Global Internet prices are falling, but growth in use is slowing. Is it time to rethink our definition of affordability?
The ITU’s recently released Measuring the Information Society 2015 report highlighted the progress we’ve made toward increasing access to affordable Internet across the globe. But if prices are dropping, why is growth slowing?
Why aren't lower Internet prices translating into increased use?
According to the ITU, by early 2015, 111 countries — including all of the world’s developed countries and 67 developing countries — had achieved the UN Broadband Commission’s 2015 target of entry-level broadband (i.e., 500MB of prepaid mobile broadband) priced at 5% or less of a country’s average monthly income.
But, in many developing countries, reaching the 5% target has not translated into increased Internet use and adoption. For example, three of the four African countries in which A4AI works have met the 5% target or are very close — Ghana (4.48%), Nigeria (5.4%) and Mozambique (6.28%) — yet all three countries have unique mobile broadband subscription rates below 15% (GSMA Intelligence, 2014). These examples are not unique exceptions; rather, they are part of a common pattern replicated across the globe.
The report also shows that growth in global Internet usage has slowed — from 7.4% in 2014 to 6.9% this year. At this rate, the ITU predicts, just 53% of the world will be online by 2020 — a number that falls short of the ITU’s own Connect 2020 target of 60%. Meanwhile, the recently agreed UN Sustainable Development Goals (SDGs) also include a target (9c) that calls for universal and affordable access across the world’s Least Developed Countries (LDCs) by 2020. However, using current growth rates, the ITU estimates that only 16% of persons in LDCs will be online by 2020.
We are left with a sobering picture: Prices are falling, yet so many remain offline that, on current trends, there is no way we will meet the targets set by the UN and ITU.
How can we explain this discrepancy, and what must we do to buck the trend?
Barriers to Use:
Poverty and income inequality
Most of the 4.3 billion people offline today live in developing countries, many with limited incomes. This offline population faces a number of barriers in accessing the Internet, from a lack of awareness of the benefits of the Internet and how to use it, to limited locally developed and relevant content. For most, however, affordability remains the key obstacle to online access. Globally, 900 million people live in extreme poverty (i.e., under $1.90 per day), and billions more could be considered “income insecure”, struggling with basic living costs. Ironically, as well as being poorer in general, emerging economies are also likely to see higher levels of in-country inequality. What this means is that for the vast majority of people in developing countries, earning the “average” national income (the number by which the Broadband Commission target is measured) is simply not realistic; most earn just a fraction of the average income. Women and rural populations earn, on average, less than their male and urban counterparts, and so are particularly affected by this income disparity.
As a result, in those developing countries where the 5% affordability target has been met, basic broadband services are only affordable for the minority that earn at and above the average income level. As those that can afford to come online have probably already done so, the rate of growth will slow further unless services become more affordable; for the remaining population at the bottom of the pyramid, the costs associated with connecting to the Internet — which not only involve paying for a data connection, but also for the purchase, maintenance and powering of a device — represent much more than 5% of their income, and are an unaffordable “luxury”. (The forthcoming edition of our Affordability Report will explore in-depth this issue of income inequalities, among others.)
Time for a new target?
The Broadband Commission’s 5% goal has proven to be an effective target since it was set in 2011. Like a pacesetter in a long distance race, it has helped countries to focus efforts on achieving a specific affordability target, and to implement the policy and regulation necessary to achieve it. But, like every good pacesetter, it is not intended or designed to remain in the race until the end; it must fall away as runners go for the record, the real target of affordable access for all. To achieve this, runners must invariably go beyond the pace set by the pacesetter. Achieving universal access — one of the stated goals of the UN’s recently agreed SDGs and the proverbial “record” here — will require countries to go well beyond the 5% target set out by the Broadband Commission as soon as possible.
The ITU acknowledges the need to set a more ambitious target and, in its Connect 2020 Agenda, has called for all ICT services to be 40% more affordable by 2020; this translates into a target of entry-level broadband priced at no more than 4% of GNI per capita. Significant price decreases between 2013 and 2014, according to the ITU’s report, mean we are 72% of the way toward meeting this 2020 target for mobile broadband.
As the ITU report shows, meeting the 5% target has not translated into high levels of Internet use in many developing countries, and particularly those with high levels of income inequality. Will reducing costs to 4% of average monthly income be enough for those still offline today to afford to connect? Given the extensive progress already made toward this target, should we not aim to accelerate adoption and reverse the slowing growth of global Internet use by setting a more ambitious target and setting it now, rather than in four years’ time? And how relevant is a 500MB target in our data hungry and increasingly data-dependent world? Should a new target instead consider 1GB packages?
We believe now is the time to redefine "affordability" and to set a new target — one that is realistic and one that is likely to have a more tangible impact upon affordability and access, particularly among the last billions to connect. Determining a new target requires consideration of a number of factors. These include the challenges associated with inequality, focusing on those at the base of the pyramid, and considering those countries still struggling to reach the current 5% target, so that none are left behind. It also must consider the need for sustainable business models, including how best to incentivise the private sector so they extend access and improve service provision in unserved and underserved areas where low-income communities reside.
What do you think? Do we need a new target? If so, what should it be?
As we move this important discussion forward, we welcome your thoughts on the topic of affordability, and what a new affordability target should look like. Please feel free to leave your ideas below, or to get in touch with us on Twitter @a4a_Internet or Facebook.