Wednesday, July 29, 2009

A Prepaid World

Something I've noticed in other developing countries as well, but especially true here in Rwanda, is that most of all services are prepaid. As in Peru, cell phones here are almost universally on prepaid plans, you 'charge' your phone with money by purchasing cards at local shops or from street vendors. These have a code behind a scratch off panel which you then enter into your phone to credit that amount. As you make calls, use data or send SMS's the charges are debited from your account. When you use all your credit, your phone will simply stop working until you credit more money.

One advantage of such a system is that acquiring a cell phone is a five minute affair. You literally walk into store, purchase a SIM card for a few dollars (and a phone if you need one) and off you go. No registering your name or address, checking your credit etc.. That is probably one reason cell phones are so popular in the country as a whole, the penetration rate is around 25%, growing quickly.

It also changes the dynamics of how people use their phones. Receiving calls and text messages is free here, and you are only charged once a call connects, so people will sometimes 'flash' someone, by calling them but then immediately hanging up when it starts ringing before the other party can pick up. The recipient can then call back, paying for the call instead of the original caller.

It strikes me that the prepaid model is a far better one for the consumer as opposed to the post-paid model of the states. I think post-paid plans are actually just a step that carriers make once it can be trusted that the customer base has the funds to pay for their service. It is far easier to rack up a large cell phone bill in the states inadvertently than it is here, you are largely removed from the cost of your actions until the bill arrives. This is a great thing for the carriers, leading to ever increasing revenues via the addition of instant gratification services such as premium content etc..

It also leads to the situation of most of us paying for far more than we use. I can't remember the last time I got even close to using the number of minutes on my plan, yet there is no plan available with fewer. I am forced to pay for something I will not use. I am using an unlocked Sidekick while here, complete with data, email, web, using MyNewsroom to read blogs etc.. and I think my total outlay for the month will be less than $25, all with similar usage as the states. Compare that to the cheapest Sidekick plan of ~$60 in the US and it is clear why few companies there offer any reasonable prepaid plans.

But prepaid as a concept goes much farther than just cell phones here, and in some cases in ways that are borderline inhumane. Electricity is provided on a prepaid basis, again 'charging' your address with a set number of credits and then having it debited as you use it. You can find out your balance via cell phone and even recharge your account via a similar scratch card and sms system as buying minutes. My hotel stay was also prepaid, the first time I've ever paid for my entire stay upon arrival.

What is clear is that a large portion of the population is living hand-to-mouth which is why prepaid is so prevalent. Even the taxis and motorcycle taxis operate on a pay as you go system of sorts, one in five taxi rides will involve stopping to fill up with a $1 of gas, every vehicle constantly running on empty. There is no such thing as 'fill her up'.

But perhaps the most shocking case of this is health care. If you go to the hospital and are admitted, you have to prepay for seven days of stay there, regardless of how long you are expected to stay. We had dinner with Dr Karl again a few days ago and he told us a story of one of the Batwa women needing to go to hospital due to complications during child birth. Even though she was obviously needing care in order for her child to survive, the 30,000 franc (~$50) seven day prepay fee was firm. He and a UN representative who was visiting split the cost, since in a country with a per capita income of ~$400 the Batwa villager obviously could not afford it on her own. (baby and mother went home healthy a few days later)

Of course as shocking as that might seem to us in the states, where at least you would be cared for first, we are still just as primitive in then requiring the patient to pay for the thousands of dollars of treatment, often a sum that is surprising and completely opaque to the patient until after the services have been rendered.

In short it is interesting to see how an economy and capitalism in general responds to differing conditions of liquidity in the population. In some cases, as in cell phones, I think the consumer actually comes out ahead, in others, such as health care it seems borderline inhumane, but perhaps it is just a step required on the path to economic growth.

No comments:

Post a Comment