High affordability, but Internet use is low: What can be done?

Posted by on June 1, 2020  /  0 Comments

The ITU’s ICT Price Trends 2019 report was just published. Below is an excerpt from an op-ed published today in the Daily FT:

One cannot use data without 3G and 4G coverage. This is not available in all localities. Coverage is the necessary condition for data use. Content is the sufficient condition.

The key driver of internet use is content. In research LIRNEasia did in India on beyond-voice services around a decade ago, we found the drivers to be ABC: Astrology, Bollywood, and Cricket. It appears that politics, especially through social media, has joined the list. The need to minimise large and small face-to-face gatherings because of the COVID-19 pandemic will accelerate data demand.

What is the harm in compelling operators to lower prices further?

Increasing coverage and ensuring service quality will require significant investment. The required investment is unlikely if the firms making the investment are uncertain of how they will be treated by government and their profits are negligible.

In 2017, the net combined loss of all mobile operators was Rs. 1.96 million. The highest combined profit during the past five years was Rs. 2.95 million in 2014 (http://www.trc.gov.lk/images/pdf/SectorAnalysis_18042018.pdf). These numbers are ridiculously small for a high-investment industry. For comparison, just the 2017-18 profit of JKH transportation companies was Rs. 3.08 billion. It can easily be documented that our governments have frequently behaved in ways that discourage investment in the telecom infrastructure.

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