World Dialogue on Regulation

A recent DIRSI study, Affordability of Mobile Phone Service in Latin America, undertaken by Roxana Barrantes, Hernán Galperin, Aileen Agüero and Andrea Molinari benchmarks mobile pricing from Argentina, Brazil, Chile, Colombia, Jamaica, Mexico, Peru and Trinidad & Tobago. The study considers strategies employed by the poor to access and use mobile telephony services and identifies the major market and regulatory barriers to increased penetration and usage as well as business opportunities to serve underprivileged users in the region. 

The authors use a service basket methodology proposed by OECD, with some relatively minor adaptations to the Latin American service marketing models, to standardise the various plans and tariffs offered by the different operators in each country to permit international comparative analysis. The value of the baskets has been estimated both in current US dollars and in purchasing power parity (PPP) dollars.

Since their objective is to measure service affordability among the poor, the analysis is focused on the low volume basket. Low users are those who have a call volume of less than one half of the medium user's volume (75 calls per month).

The following figures compare country baskets (the annual cost of a hypothetical low user) creating an index that allows benchmarking across differences of tariff structures and exchange rates.

Effective Mobile Pre-Paid refers to a basket calculated using the prices for each type of call. In the majority of the countries, prices increased in October 2007. The only exception was Peru, where prices went down.

Effective Mobile Post-Paid refers to a basket calculated with any kind of service package.  Comparing the two periods, baskets for 2007 are lower than in 2006, with the exemption of Brazil.

In the Figure 3, the PRE-PAID REAL refers to the real cost of the basket if a person had to buy a certain number of cards to pay for the effective basket (e.g. if the effective basket is $12 and the lowest denomination for a card is $5, the real basket will be $15). Only Peru presents lower prices in 2007. The other countries present equal or higher prices for the same period.

In Figure 4, the POST-PAID REAL refers to the real cost of the basket if a person had to pay for a contract or mixed plan that is higher than the calculated effective basket (e.g. if the effective basket is $23 but the contract is $20, the person will have to buy two plans). NB: This may not be the best way of going about this last option, but considering that most of the usage in the LAC region is pre-paid it was considered to be a useful shortcut, at least for the time being. Only Brazil presents higher prices in 2007. The other countries present equal or lower prices for the same period.

According to the figures, PRE-PAID services, those who are usually used by the poor are higher than the POST-PAID services. The overall study confirms that the poor have to pay higher prices to access telephone services in the main Latin American markets. This is reflected in the price differences that exist between the pre-paid system, used by the vast majority of low income users, and the post-paid systems.

LIRNEasia has conducted a similar study, comparing basket prices from Bangladesh, Pakistan, India and Sri Lanka, as part of the program on Measuring ICT Sector & Regulatory Performance. However, the Asian effort varies on subject and scope; since they took into account mobile prices for different type of users (low, medium and high) and are also attempting to compare broadband benchmarks.