Bypassing the Network May Connect the Unconnected

This week’s nugget was unearthed when a little-known telecommunications company promised to bring to market a mobile phone that can bypass operator networks and enable users to text and make free calls to people within a one kilometer radius. Sweden-based TerraNet believes the technology addresses the need for communication in developing countries, especially in rural areas where operator networks do not exist, and could also aid in disaster relief. The technology can even be used for free phone calls outside the immediate vicinity if there is a broadband-enabled PC with Voice over Internet Protocol (VOIP) capability within range. Focusing on areas without existing operator networks, TerraNet intends to launch a commercial network in 2008 with revenue models based on licensing and handset sales.

Though TerraNet's technology requires special handsets, the company hopes it will eventually be a feature available on standard phones. Phone manufacturers, however, will have to overcome the objections of operators if they intend to offer a service that bypasses the operator’s network to make free calls. Indeed, many operators – focused relentlessly on competition from other operators and maintaining ARPU (average revenue per user) – may not be prepared for a competitive threat like TerraNet’s solution. Because consumer needs and user habits differ considerably in emerging and mature markets, a solution could quickly become formidable competition in emerging markets while not posing a threat in developed countries.

While TerraNet’s solution poses a threat to telecommunications companies, Vital Wave Consulting suggests that it may also present an opportunity for PC maufacturers and local entrepreneurs. Mobile technology that taps into a connected village PC for free VoIP calls could present not only a lifeline to the outside world but a strong enough value proposition to prompt community or entrepreneurial investments in PC-based connectivity for longer-distance communications. TerraNet’s solution is also a reminder that multinational technology corporations doing business in developing countries would do well to look far outside traditional technology and business model solutions to understand competitive threats and accurately identify growth opportunties.

Also in the news:

• Motorola loses ground because of ultra low-cost segment
• Everex partners with Zonbu for low-cost laptop
• OLPC signs Peru for 260,000 laptops

Global versus Local: Search Engine Strategies for Emerging Markets

Google’s recent earnings report focused on their aggressive hiring in international locations. Eric Schmidt, Google CEO, explained that searching the Internet is now a global activity, and in order to compete with Yahoo!, Microsoft and, increasingly, local competitors like Baidu, Google’s staff has to become more international. Google has also developed a “cross-language informational retrieval” service, which translates foreign-language content for English-language searches (and vice-versa). According to one blog, translations will be available in English, Arabic, French, German, Italian, Japanese, Korean, Mandarin, Portuguese, Russian, and Spanish. Google’s “world-is-flat” macro approach will appeal to more Internet-savvy users interested in international news and opinions.

Yahoo!’s approach to international markets is slightly different. The company offers a language-translation program similar to Google’s, but a more intriguing initiative is the attempt to attract local users in developing countries by turning their search engine into citywide portals. Yahoo!’s India-based pilot, Our City - an online clearinghouse for local, dynamic content - has been introduced in 40 Indian cities and appears to have gained a solid user base. Yahoo!’s more localized approach will meet the demands of new users who are just beginning to access the web and are most interested in locally-relevant information such as government services, news, entertainment and events. While a combination of approaches is likely the best strategy for emerging market business success, a focus on locally available services and content will motivate the next billion PC users to take the Internet for a test drive.

Yahoo!, Google, and other IT companies should have no trouble finding local content. Small and medium-sized businesses (SMBs) are eager for sales opportunities outside their brick-and-mortar confines, and governments in many emerging-market countries are investing heavily in e-government portals and support for the SMB sector. Smart local entrepreneurs with intimate knowledge of local content needs could act as aggregators, benefiting from the technology, resources and scale of a multinational technology partner. All stakeholders understand this would result in more emerging-market users online, creating potential consumers of other online content and services.

Also in the news:

• Internet Slow to Reach the Unconnected
• Everex, Acer, and Medison Introduce Low-cost PCs
• Technology and Power, How is Access Defining Progress

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