GSMA: Achieving universal connectivity in Latin America requires a reassessment of Universal Service Funds

A new study reveals the limitations of this instrument’s present-day design and examines reforms and alternatives to expand 4G beyond the current market frontier.

30 March, 2023, Buenos Aires: With an exponential growth in recent years, mobile connectivity in Latin America reached nearly 400 million subscribers (62% of the population) in 2021. Among those not yet online, 40 million (7% of the population) have no coverage, while 190 million (31%) have coverage but face demand barriers such as device affordability and lack of digital skills. The diagnosis is part of the report ‘Connectivity gaps in Latin America. A roadmap for Argentina, Brazil, Colombia, Costa Rica and Ecuador‘, published today by the GSMA. According to the study, in contrast to the fast pace of change seen over the last few years, reducing the last stretch of the gap will be increasingly complex and will require a reassessment of mechanisms used so far.

The analysis reveals the lack of measurable impact evaluations and the insufficient disbursement rates of the main public policy tool to close the gap in the countries studied: the Universal Service Funds (FSU). In aggregate, more than 40% of these funds have not been disbursed. In addition, there are no robust assessments of how many additional people have been connected thanks to USF-funded programmes in any of the countries under consideration. On the other hand, FSU funding model, financed exclusively through contributions from telecoms operators, does not reflect the current internet value chain. While operators’ revenues in the region have stagnated in recent years, digital service providers saw their revenues grow rapidly. Nowadays, benefits and returns generated by internet connectivity are captured mainly by players in the online service segment.

The report determines the market frontier for each country, that is, to what extent mobile internet coverage and adoption can expand under current market conditions. The economic model reveals that, in this scenario, no country will achieve universal connectivity by 2030; a gap of between 21% and 46%, depending on the country, persists. However, certain improvements could boost demand beyond current frontiers. Options under consideration include reforming USF financing, eliminating special taxes imposed on users and internet providers, and providing low-income populations with VAT exemptions for mobile internet services. These measures as a whole will lead to a reduction in the connectivity gap of between 6 and 16 percentage points, depending on the country. This equates to an additional 50 million connected people across the five countries.

To go beyond the market frontiers, additional funding mechanisms need to be considered. The coverage gap is concentrated in remote areas or locations with complex terrain, making network deployments economically challenging. The economic model shows that achieving 99% 4G population coverage would require between USD1,200 (Argentina, Brazil and Colombia) and USD 2,000-3,500 (Costa Rica and Ecuador) per additional person covered. Providing the last 1% of the population with coverage would require even more funding, and therefore potential alternative technological solutions. Finally, in order to close the usage gap, some markets will need to boost demand further through digital training programmes and subsidies to cover the entirety or a proportion of the cost of devices and services for low-income citizens. Such costs are estimated at between USD 50-360 per additional connected person, depending on the country.

Technological innovation is advancing at an increasingly rapid pace; digital inclusion, on the other hand, is facing a slow-down. The challenges we have today, with 93% of mobile broadband population coverage in Latin America, are not the same as years ago, when everything was about to be done in connectivity,’ says Lucas Gallitto, Head of Latin America, GSMA. “The roadmap to universal internet connectivity varies from one country to another, but this study shows it must inevitably involve the expansion of demand and urgent reform of USF operation and financing. The policies that brought us here are not necessarily the same as we need moving forward.”

The GSMA report ‘Connectivity gaps in Latin America. A roadmap for Argentina, Brazil, Colombia, Costa Rica and Ecuador’ is available for download in Spanish and English here.


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