Seven levers to put very high broadband within everyone's reach

Tue 03 Dec 2019

Throughout the world, the fixed and mobile coverage afforded by each territory form the foundation for equitable access to high-quality broadband Internet across the population. In the emerging countries, governments have to secure another key factor in their quest to turn their digital strategies into success stories: purchasing power. However, there exist a variety of levers on which they can draw to lower the cost of the Internet connection and make it affordable.

Though Internet usage is on the rise, 43% of humanity is not connected [1]. The contrast between developed and emerging countries remains striking (95% penetration rate in Northern Europe vs. 12% in Central Africa).

The two pillars for widespread access to broadband

Extending a territory's coverage using high-quality fixed and mobile networks

In Europe, despite the EU's ambitious objectives, “white areas” remain and a divide persists in the East (Baltic countries). In Africa, government efforts to speed up mobile coverage often come up against structural difficulties: in addition to the lack of financial resources from which local operators suffer, geographical constraints (long distances, mountainous or desert regions), or the lack of road infrastructure and energy supply are just some of the factors that make deployments extremely costly.

The access price paid by the end user

To assess the affordability of a broadband connection for a population, the Alliance for Affordable Internet (A4AI) defines an indicator (affordability index) to which operators and governments would do well to refer more frequently. It estimates that the cost of accessing 1 GB of data must amount to less than 2% of average income (GDP per capita). . Of the 99 developing countries included in its 2018 study on mobile Internet costs, only 10 are below that threshold. The results are fraught with stark contrasts: Sri Lanka's index is 0.24% while that of the Democratic Republic of Congo is 33.5%.

To achieve low prices: make use of financial, technical and regulatory levers

A variety of levers can be drawn upon to set a virtuous circle in motion -- one conducive to the emergence of an efficient digital ecosystem, and thus low prices. They lie in the profitability of infrastructures, local content hosting, regulation for the wholesale market and access, modulated competition levels and the price of terminals.

Drawing upon the funds provided by international donors

Many international clients are working to narrow the technological gap.

In Europe, specifically the Baltic countries, the EU finances public initiative networks (RIP) with the aim of bringing coverage to the white areas, without seeking profit.

In Africa, across several countries, the World Bank, the African Development Bank, the European Investment Bank and a number of national development agencies are financing, through grants and loans, the construction of national backbones, accessible to all operators and managed under public-private partnerships, by a consortium of operators, or by wealth management companies. Beyond the initial financing, these organizations also help ensure long-term asset maintenance and profitable management

Separate infrastructure operators from service operators

There exist several separation models, all of which are intended to make an expensive resource (the infrastructure) accessible to the various service operators in a fully transparent manner, and cost-based prices.

This structural separation enables service operators to avoid duplicating infrastructure investments (multiple networks in the same city) while ensuring extensive coverage of the territory. The economies of scale achieved, whether in deployment or operation, benefit the entire industry.

Host content locally

With Internet exchange points (IXP) and mini-data centers (CDN) established on the backbone, copies of heavy content or content frequently sought by Internet users (e.g. YouTube videos) can be stored locally. If the increase in international capacity requirements is reined in and data transport costs reduced, this generates savings that can be reflected in lower access prices.

Make frequency allotment prices affordable

All too often, governments, eager to create short-term foreign-exchange inflows, charge an excessively high fee for licenses when the country’s interest would be to benefit quickly from the most efficient technology. The operators, in search of profitability, are then reluctant to engage in any extensive deployments.

Some governments appear to have learned from their mistakes: in France, the reserve price required for 5G licenses will be reasonable in exchange for additional requirements on “vertical” coverage and services.

Regulate wholesale market prices
Price regulation on the wholesale market is one of the most effective ways to prevent the infrastructure-owning operator to opt for vertical integration[FM1] . It is, moreover, the defining thrust of the revamped European regulation, which kept the wholesale market regulated, while the retail market is almost completely liberalized.

Modulate competition within the same country

When coverage density is uneven, or when there are large disparities in income between geographical areas within a country, “modulating” the level of competition allowed appears an effective solution. The model adopted by Portugal is very interesting in this regard: the national regulator has modulated operators' obligations according to the competitive level of the 3 markets it has defined in the country. In large cities, the incumbent operator has been forced to open up its infrastructure, while it has not been required to do so automatically in small cities; in public service areas, a single operator enjoys a monopoly situation over a specific zone, for the estimated time needed to achieve ROI.

Develop local reconditioning of mobile terminals

The price of mobile terminals providing access to data services remains a major obstacle in very low-income countries. Reconditioning plants can be built to lower this barrier, while also benefiting local employment. As a result, reconditioning is already widely developed in the Maghreb countries. Mauritania and Niger have also incorporated into their digital strategies a variety of projects to implement small reconditioning centers.

While it is impossible to provide a universal answer to the question of Internet accessibility, various levers can be used to reduce the price of connectivity.  Each government must adapt its strategy according to the physical characteristics of its country and the purchasing power of the population. Policies need to be envisioned over the medium term, as broadband development plans yield concrete results only after 5-7 years.

What is certain is that each new technology re-examines the subject. The roll-out of 5G will require massive technological investment. As heavily courted as they are, private investors will not agree to go everywhere. To avoid widening the global digital divide, coordination between private and public actors will be more necessary than ever.

[1] Source: Digital Report 2019 We Are Social and Hootsuite

Article extract from our white paper: Digital inclusion, a societal challenge?