Broadband Tariffs in Latin America: Benchmarking and Analysis

Abstract

We analyze tariffs for fixed broadband services in Latin America and benchmark against tariffs in the OECD. We also develop a new broadband development indicator (the Broadband Performance Index) that compares actual penetration rates with those predicted by our regression model. The results shows that broadband services in Latin America are generally expensive and of poor quality when benchmarked against OCED countries, and that Latin American countries are underperforming in broadband development after wealth, education and demographics factors are accounted for. We also provide price elasticity estimators for broadband demand in Latin America. The results reveal that an average price reduction of 10% would result in an increase of almost 19% in the penetration rate, equivalent to 4.7 million additional broadband connections. Finally we estimate the affordability of broadband services for households in a sample of countries in the region. The results reveal that sharp price reductions would be needed to achieve household penetration rates comparable to the OECD, and that public access initiatives will still be needed to provide services for the lowest-income households.

Keywords: broadband, tariffs, price elasticity, Latin America

JEL Classification: L51, L96