if mobile phone market penetration is low, what is marginal cost of extra phones/users to provider?

in other words, suppose a telecom company comes to Cameroon and builds all the towers and so on. However, let’s say only 5% of the locals can afford to buy the prepaid cards, even if they are (hypothetically) given the phones themselves for free.

So here we have a situation where the infrastructure apparently is “under-loaded” and under-utilized compared to what it was designed to handle. Unless maybe they use some sort of cheaper antennas expecting low usage?

Well, so in such a situation what is the marginal cost of adding another user, or maybe adding another 20% of the population as users? The reason I ask is, perhaps there would be a way to use price discrimination and service quality downgrade principles in this situation in order to keep the richer group keep on paying their current high rates while also providing a worse and much cheaper service to a bigger, poorer user base?

E.g. in particular suppose the poorer users are literate and we offer them only the sms service without the ability to talk. Would that allow for service fees much lower than what is normal for cellphone use? Is this or similar approach already used in Africa as part of product/service design by the telecom companies?

I know! Only sell the iPhone with a data plan.

Actually, I think density of base stations is directly related to usage. A lot of users means you put up more antennas and turn down the transmission power. That’s the principle that lets the network scale from farmland to NYC.

OTOH, if the telecom provider has a monopoly (de facto, or worse, state-granted), expect that the prices have room to be much lower any way you slice it. Funny that you bring up SMS. That, actually, costs pretty much nothing. It literally gets piggybacked on some control signaling that has to be sent anyway. Yet it’s a goldmine for telecom operators.

What really happens in areas where people cannot afford personal cell phones is that people set up small businesses using cell phones like pay phones. You can just head down to your local “call box,” use their phone with the call timer on, and pay for your usage with a small premium. These call boxes also sold phone credit scratch cards and phone credit transfers (which have an economy of their own.) In Cameroon, call boxes popped up on literally every corner, since the capital needed to start one was simply a cell phone and a bit of credit. I doubt they made big profits, but it beat sitting around all day unemployed. They’d also act as community hubs, since hanging around the call box means you’d get all the good gossip first.

Another thing that helped is that they did not charge for receiving calls. So it was very common for a working relative in the city to give a cell phone to his family in the village. He could then use his credit to call them all he wants, and could even easily transfer credit to them if they needed it.

So what you’re saying is that the call boxes allow the users to avoid the capital cost of buying a cell phone? Or do the operators get cheaper usage rates than would an individual?