BARCELONA, Spain--Facebook (NASDAQ:FB) CEO Mark Zuckerberg used his keynote appearance here at the Mobile World Congress trade show to push for his Internet.org coalition, which he said is geared toward encouraging wireless carriers in emerging markets to offer a free tier of Internet service with the goal of encouraging wireless subscribers to pay for additional Internet access.
Zuckerberg at Mobile World Congress
Zuckerberg said that fully 80 percent of the world's population is covered by 3G and 2G networks, and most of those people could afford to purchase at least small amounts of wireless data access.
"The most expensive part of connecting to the Internet with a smartphone isn't the smartphone, it's the data plan," he said.
The problem, according to Zuckerberg, is encouraging those people to spend their money to access the Internet.
To that end, Zuckerberg said that Intenet.org, which Facebook and other partners announced last year, is designed to create a reliable program to help "on-ramp" those customers to the Internet by offering a free tier of service, much like 911 on the wired telephone network. "We want to create a similar kind of dial tone to the Internet," Zuckerberg said, noting that free services could include information on food prices, weather and--naturally--social networking. "I think these are basic services that everyone should be able to access."
And, Zuckerberg said, the initial results of Internet.org's efforts are encouraging. He said that Facebook's work with wireless carrier Globe in the Philippines has doubled the number of people there accessing the Internet. He said in that program Globe is making access to Facebook free and then charging for access to other sites. In a separate effort in Paraguay, where Facebook is working with operator Tigo, the number of people using data has jumped 50 percent, and the number of people using it daily jumped 70 percent, by offering free access to Facebook.
"What we envision for carriers is a model that helps them get more subscribers and connect more people," Zuckerberg said. "We're proving the model can work."
Zuckerberg called for three to five additional wireless carriers to join his Internet.org effort and test out a free tier of Internet service for at least a year, in order to refine the service and create a reliable program that other wireless carriers could then use in their own markets. Zuckerberg said the free tier of service could include social networking, Internet search and market information like weather forecasts and food prices. Such a service, Zuckerberg said, could show users the value of Internet access and eventually encourage them to spend money on additional Internet services like video and apps--thus creating additional revenue for participating wireless carriers.
"We're highly confident that we're going to reach a point where this is going to be highly profitable," Zuckerberg said, though he cautioned that the model likely won't be profitable until around 2019. "We're near break-even and still have a lot of work to do."
Zuckerberg broke down the Internet.org project into three specific areas: decreasing the expenses around Internet access; making more efficient use of bandwidth; and improving the sales of paid Internet tiers on top of a free tier. He said decreasing the cost of Internet access can be accomplished through the use of open source software and inexpensive switches and smartphones. As for making more efficient use of bandwidth, he said Facebook's app now uses an average of around 2 MB per day per user globally, down from 14 MB a year ago. He said the company eventually expects to get down to 1 MB per day. And he said the Internet.org project is working to improve its "upsell" experience, to make it as easy as possible for Internet users to pay for service after accessing a limited amount of free services.
In conjunction with Zuckerberg's keynote, Internet.org made several announcements, including the release of a study that found that expanding Internet access in developing countries to levels seen today in developed economies would increase productivity by as much as 25 percent, generating $2.2 trillion in GDP and adding more than 140 million new jobs, thus lifting 160 million people out of poverty. Internet.org also announced SocialEDU, a pilot project that it said will provide students in Rwanda with free access to a collaborative online education experience. Internet.org member Ericsson also announced its new Internet.org Innovation Lab, which will developers the ability to test their apps in real world environments at Facebook's Menlo Park headquarters.
Finally, Zuckerberg briefly addressed Facebook's recent announcement of its $16 billion purchase of messaging app WhatsApp. He said that WhatsApp is "the most engaging app on mobile that we've ever seen."
"I think by itself it's worth more than $19 billion," he said. "If we can do a good job helping it to grow, this will be a huge business." Zuckerberg explained that, with Facebook's backing, WhatsApp can concentrate on connecting 2-3 billion people without having to worry about raising money or generating profits via subscriptions.
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