of contact with family expatriate workers, leading to increased repatriation of earnings, and increased revenues for farmers who can get price information without relying on quotes from local middlemen. Pitroda (1993) cites a government study of the impact of a new telephone exchange on a town of 5,000 in Karnataka, India. During the year following installation of a 100-line exchange, the results suggest a rapid expansion of business activity, establishment of frequent communications with relatives in North America and Europe, and an increase of 80% in local bank deposits. In a sample-based statistical comparison of villages with and without Village Phone services in Bangladesh, Bayes (1999) finds price differences of approximately 7% for paddy, 8% for eggs, and 9% for foreign exchange, all attributable to improved knowledge of market conditions. The World Bank (1999) reports a much larger benefit -- price increases of 55% -- for farmers in Sri Lanka who have access to telephones.

# **Consumer Surplus Measures**

While direct estimates of income and employment impacts are useful, more general welfare measures provide the best summary information about the value of telecom services to poor households. Using a variety of methods, numerous studies have estimated consumer surplus in this context (the difference between households' actual payments for telecom services and the amount they would be willing to pay).<sup>9</sup> Saunders, et. al. (1994) report savings between 2.5 and 5.5 times the cost of a telephone call in Andhra Pradesh State, India; 4 times telephone rental cost in Egypt; 10 times the cost of business calls in Kenya; and between 13.5 and 20.1 times the cost of telephone calls in Northern Luzon and Northern Mindanao, Philippines. The same publication reports that measured revenues from 92 public phones in 82 Costa Rican villages represent only 81% of the benefits received by telephone users. The Asian Development Bank (1996) reports savings of 2.6 times the cost of telephone calls in rural Thailand. For the Bangladesh Village Phone program, Richardson, et. al. (2000) estimate consumer surplus at 3-10% of mean monthly household income. Torero (2000) finds that increased access to residential phone services in Lima, Peru since privatization has generated an annual per capita consumer surplus of approximately $US 40 for very low-income consumers, $28 for lowincome consumers and $146 for medium-income consumers. Since Peruvian income per capita is approximately $2,500 per year, these are significant benefits.

# **Cost-Effective Intervention**

While telecom benefits for the poor seem substantial, access promotion programs may be undermined by institutional defects such as corruption, costly administration and benefits capture by more affluent households. Wellenius (1997) argues that the public sector can promote access cost-effectively through appropriate use of economic incentives. In Chile, for example, the government has promoted access for rural communities by auctioning targeted subsidies to private telecom operators. Coupled with careful monitoring of service delivery requirements, this approach has broadened access for lowincome Chilean households at very low unit cost to the public sector. India (Ramadorai, 2000), Bangladesh (Richardson, 2000) and Senegal (Fuchs, 1998) have rapidly expanded

**9** For a general survey of the evidence, see Bedia (1999).

14