Increasing Broadband Internet Penetration
In the OIC Member Countries
55
Thus, the relationship between both variables indicates that a change in the price level would
have a positive impact in the level of penetration of fixed broadband. By relying on the
estimates depicted in figure 17, the effect of a price reduction between 5% and 25% was
estimated for different regions of the world (see table 19).
Table 19: Impact on penetrati n level (percentage of households) of fixed broadband (FBB)
of a price reduction
Region
2015
Household
Penetration
5%
Price
Reduction
10%
Price
Reduction
15%
Price
Reduction
20%
Price
Reduction
25%
Price
Reduction Australasia 75.16 77.26 79.35 81.45 83.55 85.65
Central Asia 22.87 25.36 27.84 30.33 32.81 35.30
Eastern Asia 67.80 70.09 72.38 74.67 76.96 79.26
South Asia 8.39 9.72 11.05 12.38 13.70 15.03
South-Eastern Asia 17.35 19.53 21.70 23.88 26.06 28.23
Northern Africa 17.16 19.32 21.49 23.65 25.81 27.98
Eastern Africa 2.22 2.63 3.05 3.46 3.87 4.28
Midde Africa 0.74 0.88 1.03 1.17 1.31 1.45
Southern Africa 19.61 21.93 24.25 26.57 28.89 31.21
North America 84.44 86.29 88.14 89.99 91.85 93.70
South America 41.77 44.55 47.32 50.10 52.88 55.66
Eastern Europe 51.82 54.47 57.13 59.78 62.43 65.09
Northern Europe 86.24 88.04 89.85 91.65 93.46 95.26
Southern Europe 69.48 71.73 73.98 76.22 78.47 80.72
Western Europe 89.11 90.84 92.57 94.30 96.03 97.76
Source: Estimates by Telecom Advisory Services based on ITU 2015 dataAs indicated in table 19, the price elasticity is higher for the regions with lower levels of
penetration. As a result, in regions like Middle Africa or South Asia, a 25% price decline could
yield an approximate doubling of current penetration levels. The increase in fixed broadband
penetration is substantial in other emerging countries as well.
Broadband pricing needs to be decomposed among its different elements because they affect
broadband initial adoption and usage in different manners. Initial adoption is constrained by
device acquisition, its corresponding tax burden, service activation cost, and expected
recurring costs derived from subscription retail fees and taxes.
Device retail prices and their corresponding taxes vary between fixed and mobile broadband.
Fixed broadband requires the acquisition of a personal computer, while mobile broadband
could be supported through either a personal computer or a smartphone. Retail acquisition
prices of this type of equipment are driven by supply and demand conditions, in particular
manufacturing economies of scale and component costs. While device retail pricing is typically
out the realm of policy control, taxation is not. Final price of devices is affected by a set of
different taxes, which vary by country and year. Taxes can, in some cases, add a significant
burden to the retail price.
As an example of initiatives aimed at lowering broadband prices, in September 2011, Comcast,
the cable TV operator in the United States launched its “Internet Essentials” plan to offer
broadband to as many as 2.5 million low-income families for a monthly rate of US$ 9.99. The