Increasing Broadband Internet Penetration
In the OIC Member Countries
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Achieving broadband affordabilityAs discussed above, pricing of broadband service and devices is one of the critical barriers to
achieving high penetration. As it has been considerably researched, the development of
competition is one of the major tools for affecting a reduction in telecommunications service
pricing. The theoretical basis of competition is the notion that, in the telecommunications
market, multiple operators can compete among each other and generate sufficient benefits for
consumers in terms of price-reductions, while guaranteeing an appropriate rate of innovation.
The following features characterize a telecommunications competition model:• Existence of multiple operators serving the same market based on their own network,
• Existence of multidimensional competitive dynamics (prices, services and user service
quality) among industry players,
• Reduction of retail prices for consumers, and intense competition in product
differentiation (dynamic efficiencies), resulting in additional consumer surplus,
• Competitive stimulation for each operator to increase the level of investment in its
own network,
• Absence of tacit collusion between operators due to the high rate of innovation and
competition based on product differentiation.
While the theoretical principles for sustainable competition in broadband are well established,
their implementation is not straight-forward. Along these lines, it is important to emphasize
that in order to determine the existence of an adequate level of competition capable of yielding
low broadband prices, the regulators need to have access to expertise in market analysis
capable to establishing whether the number of players in the market are sufficient to warrant
enough consumer benefits or whether additional remedies are required to stimulate
competitive intensity.
Beyond the competitive stimuli, the reduction of broadband service prices can be achieved
through a number of targeted public policy initiatives. The first reviewed above with example
of Uruguay relies on a state-owned operator to offer a low-priced service. A slightly modified
approach to achieve this is for the government to offer a subsidy on the cost of broadband
access. This could be done in the form of a plain voucher or a tax refund for qualifying
segments of the population (e.g. students). In previous experiences, the critical success factors
in this approach are two:• Establish upfront who is supposed to determine what constitutes an “affordable”
offer? The public service provider or the regulator,
• Ensure that whoever will define the “social” offer has the right economic expertise.
The second option to improving broadband affordability entails conducting a negotiation
between the government and private operators aimed at agreeing that they will offer a low-
priced broadband service targeted for disadvantaged segments of the population. In this case,
government policy makers negotiate with private broadband providers the offering of a low-
priced plan. This can be achieved in the context of the formulation of a national broadband
plan. Alternatively, it could be achieved as part of an agreement between the government