Prices and Quality of Broadband in Latin America: Benchmarking and Trends

Universidad de San Andrés Centro de Tecnologia y Sociedad Working Paper No. 12

19 Pages Posted: 7 Nov 2012

Date Written: August 31, 2012

Abstract

After several years of growing at rates close to 50%, the fixed broadband market in Latin America is beginning to show signs of slowdown, as a result of saturation levels in higher-income urban areas and low adoption among medium and low-income households. Expanding the boundaries of the fixed broadband market towards these households represents one of the main challenges for telecommunications policy in the region over the coming years.

The results of this paper suggest that, in general, fixed broadband prices in Latin America remain above the thresholds that promote the widespread adoption of the service. In particular, a comparison with developed countries suggests that there is ample room for price reductions and improved service quality. The “typical” broadband plan in Latin America is 66% more expensive than in OECD member countries, while, on average, the price per Mbps of download speed in developed countries is seven times cheaper than in Latin America.

In regards to the service quality offered in the region, the results show a significant improvement over the past two years. The average download speed of the “typical” plan in Latin America doubled from 2010 to 2012, from less than 2 Mbps to almost 4 Mbps. However, the quality of the “typical” plan in OECD member countries also doubled (from 10 Mbps to 20 Mbps) during the same period. As a result, the gap in terms of service quality that separates the two regions remained constant. On average, the quality of service promised in the “typical” broadband plan in the region is five times lower than that in developed countries.

In analyzing the relationship between broadband prices and income, the results indicate that, on average, a household in Latin America must make an effort seven times higher than an OECD household to pay for the “typical” broadband plan available in the respective markets. Bridging this affordability gap represents a major challenge for achieving high penetration of services in the region. Several countries in the region have recognized this challenge, undertaking infrastructure initiatives and regulatory changes to increase competition, and fostering the supply of basic connectivity plans.

Keywords: broadband, affordability, Latin America

JEL Classification: L96

Suggested Citation

Galperin, Hernan, Prices and Quality of Broadband in Latin America: Benchmarking and Trends (August 31, 2012). Universidad de San Andrés Centro de Tecnologia y Sociedad Working Paper No. 12. Available at SSRN: https://ssrn.com/abstract=2171788 or http://dx.doi.org/10.2139/ssrn.2171788

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