Market Forces Alone Won’t End the Digital Divide

In this opinion piece, Murali Shanmugavelan recounts his childhood neighbourhood in Tamil Nadu, India, and its degree of connectivity (one telephone per 100 people) with the current rise in telephone, computer, internet, and satellite connectivity in the developing world.


As stated here: "Private telecom firms have played a pivotal role by reducing calling costs and revamping payment packages. The invention of 'pay-as-you-go', which allows those without a credit history to own a mobile telephone, has given people with few means a chance to take part in the information revolution...A recent report by the consultancy firm Intelecon predicts that 90 per cent of the global market will have access to a mobile phone operator by 2010."


However, the document points to the fact that between 2 and 5% of the world's economically poorest people will likely be bypassed by this access, and those living in the "digital underclass" will find a wide disparity in worldwide mobile phone charges, according to the London School of Economics. For example: "In 2004, there were 48 mobile phone subscribers in India for every 1,000 people compared to 367 in Brazil. Yet Brazilians had to pay an average of US$18.90 a month while Indian subscribers paid just US$3.20." This defies conventional marketing wisdom, according to the document, that prices fall as subscriber numbers increase. "More often than not, these high tariffs are simply the result of companies pursuing larger profit margins without sufficient protection for the consumer."


In Europe, regulators are examining unfair pricing practices: "The European Commission has introduced the 'Eurotariff', which sets limits on the amount mobile operators can charge for calls made or received while a user is abroad in an EU country. It has also questioned why so-called premium rate numbers should be more expensive than national calls and has ordered providers to be more transparent about their pricing policies....The private sector, even when competitive, will not automatically guarantee affordable access to underserved consumers." As stated here, it takes a combination of competition and regulation to drive down prices.


Satellite technology, while expanding the reach of telephone and internet, costs around US$1500-1700 for one mbps of satellite bandwidth per month compared to US$2.50 a month for the equivalent connectivity between North America and Europe via an undersea optical fibre link. The massive investment in this link - the Eastern Africa Submarine Cable System (EASSy) - has been reportedly held up by disagreement between its 22 consortium members.


The article concludes that though there is agreement about the value of rolling out services to low-income and hard-to-reach communities, it is government and not private industry that bears the responsibility for this access. "National strategies for access to communications in developing countries must therefore be smarter and linked with other initiatives. For example, planners are considering how to make use of India's extensive railway network to deliver internet connections to remote villages. Such 'hybrid infrastructures' require state intervention and coordination....The answer is threefold: political commitment to curbing unfair competition, investments in infrastructure in rural areas, and the establishment of strong and independent regulators."