The affordability conundrum: why increasing Internet service take-up may not be an easy fix

Across the Caribbean region, there has been many calls for improved access to and availability of telecoms and ICT services, particularly to areas that might still be underserved. However, very little is being said about the limited take-up of those services in areas where there is access.  Unfortunately, increasing take-up may not be as easily solved..

 

In tackling the challenges of back-to-school, whilst also trying to manage COVID-19 infection rates, many Caribbean countries are employing varying degrees of face-to-face tuition and remote learning. This increasing reliance on electronic (e-)learning modalities has been the impetus for countries to ramp up their acquisition of laptop and tablet computers for use by students and teachers.

Without a doubt, the concerted effort to get digital devices in the hands of as many teachers and students as possible is commendable – and even necessary, under the circumstances. However, there is potentially a bigger issue that has been not yet been addressed, which may challenge the utility of providing all of those devices in the first place, and arguably may be tantamount to having a nice new shiny vehicle, and still not being able to drive it. That issue is the affordability of Internet service, particularly for lower income households across the Caribbean region.

To a considerable degree, and across most Caribbean countries, Internet networks, be they wired or wireless, tend to cover most of the population. However, there may still be pockets – such as small communities, or even clusters of homes – which may still have limited or no Internet access. Yet, for the coverage that does exist, generally, the service take-up is limited, and even ad hoc, thanks to the purchase of small prepaid plans when individuals have the funds to do so.

 

People just cannot afford

Although it might not always be apparent, a large proportion of individuals and households in many Caribbean societies cannot afford fixed-line or mobile broadband Internet service on a continuous basis, such as via a post-paid subscription. As has been the case over the past 20 years, with the introduction of low-cost mobile/cellular service in the Caribbean region, the majority of the populace – at least 80% – purchase prepaid subscriptions, which allow them to control their spending. When they have consumed a plan or subscription, they will only make another purchase when they can afford to do so, which may be days, or even weeks later.

It is also important to highlighted that COVID-19 has had an adverse impact on the income of many individuals, particularly those who work in the tourism and hospitality industries, which effectively has been shut down since around March, and in many Caribbean countries, is one of the largest employers. As a result, people have either lost jobs, or are not earning as much as would have otherwise. Additionally, and to varying degrees, there has been a general slow-down across most Caribbean economies, with many companies, and even governments, having to adjust revenue projections for this fiscal year.

Consequently, many households, particularly those with school-age children, find securing Internet connectivity is especially challenging. Yes, the children may have been given a tablet or a laptop computer, but with (several) mouths to feed, whilst trying to keep a roof over the family’s head, whatever income that is coming in, might not be able to stretch to facilitate two, three, or even four-plus children having consistent Internet access at home.

 

The infrastructure is not only expensive to deploy, but also maintain

In some instances, it may be unspoken, but there is an assumption that the telecoms companies (telcos) ought to lower their rates, or make special provisions for individuals and households that not be able to afford the services they are offering – considering how crucial being connected to the Internet has become. However, the telcos themselves are facing a broad range of challenges, whilst also trying ensure that, at the very least, they can maintain a sustainable business.

First, and over the past decade or so, the revenues typically generated by the telcos have been falling steadily, due to among other things, competition, regulation and the power and versatility of the internet for delivering multiple services. Although consumers have benefitted considerably, in terms of the rates payable, and the range of services being offered (and rightly so!), the margins for the telcos have gotten tighter: meaning that they may no longer be in a position to be as generous as one might like.

Second, and as Small Islands Developing States, the cost of doing business is high across the region. Virtually all goods have to be imported, which increases their landed cost. Further, and in many countries, electricity and fuel costs are high, office space is expensive, and the inefficiencies in the society also have an impact on operating costs and productivity.

Additionally, many telcos regularly experience vandalism of their networks, and theft of equipment, necessitating continual repairs and replenishment, and which in turn drive up operating costs. For example, and according to Stephen Price. the country manager for FLOW and C&W Business Jamaica, as of the week of the last week of October, the company had recorded nearly 200 incidents of theft in Jamaica in 2020, with restoration costs exceeding JMD 140,000,000, or approximately USD 1 million (Source:  The Gleaner).

 

A solution might not be an easy fix

To bridge the affordability gap, and as a general practice, many counties rely on their Universal Access/Service Funds (UASF) to subsidise, or otherwise contribute to, the service payments made to the telcos. In many Caribbean countries, the focus of the UASF tends to be on infrastructure buildout, such as to extend networks to communities or parts of a country that are not economically viable for the telcos to undertake. Additionally, and in some cases, the Funds are being used to purchase devices, such as the laptops and tablet computers for use by students and teachers.

Depending on the framework established for a UASF, it may not be allowed to cover operating expenses, or to support economically-challenged groups in a society, such as the aged, low-income households, or differently-abled persons.  Hence, in order to address those needs may require legislative amendments, which could be a protracted process, along with the subsequent development and approval of the guidelines, to facilitate implementation.

Finally, it is worth noting that as telcos’ revenues have been falling, invariably and across the region, the contributions to the UASFs have also been decreasing. As a result, and cognisant that there may be a broad range of other projects that are being financed by the UASFs, there may not be sufficient money available to cover a subsidisation programme over the long term. Hence, it may be appropriate to consider UASFs as a stop-gap only, but more sustainable solutions would need to be conceptualised and implemented to decisively address this affordability conundrum.

 

 

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