Snapshot: How much do we spend on mobile service across the Caribbean?

Over the last 10 years, the introduction of affordable mobile/cellular service has transformed the telecoms landscape in the Caribbean. Continuing with our “Snapshot” series, we compare the amounts spent in the region on basic mobile service.

The take-up and use of mobile/cellular service in the Caribbean has revolutionised our lifestyle and attitude on staying connected. It is virtually indispensible across all levels of the society, and is an integral element in our daily lives. Although service providers offer both prepaid and post-paid services, in most countries, subscriptions to the former predominate, since it offers greater budgetary control.

Methodology

Calculation of the monthly mobile spend for mobile/cellular service in the region has been guided by the approach set out in the Revised OECD Telecommunications Price Comparison Methodology (2006).  Three service baskets, based on the volume of voice calls, text and multimedia messages, were defined as set out in Table 1.

Service basket	Voice/year	SMS/year	MMS/year
Low Volume (LV)	360	396	8
Medium Volume (MV)	780	600	8
High Volume (HV)	1680	660	12

Table 1: Service baskets used in mobile spend calculations (Source: OECD)

The exercise focussed on the two largest operators per country where applicable, and single operators, where there was still a monopoly in the mobile/cellular market. In the countries where Digicel and LIME (formerly Cable & Wireless) both operated, they were the largest providers. The exceptions were the Bahamas, Belize, and Trinidad and Tobago (see Table 2).

The rates used to determine the monthly spend were for the operators’ prepaid service and were sourced from their websites, as at the end of April 2011. Prepaid plans readily provided the inputs for the calculations, and since they are extensively used in the region, they would be more representative of the amounts spent on mobile/cellular service.

Results

For all levels of usage, the lowest monthly spends were experienced in Jamaica, where the amounts ranged from USD 5.42 to USD 27.26 per month. On the other hand, the highest monthly spend for all baskets was recorded in the Cayman Islands, where amounts ranged from USD 23.07 to USD 106.48 per month.

The Low Volume (LV) user spends on average USD 14.29 per month. Medium Volume (MV) users typically spend USD 33.55 per month, whilst for High Volume (HV) users, their estimated monthly spend is USD 68.89.

Factors to consider

Across the Caribbean, there is a wide disparity in the price of mobile services based on expenditure for specified baskets of services. Monthly spend, regardless of basket, can vary by over 300% across the region.

Although there might still be some expectation that rates in the region can get even lover, some key factors that would affect the extent to which that can occur are outlined below. These considerations could also account for the diverse calling rates observed in the region.

• Population – smaller populations tend to correspond to smaller economies of scale, which in turn can be reflected as higher calling rates.
• Per Capita Income/GDP – the amount that persons are prepared to spend on mobile service will influence calling rates. For those who are prepared to spend very little, for example by purchasing the lowest prepaid amount or topping up infrequently, rates will be affected since call volumes would be relatively low. Moreover, operators experience some degree of uncertainty with regard to revenue streams from their pre-paid service: it is not guaranteed to be consistent. When this uncertainty is coupled with the predominance of pre-paid plans in the region, their calling rates tend to be higher than on post-paid plans.
• Level of competition – a basic principle of economics is that competition drives down prices: as competition increases rates will decrease. However, as markets mature and operators become established, an equilibrium can exist where there are no appreciable changes in calling rates. The situation is especially evident when there are two or more key players of more or less equal market share in the same market. There might be regular market promotions, or a slight rate adjustment, but the operators are no longer actively engaging in spirited jostling to increase their customer base.
• Topology/level of urbanisation – geographical topology and the level of urbanisation have a considerable impact on network build-out, its associated costs, and thus the calling rates that are implemented. In flatter or more densely populated countries, where basic infrastructure is well established, relatively lower rates can be expected.

To an appreciable extent, all of the above factors affect the cost of providing service, along with profitability and return on investment (RoI). Although we, the users, see telecoms service and our mobile phones as indispensible – along the lines of electricity and water – these services are delivered by private, commercial entities. As a result, their operations must be profitable and must yield a sufficient RoI for even the current levels of service to continue. Moreover, given the disparity in populations, incomes and geographies within the region, mobile rates will likely continue to vary considerably between Caribbean countries for the foreseeable future.

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