Prices and quality of broadband in Latin America: benchmarking and trends
Date
2012-08
Authors
Galperin, Hernán
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Journal Title
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Publisher
Universidad de San Andrés. Departamento de Derecho. Centro de Estudios en Tecnología y Sociedad
Abstract
After several years of growing at rates close to 50%, the fixed broadband market in
Latin America is beginning to show signs of slowdown, as a result of saturation levels
in higher-income urban areas and low adoption among medium and low-income
households. Expanding the boundaries of the fixed broadband market towards these
households represents one of the main challenges for telecommunications policy in
the region over the coming years.
The results of this paper suggest that, in general, fixed broadband prices in Latin
America remain above the thresholds that promote the widespread adoption of the
service. In particular, a comparison with developed countries suggests that there is
ample room for price reductions and improved service quality. The “typical”
broadband plan in Latin America is 66% more expensive than in OECD member
countries, while, on average, the price per Mbps of download speed in developed
countries is seven times cheaper than in Latin America.
In regards to the service quality offered in the region, the results show a significant
improvement over the past two years. The average download speed of the “typical”
plan in Latin America doubled from 2010 to 2012, from less than 2 Mbps to almost 4
Mbps. However, the quality of the “typical” plan in OECD member countries also
doubled (from 10 Mbps to 20 Mbps) during the same period. As a result, the gap in
terms of service quality that separates the two regions remained constant. On
average, the quality of service promised in the “typical” broadband plan in the
region is five times lower than that in developed countries.
Evidence suggests that there are very diverse situations within Latin America’s
broadband markets. While some markets have prices comparable to those in the
OECD countries, in the less developed countries of the region prices are five to 35
times higher, depending on the price indicator considered. However, the trend
indicates a steady decline in broadband prices, and a very significant decline in some
of the less mature markets, which points to a moderate optimism regarding increased
adoption in the medium term.
In analyzing the relationship between broadband prices and income, the results
indicate that, on average, a household in Latin America must make an effort seven
times higher than an OECD household to pay for the “typical” broadband plan
available in the respective markets. Bridging this affordability gap represents a major
challenge for achieving high penetration of services in the region. Several countries
in the region have recognized this challenge, undertaking infrastructure initiatives
and regulatory changes to increase competition, and fostering the supply of basic
connectivity plans.
Finally, it is essential to review the tax burden on broadband services, which
significantly impacts the prices analyzed in this paper. Different studies show that
the contribution of broadband to economic and social welfare increases with the
level of penetration. Faced with this evidence, current tax policies penalizing
broadband adoption entail a reduction in future economic and social benefits for the
inhabitants of the region.
Description
Fil: Galperin, Hernán. Universidad de San Andrés. Centro de Estudios en Tecnología y Sociedad; Argentina.