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The 4 Barriers to Affordable Internet in 46 Emerging and Developing Countries

By Guest Writer on February 14, 2014

Three in five of the world’s people are not connected to the Internet. This digital divide hampers economic and social progress.

a4ai-report

The Alliance for Affordable Internet’s Affordability Report represents the first step in the Alliance for Affordable Internet’s ongoing efforts to understand why some countries have succeeded in making Internet access affordable and universal, and what others can do to catch up quickly.

The report presents the results of a new ‘Affordability Index’, which ranks nations across communications infrastructure and access and affordability indicators fundamental to achieving affordable Internet. It also explores the key barriers to affordability.

The Affordability Index: An Overview

The Affordability Index is a composite index, comprised of both secondary and primary data. It covers 46 emerging and developing countries. The Affordability Index also considers the cost of Internet access for the two billion people living on less than US$2/day in the countries we studied. For this population, the UN Broadband Commission target of entry-level broadband services priced at less than five percent of average monthly income is far from attainable.

In the 46 countries studied, the cost of entry-level broadband exceeds on average 40 percent of monthly income for people living on US$2/day, and in many countries exceeds 80 percent or even 100 percent of monthly income.

Barriers to Affordability

Our research also identifies a number of key barriers to affordability and suggests ways to overcome them. These include:

1. Competition Is Not A Silver Bullet.
It is clear that competition alone, or the introduction of a particular number of players in a market, is not a sufficient condition to ensure affordable access to broadband services in emerging and developing countries. Well-rounded policies and regulations that stimulate both supply of and demand for broadband are a must.

2. Overcoming the Infrastructure Barrier Remains a Priority to Ensure Affordable Access.
Investment is not taking place fast enough to connect rural, remote and peri-urban areas. Further, the generally low infrastructure scores suggest a need for policies and regulations that lower investment risk and cost structure for industry while creating an enabling environment, with clear incentives and increased regulatory certainty. This can be done by facilitating resource sharing across network operators and other infrastructure providers as well as by creating public-private partnerships (PPPs) to subsidize infrastructure projects. PPPs that are based on an open access framework can play an important role in accelerating mobile broadband infrastructure. Regulators across all regions must take steps to establish clear policies and plans that support the expansion of broadband networks and reduce the costs associated with market entry. Spectrum policy and regulation must also be forward-looking and provide the opportunity for investment while also encouraging innovation.

3. Reducing Prices and Closing the Access Gap for Under-Served Populations is Critical for Development.
Through subsidies and market incentives, governments play a key role in securing the benefits of infrastructure investment in non-commercially attractive areas while at the same time addressing the socio-economic barriers that prevent the market from achieving scale. Targeted subsidies are often administered through universal access and service funds (UASFs). The experience of Morocco, Pakistan and Colombia demonstrate how targeted subsidies are harnessed to bolster local content and services. Another direct approach to fostering demand is to reduce taxation on the telecommunications sector.

4. National leadership is a critical ingredient to maximize the positive impact of broadband on jobs, productivity, economic growth and innovation.
Many countries have taken steps in the right direction by implementing broadband policies, but many of these policies are far from being comprehensive enough to address the barriers to improving affordability. Several countries are moving towards broad-based plans that seek to create a virtuous cycle, expanding usage at the base of the pyramid while also strengthening infrastructure investment to meet expanding demand.

Conclusions

Broadband markets that price Internet access out of reach for the majority of people are neither socially nor economically efficient. Although there is a need for much more detailed research into the drivers of affordability, this report already suggests several relatively straightforward steps that countries can consider to break this impasse. Liberalizing the telecommunications industry is not enough; the state also has an important role to play, through facilitating or underwriting strategic investments, subsidizing access for underserved communities and implementing effective and transparent regulations, such as open access to subsidized infrastructure.

However, active participation of all stakeholders in hammering out a concrete plan of action is perhaps the single most important step to move from high prices and low uptake to low prices and high demand.

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2 Comments to “The 4 Barriers to Affordable Internet in 46 Emerging and Developing Countries”

  1. Andrew says:

    The zeroth barrier: not being able to spell “affordable”.

  2. Wayan Vota says:

    Funny Andrew, real funny.