Broadband Expansion Driving Opportunities in Emerging Markets

Broadband Internet is a topic on the lips of many these days, and a lot of the conversation has revolved around the benefits that expanded access to broadband can bring. The announcement this week that the number of fixed broadband subscriber lines in the world hit 500 million in July showed how far access has come - and how far it still has to go. The International Telecommunications Union (ITU) recently called on policymakers and regulators to improve access to broadband in emerging markets, citing the growing body of research linking broadband expansion to economic development. This research has demonstrated that broadband has a greater connection with economic growth than other communication technologies such as fixed-lines and mobile phones and dial-up Internet.


Yet despite its rapid growth, broadband access is uneven in emerging markets. In many countries, mobile broadband networks are poised to take off much faster than fixed-line broadband. The market opportunity associated with billions of mobile subscribers has spurred the delivery of Internet-enabled mobile services and mobile network upgrades to accommodate those services. There are already many more mobile phones than PCs, while the cost of fixed broadband has been found to be, on average, three times more expensive in emerging markets than mature markets. This trend is not lost on mobile phone players like Nokia, which is staking its claim to the next billion internet users on localized services and affordable smartphones that aim to rival the PC.

Despite these broadband trends, PC makers are unlikely to cede the next billion internet users to the mobile industry. Even with nearly 2 billion internet users, the "next billion" sit in the middle market with a level of household income that makes a low-cost PC within reach, especially with financing. Furthermore, most of these potential customers live in cities, where PC manufacturers have established distribution networks and Internet access is increasing as a result of falling broadband prices and a rise in public Internet access points. Understanding why and how consumers want to use the Internet may hold the key for companies throughout the value chain to capturing these next-generation users.

The "Down-Market Opportunity" in Emerging Markets

With the rising popularity of smartphones, mobile operating systems have become a major battleground for technology and communications giants, and with growth slowing in developed countries, competitors are shifting their sights to markets that offer stronger prospects. Google recently revealed that it is gearing up for a major push for its Android OS in emerging markets. Working in conjunction with partners such as Taiwan-based MediaTek, Google seeks to place its system on low-cost phones not only in China and India but in emerging markets throughout Europe, Asia, Africa and South America. Google's VP of Engineering, Andy Rubin, refers to this as "the down-market opportunity", a reference to the growth opportunities offered by less developed countries, which have been emphasized during the recent global economic recession. This announcement coincides with reports that the economic recovery may be weakening in the US and fresh projections by the World Bank that developing countries will lead global recovery.

This idea of looking "down-market" for opportunities is not new, and it can be applied to country markets as well as consumer segments. Nearly ten years ago, Goldman Sachs tagged the largest emerging markets, Brazil, Russia, India and China, with its now-ubiquitous BRIC designation. Now that the big four have begun to fulfill their promise, a new tier of emerging markets with high-growth potential has emerged, and multinational firms are starting to take notice. Named "the CIVETS" by HSBC, the Economist Intelligence Unit (EIU) evaluated the prospects for this group of countries in a report issued earlier this summer. According to the EIU, Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa all have sizeable young populations, diversified economies, reasonably sophisticated financial systems, and relatively low public debt. The EIU forecasts that the group will post annual GDP growth of 4.5% over the next twenty years.

Although the BRICs will continue to dominate emerging market headlines, firms would be smart to pay more attention to developments outside of these countries. The emphasis that Google and others are placing on these next-tier markets demonstrates that companies seeking business growth strategies in the wake of global economic recession may benefit from a more diversified geographic focus. Rising middle-class customers in the CIVETS and other dynamic, smaller emerging markets may offer valuable growth in the coming decade.

New Developments Highlight Newfound Prominence of mHealth

2010 is shaping up to be a busy year for mHealth. In June, the West Wireless Health Institute and the Carlos Slim Foundation announced a new partnership aimed at advancing wireless health technologies in the U.S., Mexico and other Latin American countries. The declaration came at a meeting of leading mHealth implementers and was accompanied by the news that the Gary and Mary West Foundation has pledged another $25 million to help accelerate the recruitment of new talent and the funding of research on wireless health solutions. And last week, the organizers of this year's mHealth Summit revealed that major health and telecom players such as Verizon Wireless, Pfizer and Microsoft Research would be participating in the event as sponsors.

After years in which many participants in those sectors have held back due to uncertainty over business models and standards, these developments signal that the field of mHealth is acquiring a new maturity. Operators such as Vodafone have created business units specifically to realize new opportunities in mHealth. Health-related firms are also stepping up their involvement in the space, as evidenced by McKesson's recent hire of Vital Wave Consulting's own Karen Coppock to head up their corporate foundation's new Mobilizing for Health initiative (click here for more information on this program).

The increased activity in mHealth indicates that private-sector firms are realizing the potential for profits in the delivery of mobile health services. As the world heads toward its five billionth mobile connection, the ubiquity of mobile technology and advances in health-related mobile capabilities are combining to create a critical mass of opportunities. Business models for profitable mHealth lines are still being worked out, but a growing number of companies are realizing that plunging in now gives them the chance to shape these opportunities to their advantage.

Editor's Note: Vital Wave Consulting would like to thank Karen Coppock for her many contributions as VP of Consulting Services and wish her the best of luck in her new endeavor!

Collaboration Shaping Demand for Health Technologies in the Developing World

A consortium of international health stakeholders just issued a call for collaboration to expand the use of technology in reducing maternal and newborn mortality. The call was issued by the Partnership for Maternal, Newborn and Child Health (PMNCH), an international alliance of 280 governments and development community members working to reduce maternal and infant mortality. This group has garnered the support of high-profile organizations such as the mHealth Alliance, a cross-sector organization launched in 2009 by the Rockefeller, UN and Vodafone Foundations. When organizations such as these collaborate, they are actually shaping how governments will use and demand technology in the future.

Maternal and child health has captured broad attention throughout the development community. Reducing maternal and child mortality is the stated goal of Millennium Development Goals (MDGs) 4 and 5, and they are the goals that have seen the least amount of progress. The recognition that insufficient progress has been made in these areas is illustrated by the emergence not only of the consortium, but of other organizations such as Advanced Development for Africa (ADA), a new foundation dedicated to scaling African health programs with a focus on maternal and child health as well as communicable diseases. And The Bill & Melinda Gates Foundation recently announced $1.5 billion in funding over the next five years for maternal and child health, family planning and nutrition.

Multinational companies seeking to expand the reach of their technology solutions in the developing world can advance their goals by getting involved with the development community early. By identifying and mobilizing resources towards key issues, the development community is influencing the health agenda and ultimately the technologies that governments procure. For instance, a new partnership between the Carlos Slim Institute for Health, the Gates Foundation, the Government of Spain and the Inter-American Development Bank promises $150 million to Mexican and Central American governments to support maternal health, nutrition, vaccination, anti-dengue and anti-malaria campaigns. Joining forces with leading organizations and emerging alliances in public-private partnerships can help multinationals get a seat at the table and shape the new demand for healthcare technologies.

Africa's homegrown companies come into their own

The start of the World Cup in South Africa this month promises to shine a new light on Africa's increasing economic dynamism, which is often overshadowed by the flashier growth of markets like China and India. It is not just the continent's consumer base that is expanding; homegrown African companies are also spreading their wings and challenging foreign multinationals in areas such as retailing, financial services and mobile communications. These firms are taking advantage of reduced barriers to intra-African trade and their knowledge of African consumer tastes to grow beyond their home countries and gain the scale they need to compete with companies from outside the region. The rapid growth of forty of the best

African firms have even led The Boston Consulting Group to christen them the "African Challengers". The growth of local "champions" signals a new maturity in African markets. In these countries, as well as other emerging markets, the emergence of competitive local companies usually follows a period in which foreign investors have taken advantage of political stability, low-cost labor and favorable incentives to produce goods and services for both local and export markets. Skills and knowledge transferred by these firms to local workers, as well as increased economic activity, then fuel the growth of native firms. An increasing number of African countries, in particular South Africa, Botswana and Kenya, now have the conditions in place to produce enterprises that can compete with multinational corporations (MNCs).

The growth of these companies poses a challenge to Western firms, but it also presents an opportunity to learn from the strategies and innovations of businesses that have their finger on the pulse of local customer segments. When entering new geographies, MNCs would do well to "go native" by understanding local, competitive dynamics. Thorough competitive intelligence and analysis of emerging-market competitors can be a critical part of MNC success on a global scale, especially when these new, local entrants threaten to upset the status quo.

Esther Dyson on health and the quantified self...

by Karen Coppock
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Esther Dyson spoke at the Commonwealth Club at the Microsoft campus in Mountain View last night on Homebrew Healthcare or the "quantified self."  Esther has been active in the health space with investments in Keas, Polka.com and patientslikeme and board seats with Voxiva and 23andme (which has been in the news quite a bit lately and was a hot topic in the Q&A session).

Esther believes that there are three health-related markets:

1. traditional healthcare market - includes current healthcare system (hospitals, insurance companies, pharma...). Is an enormous market, very advertising-centric and full of big businesses
2. bad health market - producers of things that distract you from good health (i.e., potato chip and tobacco producers, fast food...) Is also an enormous market, extremely advertising-centric and full of big businesses
3. wellness market (Esther actually called this third category the health market, but I will call this the wellness market for clarity) - promotes good health behavior and self-denial. Is a new market, there hasn't been a commercial benefit from this market in the past, so is not developed, but several trends are converging, which is changing this:
• data collection is getting easier
• game dynamics being used outside of gaming
• mobile phones are on hand 24x7 enabling the easy data collection in bullet point #1

Many of the firms with which Esther is involved are in this third category, the wellness market. Interestingly, the idea of parallel health and wellness markets also surged at the Mobile Health 2010 conference - seems to be a common theme when discussing new technologies and health.

A recurring topic throughout the discussion was data privacy. Esther commented several times that people do not want privacy or to share, what they want is control. They want to determine who gets to see what data. She polled the audience - almost everyone said that they would be comfortable providing fitness-related data to a close group of friends so that they could help motivate you with your fitness goals. Conversely, almost NO one said they would feel comfortable providing fitness or health-related data to their employers. Lastly, Esther noted that patients with terminal diseases (several of those on patientslikeme) may be willing to share everything with pharmaceutical companies if it would help accelerate the discovery of a cure (likely for other patients and not themselves).

Reflecting on the discussion with my emerging-markets hat on, I wondered if the model of parallel markets (the traditional healthcare market and the wellness market) will be followed in emerging markets.  Given that the traditional healthcare market in these countries is relatively undeveloped, I believe that these countries may actually have an opportunity to merge the traditional healthcare market with the newer wellness market and evolve these two into a  single, unified market for the benefit of all.  Unfortunately bad health markets are strong and growing in emerging markets, so there will be at least two parallel markets - health/wellness and bad health - in developing countries.

World cup fever - technology lending a hand

 by Karen Coppock
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Much of the world is focused on South Africa and the 2010 World Cup and technology is playing a significant role in enabling fans to get their soccer fix. For example:

• Solar power is being used to enable live, large-screen television broadcasts of the World Cup in Kibera (a large slum in Kenya) and Jericho (a town in South Africa). The sponsor of this program - Solafrica - notes that its objective is to educate the local residents on the benefits of solar power - I imagine the 1,300 or so people that watch these broadcasts every day are fully convinced of the benefits and are thrilled to participate in the global soccer frenzy.

• Twitter is hosting a comprehensive World Cup conversation including tweets from the World Cup organizer, FIFA. Even soccer stars such as Ronaldo in Brazil are sending motivational tweets to his peers in South Africa.There are almost more than 71,000 are fans of the Facebook World Cup 2010 page.

• Mobile phone users can stream live video of the games from ESPN3 and for those with strong ears (or patient friends), there are the Vuvuzela applications - Vuvuzela 2010 claims to be the #1 free iPhone application downloaded in Argentina, Austria, Brazil, France, Germany, Greece, Portugal, Italy, Netherlands, UK and South Africa.

Soccer fans crave information and love to debate the  virtue (or shortfalls) of the games, players and teams....developers of mHealth, mEducation and mGovernment services could likely learn from the diverse ways the soccer community has engaged with technology and how to best reach diverse populations and market segments.