Mobile Telephony in Latin America and the Caribbean: Who can afford it?
Mobile telephony has experienced a dramatic growth in Latin America and the Caribbean and it has an average penetration level of around 80%. But can mobile users afford the service's cost? What happens if we take income into account and compare Latin America's cost with those of other regions. Is mobile telephony in Latin America cheap or expensive?
Answers to these questions can be found in a study by Hernán Galperín within the framework of DIRSI's research on ICT Indicators and Mobile affordability.
The study considers the monthly cost of a low usage basket of mobile telephony services (1 call and 1 SMS message per day). Results show a wide variety of situations among countries in the region (see table - Cost of the prepaid low-volume basket in current US$, 2009): low-tariff countries include Paraguay, Costa Rica and Jamaica. The highest tariffs are in Brazil, where they are are almost eight times higher than in Paraguay (US$45 vs. US$6). The study also reveals that average tariffs in the region are high when compared to other regions' . The average cost in Latin America (US$24 in parity dollars) doubles the average of OECD countries (US$13) and more than triples the average of south Asia countries (US$7) [see table at the bottom of the page with the cost of the prepaid low-volume basket in selected countries worldwide].
Galperin also compares the cost of the low usage basket with income in order to determine the level of affordability of the services. Mobile telephone services are considered affordable when they cost less than 5% of a user's income. The results show that, with the exception of Costa Rica, the cost of the low-usage basket of mobile telephone services is greater than the ability of users to pay for them, particularly among the poorer sectors of the population. In most of the countries of the region the low-usage basket is only affordable for the 10% of the population with the highest income levels. There is a significant affordablity gap for the rest of the population.
The study concludes that the high cost of mobile service in the region are primarily a result of the high level of market concentration and the heavy tax burden imposed on the service in most countries. Making mobile services mobile more affordable, says Galperin, “will require more competition in the sector, for example by implementing number portability and reserving radio spectrum for new operators, and reducing the tax burden imposed on a service that the poorer sectors depend on."
