Incredible Internet Inequality

By: Lykke E. Andersen & Fabián Soria*

According to the latest Bolivian Population Census (2012), only 9.6% of households have Internet access (either fixed or wireless). Considering that the Bolivian Constitution puts telecommunications (including Internet) on par with water, sanitation and electricity as a basic human right, this coverage is outrageously low.

The main reason for the low coverage is the high cost. Even after nationalizing the telecommunications sector (2008) and investing USD 300 million in our very own telecommunications satellite, Tupac Katari (2013), Internet services in Bolivia remain patchy, expensive and slow compared to other countries in the region. For most Bolivians, having Internet at home is simply unaffordable.

Figure 1 shows that, for an average person in Bolivia, one hour of work would buy less than 1 day of a lousy 1Mbps (Megabits per second) Internet connection, whereas the average person in “developed countries,” such as the Netherlands, South Korea, Denmark, and China could buy several years worth of such a service for just one hour of work.

Figure 1: Internet Purchasing Power (days of 1Mbps Internet service that can be bought for one hour of work), as well as average download speed and average cost per Mbps.

Three main factors determine the effective price of Internet illustrated in Figure 1. First, the monthly fee paid for Internet services, which is very similar across countries, averaging about USD 40 per month. Second, the speed of service, which vary tremendously across countries from less than 1Mbps in some African countries to more than 100Mbps in some European countries. Third, the level of income, which also varies by a factor of 100, from USD 610/year in Mozambique, to USD 61,860/year in Denmark (just within our sample of friends’ countries).

The problem is that Internet companies charge about the same dollar amount for a 1Mbps connection in a poor country with per capita GDP of USD 600, as for a 100Mbps connection in a rich country with per capita GDP of USD 60,000. This makes the effective price (in terms of how much people have to work to receive a similar service) vary by a factor of several thousand across countries, with Bolivia and a bunch of African countries experiencing Internet as outrageously expensive, while the cost is basically irrelevant in countries like the Netherlands, South Korea and Denmark.  The high inequality in incomes combined with the high inequality in Internet service quality, conspires to create incredibly high inequality in Internet access.

Unfortunately, it is not that easy to improve the situation. The Bolivian government understands how important good Internet access is, and has shown its willingness to do whatever it takes to improve the situation (including nationalizing telecommunications companies, launching a USD 300 million telecommunications satellite and providing free Internet in strategic public areas, such as airports, schools, popular city squares and busses).

There is one key Internet bottle-neck the Government could tackle, though. The low speed of Internet services in Bolivia is mainly due to the lack of high speed fiber optic connections out of the country. The satellite helps to provide access where fiber optic is not available, but it basically just spreads the same slow internet around Bolivia. Due to the small market, it is unrealistic to expect private companies to invest in a high speed, top-of-the line fiber optic network connecting all the territory and linking to neighboring countries, so this would be an excellent thing for the Government to invest in. Once this network is in place, local Internet Service Providers can hook up to this network and provide faster and cheaper access for everyone.

Special thanks to the people of Más y Mejor Internet para Bolivia and other friends for helping us gather information via social media.

 * Dr. Lykke E. Andersen is the Director of the Center for Economic and Environmental Modeling and Analysis (CEEMA) at the Institute of Advanced Development Studies (INESAD), La Paz, Bolivia. Fabian Soria is a social development consultant and Associated Researcher at INESAD based in Washington, D.C.