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Hello... Cell Phones or Landlines for Poverty Status Indicator?

Hello… Cell Phones or Landlines for Poverty Status Indicator?

Zoe Cohen, IRIS Center. June 11, 2009.

It is 4:45 am and I am on a small bus in Puno, Perú, heading towards the border with Bolivia. I am sitting with Violeta, one of the surveyors, and we are going to interview a group of women who are joining a new village bank in the town of Desaguadero. The sun has not risen and at 12,500 feet above sea level my fleece jacket and hat are not keeping me very warm. We are surrounded by women in their traditional “polleras” (large layered skirts), bowler hats, and they each have at least two wool blankets wrapped around their shoulders and across their laps to keep warm. Clearly they knew it was going to be freezing; I just thought it would be “cold”. As women chat away in Aymara I realize that this dark hour of the morning is a typical “rush hour” as people head out to sell their wares at the market in Desaguadero.

All of a sudden, a cell phone rings!! I check mine, it’s not me. The woman to my left, an elderly woman in her traditional garb, answers, and a lively conversation in Aymara ensues. Although the scenery is different, the language is distinct, and the socioeconomic level of the people is quite low, cell phones ­ just as in the U.S. ­ are a typical part of the morning commute and play a large role in the daily life of most Peruvians.

Issue: There is widespread use of cell phones in Peru, but landlines still remain. The Poverty Assessment Tool (PAT) developed for Peru includes ownership of a landline in a household as an indicator of a family’s socioeconomic status. Can ownership of landlines still be considered an effective indicator?

The presence of a landline was included in the PAT for Peru because it was one of the best predictors of poverty, in combination with the other indicators in the PAT, at the time the original data were collected in 2003. However, the increasingly widespread prevalence of cell phones calls into question whether a landline is indeed a good predictor of poverty (see for more information).

In a recent IRIS study of 1,352 households from the departments of Puno and Tacna, Peru, only 10.3% (140) reported that the household had a landline.

To maintain a landline, a Peruvian must have a relatively stable income in order to pay for monthly service. Although one may make few outgoing calls on the phone and mainly just receive calls, the monthly bill must be paid in order to keep the line activate.

On the other hand, in Peru, the user pays in advance for a cell phone and then adds credit when he or she has disposable income. On the street, people sell phones starting as low as $20 US. Although there is the option of buying a phone plan in which you pay a monthly bill, the more popular option is to buy prepaid cards that put credit on the phone in order to make outgoing calls; there is no cost to receive calls.

On the cold morning in Puno, the woman sitting next to me received the phone call, meaning that she could chat for as long as she wanted and she would not be charged at all. If she was going to the market to sell her goods and she walked away with a good profit that day, maybe she would buy a phone card to be able to make outgoing calls later that day. Maybe she would only make enough money to cover the basic needs of her family. Either way, she could still keep the phone with her and people could call her.

Cell phones indicate development and innovation, but they may not necessarily mean that people are better off. It takes a small investment to purchase a cell phone and there are no monthly bills. On the other hand, the investment in a landline also requires that the monthly bill is paid in order to continue to make and receive calls.

Should the PAT tool instead ask if the household has a cell phone with credit to make outgoing calls? No, as this would be an unpredictable indicator since the answer could change daily or even hourly. A well-off person may have just run out of phone credit and be about to purchase more when the surveyor stops at her house to fill out the questionnaire. On the other hand, a very poor woman may have just bought 10 soles (about $3 US) of credit for the first time in a month, only 10 minutes before the surveyor arrived at her house to administer the questionnaire. Asking whether the client had a credit on her cell phone, therefore, would not be a reliable indicator of her socioeconomic status.

Given the above, is it relevant to include a landline as one of the many indicators used to determine household poverty level? While it may appear relevant, the relative importance of a landline probably changes a lot more quickly than other variables, due to the quickly-spreading use of cell phones. So, where do we stand on inclusion of landlines as an indicator?

When looking at the statistics, it is important to remember that the lack of a landline does not mean lack of personal phone access, nor lack of wealth. From the Andes to the Amazon, cell phones prevail.

We raised the issue with PAT specialists at IRIS.

Brian Beard says:
In addition to having to pay a monthly fee for a landline, in many countries the customer also has to pay for the time (per minute, or per 'pulse'), unlike in the US where most landlines have unlimited usage for local calls. In some countries there is also a very large opportunity cost to get a landline installed, requiring one to schedule an appointment with a highly inefficient telephone company that could take months and months to happen, unless you bribe someone. Thus, cell phones are a much cheaper and more practical option for the poor. The PAT team is discussing this issue, and for future PATs and PAT updates, we will be very wary of using either type of phone, since the relative worth of phones as a poverty indicator tends to change quickly as new technological innovations are introduced.

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