High bills may put damper on mobile growth

location based services

"The fish have gone from the rivers because of the noise. The fields are polluted from the oil, nothing grows," said Uche Onyemetu, who lives near an oil installation and four flares.

"This is supposed to be a rich village, but the whole area is poor," the unemployed 31-year-old said.

Oil began flowing shortly before the West African nation's 1960 independence from Britain. International oil companies operating in Nigeria have since paid untold billions of dollars to the federal government.

But most of Nigeria's 130 million people remain mired in poverty, much of the oil money stolen by leaders.

Across the south, Nigerians are clamoring for a greater share of the proceeds from the region's huge oil installations. Some have taken up arms, attacking oil installations and kidnapping foreign oil workers to press their point.

Bitterness over seeing so little benefit from the oil industry is compounded by living with the pollution it produces.

The natural gas flows along with the crude when it's pumped from the ground. While a valuable energy resource in its own right, processing and shipping the gas wasn't viewed as sufficiently profitable when much of Nigeria's oil infrastructure was built, so the gas was treated as an unwanted byproduct and burned off.

Gas flares pollute the fields and traditional fishing grounds. Villagers say their acrid black smoke sickens and blinds them and the flares' keening whine, which sounds like a jet plane, hurts their ears.

"They never end, never since before I was born," said 27-year-old Gift Obilor Jonah.

A Nigerian court recently ordered Shell and its joint-venture partners to pay $1.5 billion to one community to clean up the pollution, but the decision is under appeal.

The federal government, under pressure from residents of the Niger Delta, said about a decade ago that all the flares must be extinguished by 2008.

The international firms that work with Nigeria's state-owned oil company are investing billions to harness the excess gas so it can be sold, but they say a lack of major regional markets and other spending priorities are hampering the effort.

Shell, which plans to shut off its flares by 2009 — about a year later than originally planned — "is committed to ending routine flaring of gas in its Nigerian operations," said a company spokeswoman, Caroline Wittgen.

"This requires the company to gather and bring to market gas from more than 1,000 wells, which is a big undertaking," she said by telephone from London.

At Eaboch, a town of mud huts and a one-room schoolhouse, vows to end the flaring, create jobs and develop the region are given little heed.

"They keep telling us that it will stop, but it's not stopping," said Onyemetu. "The government is always saying they'll stop ... But up to now, it's still continuing."

At one of the few flares that shoot sideways a few feet off the ground, Ukpamueki Ogwhe has found a way to use the fire.

Ogwhe, 70, staggers under a woven basket balanced on her head and filled with shredded cassava. She places the cassava as close to the flames as she can tolerate.

The cassava, a staple food in Nigeria, dries faster near the flares than under the sun. Oghwe can produce the tasteless white curls faster than her competitors and sell more of them at a roadside market.

"This is good for us, it's useful for us. We can dry our cassava," she said as the flame roars nearby. "But if it could be used to make lights or fuel for cooking, it would be even better."


Yet even as manufacturers come up with ever more sophisticated, multi-functioning handset models, some industry analysts are wary that having more gadgets on a phone won't necessarily lead to more profits for companies.

According to a survey by tax and financial adviser group KPMG released Monday, many would-be buyers of high-tech phones are not willing to pay the premium that is required to get access to the converged services. In fact, 37 percent of respondents in North America said that they would not pay the higher price for additional services at all, while 20 percent said they would spend only up to 10 percent more than their current bill.

As a result, even though the most popular function on phones apart from making and receiving phones is Internet access, followed by taking and sharing photos, while sending e-mails ranked in at third place, if the cost of using such services is too high, then people would be less willing to use them on a regular basis.

"While holding the line on costs remains critical, executives expressed high levels of optimism going forward in terms of revenue growth," said Carl Geppert, partner for KPMG's Americas communications and media practice. "Growth, however, will not come easy, as convergence and intensifying competition are fueling a relentless decline of prices for voice, broadband, video and packaged services," he added.

So on the one hand, manufacturers are upbeat about the industry's future prospects in coming up with new products that would tickle the fancy of the consumer. And yet on the other, there is growing concern that unless there is a broad review of how mobile carriers bill for their services, many would-be buyers would stay away from using multi-functioning phones.

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(Ads by Google)Indeed, the KPMG survey found that 52 percent of executives it polled felt that the pressure to cut costs and offer ever-lower prices would have a major negative impact on growth in the industry, while 17 percent said that market saturation itself would limit growth, while 11 percent were concerned about the shortage of qualified staff to allow companies to keep coming up with new products and provide the necessary follow-up services needed to enable customers to use the phones.

"Service providers should use enhanced and bundled services to deepen customer relationships and allow other parties to reach users, delivering a loyal subscriber base that is attractive to advertisers and digital commerce partners," Geppert said, adding that "attempting to exploit converged services purely to squeeze more cash from consumers on a traditional subscription model will not work."

The KPMG executive pointed out that this was a generation that was used not only to the freedom of the Internet, but all the free services that cyberspace provided. As a result, "service providers may need to follow the Internet business model themselves by doing what the major Internet search engines have been doing for years; providing a service offering so compelling that it attracts hundreds of thousands of eyeballs which - in turn - are attractive to third party advertisers," the KPMG executive said.

Meanwhile, the survey found that 90 percent of consumers in North America wanted to use just one single service provider for their mobile phones, with 89 percent wanting a single, consolidated bill for all the services they use on their phone.

Copyright 2006 by United Press International



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