls.
This is where Skype makes its money.
For the business market, Skype enables a company to hold conference calls with foreign suppliers for nothing, and allows the entire network of a multinational to be hooked up for free.
The technology behind Skype – a Luxembourg company with only $60-odd million in revenues and 54 million customers ï¿½ is VoIP, or voice over internet protocol. VoIP’s self-evident potential persuaded eBay to pay $2.1 billion for it, with an additional $1.5 billion if certain targets were met.
The question is whether we are back in the silly world of the late 1990s, where internet mania caused billions to be spent on ultimately underwhelming technology.
This time it does seem different. Skype’s crucial selling point is that it does not matter where you call or for how long – it is all free. This means that the entire pricing model of the old telecoms world has been torn up.
How can Eircom survive in this market? As the Economist magazine contended last week, Eircom, like other telecom giants, has a choice. It can ignore it, disrupt it and hope that it goes away. Or it can embrace the technology and find new ways of harnessing its potential – even if that means cannibalising its existing revenue model.
It also means, as VoIP is, or will be, also available on mobiles, that the mobile operators – who are hugely dependent on expensive and soon-to-be-redundant voice technology – will want to be thinking about new angles.
For consumers it is a fantastic innovation. But for it to be available to all, broadband needs to be properly rolled out either as fixed line or wireless broadband. Not to do so would leave Irish business at a great disadvantage.
We are a trading nation that depends heavily on contacts with the rest of the world. Anything that might retard this will be bad for the country in general.
As for lifestyle changes, prepaid VoIP credit for mobiles will become the norm, and, at ï¿½10 for 10 hours, it will further cut the cost of communication. For starters, expect texting to disappear as quickly as it appeared, as free calls over your Skype-driven new mobile become the cheapest way to communicate.