An inclusive internet needs more affordable data

The dragon of high spectrum costs needs to be slain once and for all…

On one thing everyone is agreed. The Covid-19 pandemic has revealed the essential value of digital connectivity in the modern world, not just for commerce, but for civil society. At the same time, its importance has even more starkly exposed the gaps between the digital haves and have-nots. This was described by Dr Bob Pepper of Facebook, as ‘the paradox of success’, as he introduced a discussion on the latest research on the Inclusive Internet Index (3i) .

Running for five years now, the index shows that while there have been improvements in quality, perhaps the most dramatic change is in coverage. According to the GSMA, since 2015 mobile data coverage has increased from 46 to 82 per cent of the world’s population, supported by investment of $270 billion. The research reflects the story told in many IIC debates over the last year. The usage gap (those covered but not connected) is six times greater than the connectivity gap. The goal of internet inclusivity now requires a strategic pivot away from connectivity in favour of usage.

There are many barriers to increasing internet uptake, including availability of devices, access to electricity and lack of digital literacy.

But one issue rises above the others as the sine qua non: affordability. The good news in the 3i research is that the cost of mobile data has continued to fall, especially in the developing countries who most depend on it. But it counts as a qualified success for two reasons. Firstly, the cost of data in low income countries remains two to three times more expensive than developed countries, accounting for 7 per cent of average income. This puts usage beyond the reach of poorer communities.

Secondly, costs have been driven down in many countries by authorities releasing additional mobile spectrum at no charge.

This was designed to enable wider internet usage during the pandemic, often resulting in MNOs being able to offer educational content at zero rate. While it was seen as successful, there are concerns that, post pandemic, spectrum costs will rise again. And, as one telecoms CEO pointed out, the cost of spectrum will always end up in the cost of data.

Treasuries around the world have got used to treating spectrum as an opportunity to raise revenue at the expense of international conglomerates. More recently it has become clearer that these revenues are effectively taxes being paid by users. Perhaps here too, we can detect good news.

A number of recent auctions have yielded less cash than expected, partly due to more sensible reserve prices, and partly due to operators being prepared to walk away (if only to come back later).

The argument long made by operators and economists, that the returns from a growing and inclusive digital economy will far outweigh the short term revenue gained from spectrum sales. The argument appears to be gaining traction. The question is, will it result in a continued fall in data costs as the pandemic subsides? We’ll have to wait for next year’s 3i report to find out.