How affordable is your broadband?

Using statistics from ITU and World Development Indicators (WDI), I have tried to calculate (grossly and certainly with lots of room for improvement) a tool to measure this “affordability gap” between countries and – more importantly – within countries.WDI statistics include income distribution statistics, namely the income for the top and bottom deciles of the population plus income per quintile. So, taking the latest information on income distribution and applying it to the latest reported GNI per capita, I have tried to extrapolate a distribution for income for countries. The result is a proxy of the income distribution of the per capita income per decile:

With the distribution, an estimation of the distribution of income for each country can be also estimated. Additionally, information provided by ITU includes the monthly price for fixed broadband access. From this, we can estimate for which portion of the population broadband can cost more than 5% of their monthly income. For example, at $44 all of the population of Denmark can afford fixed broadband (5% of monthly income is higher than $44 for all deciles of the population). On the other hand, only 30% of the population of South Africa can afford fixed broadband at $27 per month (that is, $27 is higher than 5% of their monthly income for the first three deciles of the population). The graph below shows this comparison (the blue area now represents 5% of the monthly income, the red line is the monthly price of fixed broadband).

Data was available for 143 countries, covering approximately 6.7 billion people. Income distribution data is really outdated for some countries, going back to early 1990s in some cases.

Results

The following table summarizes the overall findings from this relatively simple exercise:

Table 1. Broadband Affordability (Number of countries)

The columns on the table are determined by different “monthly income” estimations, and the numbers shown are the count of countries that meet the criteria shown on the left. For example, the number 22 shown in bold means that 22 countries have a broadband price that is between 10% and 20% of the monthly income of the 7th decile of their population. If we just look at the national average income level (the first column), 75 out of the 143 (52%) countries analyzed have broadband prices that are 5% or less of their monthly income. Hence the claims made by some analysts that many countries have current affordable broadband service. Moreover, these 75 countries account for almost 5 billion people, suggesting that most people in the world have access to affordable fixed broadband service.

However, a closer look at the distribution of income shows a different picture. For example, there are approximately 20 countries that, despite having broadband prices below 5% of their average income, broadband is still unaffordable for the bottom 40% (see for example, China above). In fact, only 29 countries – out of the 75 mentioned before – can claim under this analysis that broadband is affordable for the 100% of their population.

It is also interesting to note that there are 14 countries where the monthly price of broadband is more than 100% of the average monthly income. Moreover, there are 39 countries with an estimated aggregated population of more than 840 million people that have broadband prices higher than 5% of monthly income for all deciles – that is, unaffordable for close to 100% of the population (see, for example, Iraq above).Taking into account this analysis by deciles and applying it to all the countries, an estimated 3.5 billion people do not have access to affordable fixed broadband, as shown in this figure.

This post only intends to highlight the need for a more detailed analysis of affordability within countries. Whereas an “average” analysis of affordability could suggest that most people have access to affordable broadband around the world, in reality many segments of the population are not able to afford broadband service. This oversight may end up exacerbating differences within countries which may end up increasing the digital divide, with negative effects on the extreme poor and on any attempt to increase the income of the bottom 40%. The analysis shows that almost 3.5 billion people are being left without affordable broadband, spread all over the world. Further analysis at the country level should be carried out to determine the different options to make broadband more affordable.

Other Considerations

The analysis carried out in this note takes aggregated prices and income statistics. Additional research should be carried out at a regional or preferably country level. For example, the “Broadband Networks in MENA: Accelerating High-Speed Internet Access” report includes a more in-depth analysis of affordability for several countries in the region.

It is important to mention that the definition of broadband is that of ITU: 256kbps or higher. The trend, however, is to move towards faster connection speeds (5Mbps and up, also called Ultra-Fast Broadband or UFB). To measure a “Broadband for All” initiative, we need to define the service and what constitutes an affordable access to the service. Higher minimum speeds would imply higher prices to be considered, and all estimations done in this analysis would be affected negatively.

Related to the above, the 5% benchmark may need to be revisited. On one hand, broadband is usually seen as a household service and some countries are starting to measure its penetration in terms of households. On the other hand, mobile broadband is a personal service that is seldom shared within a household. Lastly, it is important to highlight the fact that broadband costs do not include other telecommunications services (namely, mobile and fixed line).

It is also important to note that the analysis does not include coverage or quality of service. In many countries access to broadband is limited only to some urban areas, and extending access to the rest of the country (especially rural and low income areas) would imply high investments that companies are rarely willing to make. Similarly, a low quality of service might be making up for lower prices in some environments with weak legal and regulatory environments. In any case, these considerations would indicate and underestimation of the affordability gap found in this note

Information for Selected Countries

Published in collaboration with The World Bank

Author: Arturo Muente-Kunigami joined the World Bank in 2006, and is currently involved in investment projects and analytical work across a wide range of topics, including telecommunications regulation and infrastructure.

Image: A man types on a computer keyboard in Warsaw. REUTERS/Kacper Pempel