prepaid mobile phone

Tariffs and the affordability gap in mobile telephone services in Latin America and the Caribbean

Posted by MohiniBhavsar on Jul 10, 2010
Tariffs and the affordability gap in mobile telephone services in Latin America and the Caribbean data sheet 1510 Views
Hernán Galperin
Publication Date: 
Mar 2010
Publication Type: 
Journal article

This study focuses on the affordability of the OECD’s low-usage basket of mobile telephony services, which includes 360 calls and 396 text messages (SMS) a year, segmented by duration, time of day and destination. In other words, the study compares the monthly cost of prepaid service for a user who makes approximately one call and sends one text message per day. Because our main interest lies in estimating the affordability of this basket of services for users at the bottom of the income pyramid, two indicators are used: (1) The proportion of income that the cost of this basket represents for users in the third income decile, which acts as a proxy for income at the bottom of the pyramid; (2) The affordability gap, which corresponds to the difference between the cost of the basket and 5 percent of the income of the potential users in each income decile.

The main findings are summarized. (1) There is significant dispersion of mobile telephony tariffs in the region, with costs of the low-usage basket ranging from US$45 in Brazil to US$2.20 in Jamaica (in current dollars). The average for the region is US$15. (2) For users who consume a minimum basket of mobile services, prepaid service is less expensive than post-paid service in 13 of the 20 markets in the sample. (3) Overall, mobile telephony tariffs in Latin America are significantly higher than those of OECD countries (2 times more) and other emerging markets (3 times more). (4) The only country in the region in which mobile telephone
services can be considered affordable for low-income users is Costa Rica. (5) Despite advances in the adoption of the service, the results of this report highlight a significant affordability gap that limits consumption of mobile telephony services for most people in the region, and point to a need for continued efforts and initiatives to reinforce competition in the market and review the heavy tax burden that affects mobile telephony service in the region.