Mobile industry focuses on handsets for the poor

The 3GSM World Congress Asia wrapped up with a major achievement: reducing the cost of a mobile phone to below $30, making wireless communications even more accessible to people in poor nations.

Then the GSM Association, which organizes the congress, set a new goal: Halve that figure to $15 per handset by 2008.

The idea is to supply people in the world’s developing countries with a low-cost GSM (Global System for Mobile Communications) handset. Such phones will normally have a black-and-white screen and a durable plastic cover to protect them from dust and damage. They should operate in a variety of languages, including Arabic, Hindi and Chinese, and run for long periods on a single battery charge.

The GSM Association estimates there are over one billion people in developing areas such as South America, the Middle East, Africa and parts of Asia who could benefit from low-cost mobile phones. It has given top priority to getting handsets into those people’s hands to speed up social and economic growth in developing countries. In some areas, a mobile phone network will be the only way a user will be able to access the Internet for years to come.

Motorola took the under-$30 handset crown during the conference with its handset model C113, but a number of other companies may undercut it soon.

The $15 handset could be a reality by 2008 if chip makers such as Infineon Technologies AG, Koninklijke Philips Electronics NV, or Texas Instruments Inc. are able to reduce the cost of vital chips inside the handset to about $5, according to Rob Conway, chief executive officer of the GSM Association. The chips account for over a third of the overall handset cost, he said.

Infineon showed off a strong contender at 3GSM in Singapore. The sub-$20 reference design, complete with its E-Goldradio chip, boasts all the features an ultra-low-cost (ULC) mobile phone needs, and adds a battery pack that requires three standard AAA batteries to eliminate the need for people to plug in and recharge phones. Easy to use batteries are vital in poor countries where power supplies are unreliable and users may have to go for long periods between recharges.

The reference design only describes the cost of the materials used in the Infineon phone, and the final, retail price of a phone using the system could be higher, said Stephan Mentz, senior manager of marketing for entry phones at the German company.

Other companies like Texas Instruments have also developed ULC designs. The Dallas, Texas, company showed how a mobile phone could be built with a single chip late last year, and Nokia has adopted the chips for mass-market handsets. Neither company was immediately able to offer pricing information on the handsets.

Nokia’s top seller in developing countries is its 1110 model, thanks to a durable keypad with a rubber cover to protect it from the elements, and because the phone tells the user exactly how much money is left after each call or message, said a Nokia representative at 3GSM. The notification function is important because much of the developing world relies on prepaid calling, rather than the monthly service available in advanced countries.

Alcatel SA displayed several sub-$30 handsets at 3GSM Asia, including one with a clever color screen. The OT-E160 model comes equipped with what at first appears to be a real color screen — a luxury on a ULC mobile phone because the screens add about $10 to the price tag — but the screen is really a film background added to make the handset look like it has a color screen.

The color film background shows a mountain scene with a meadow in the foreground and a blue sky. The picture never changes, but black text on the screen that tells time and other information does. The company plans to offer other backgrounds as well, including ocean views, islands, grasslands and others.

“Handphones are a status symbol in many countries, and a color screen is one feature people in developing countries really want, but it makes the phone too expensive,” said Amaury Achard, director of marketing for Alcatel in Europe, the Middle East and Africa. Alcatel’s color film background adds very little cost to the phone, he said.

Alcatel plans to release a phone with a clam-shall design for the ULC market soon. The OT-E159 should cost around $40.

Although the emerging market mobile phones aren’t big money makers for companies like Alcatel, Motorola and Nokia, the challenge of creating low-cost phones and getting them into the hands of so many new users is compelling.

In India and China alone, nearly two billion people do not yet own mobile phones. India boasted just 57.4 million mobile phone subscribers as of the end of June, 2005, according to the Telecom Regulatory Authority of India, despite a population of well over 1 billion people. China, which has more mobile phone users than anywhere, reported 372.8 million subscribers at the end of August, according to its Ministry of Information Industry. The country has over 1.3 billion people, so nearly one billion still don’t have a mobile phone.

“We want to get them, we want to make sure it’s a Motorola phone,” said David Taylor. As part of the GSM Association’s competition, a group of 10 operators in developing countries has agreed to buy around 6 million of its sub-$30 handsets.

With mobile phone component makers and network operators around the world already working hard to reduce mobile phone prices, it should take little time to meet the GSM Association’s newest target.