Connecting the next billion: benefits, challenges and policies of expanding affordable internet access in Africa
In many countries around the world, it is easy to take internet access for granted. There are an estimated 3.2 billion people online today1, using the web to improve their daily lives by accessing news and health information, using e-government services, and connecting with global markets. Yet over 60% of the world’s population remains offline, excluded from accessing the life-changing possibilities of the web. Internet penetration rates drop further in Africa, where just one in five people use the internetibid..
What accounts for these low levels of connectivity in Africa and across the developing world? How would expanding internet access across the continent change social and economic realities for the average citizen? What do African governments and stakeholders alike need to do to make increased access a reality?
Barriers to connectivity
There is a number of obstacles to increasing internet access among populations that wish to be online, from low levels of digital literacy, to insufficient infrastructure to support the delivery of services, and a lack of relevant content. The primary barrier to expanding online access throughout the developing world, however, is affordability.
In 2011, the United Nations Broadband Commission set a target for entry-level broadband to cost no more than 5% of average monthly income (i.e., GNI per capita) by 2015. Though progress has been made toward reducing the price of a basic internet connection, we have fallen woefully short of achieving this target. Only 23 out of the 51 emerging and developing countries surveyed in the Alliance for Affordable Internet’s 2014 Affordability Report could claim to meet this 5% threshold2. In the remaining 28 countries surveyed, internet costs as a percentage of GNI per capita remained well over the 5% mark, with the price of a fixed broadband package hovering around 40% of average monthly incomeibid..The high cost to connect particularly inhibits the ability of certain populations ‒ such as those living in poverty (i.e., those earning less than $2/day), those living in rural areas, and women ‒ in getting online.
This digital divide exacerbates already existing economic and social divides, conspiring to stifle national development and keep those who arguably stand the most to benefit from online access from accessing the empowering potential of the web.
The importance of expanding internet access in Africa
The benefits of broadband are significant and wide-ranging, and have the power to improve development outcomes and underpin achievement of the new UN Sustainable Development Goals. The positive economic effects of internet access have been well documented ‒ a World Bank study showed that a 10% increase in broadband penetration can accelerate economic growth in low- and middle-income countries by up to 1.38 percentage points3. Given sub-Saharan Africa’s estimated GDP of $1.712 trillion, even modest increases in online penetration have the potential to yield billions in economic benefits4.
The impacts of increased connectivity on areas such as health, governance and society are perhaps even more significant in their ability to dramatically improve the day-to-day lives of Africans. It is estimated that e-health services, including remote diagnosis, advice, treatment and health education, will save over one million lives in Sub-Saharan Africa over five years5. Affordable broadband access will enable the expansion and amplify the use of these services, which are already being used to fill critical healthcare gaps, particularly in rural, conflict-affected and other underserved areas throughout Africa. Increased access to information and educational resources on the web has also helped to improve agricultural and other employment outcomes, with online and mobile apps leading to increased productivity and job opportunities. Similarly, an increase in the availability of and ability to access and use web-based government services will enable citizens ‒ particularly those who live far from major cities ‒ to take advantage of previously unavailable public services; it is estimated that more effective delivery of these services could achieve technology-related productivity gains of $10-25 billion annually, by 20256.
Yet progress toward expanding internet access across Africa has been slow, and has been further slowing in recent years. In Africa, internet use has grown by just 1.7% over the past year ‒ from an estimated 19% in 2014 to 20.7% in 20157. At this rate, it will take decades for Africa to reach the internet usage levels currently seen in Europe (77.6%). What can African governments do to bring more citizens online, close the growing digital divide, and enable faster and more equitable socio-economic development?
Achieving affordable internet through policy reform
Technical solutions to deliver affordable internet access are well advanced, but all too often obsolete or ill-conceived policies and regulations are restricting their deployment and keeping prices artificially high. To address this challenge, the Alliance for Affordable Internet (A4AI) supports policy and regulatory reforms in line with international best practices that are proven to help reduce industry costs and ultimately improve affordability. It does this by supporting the establishment of in-country multi-stakeholder coalitions, with members from across the government, private sector, civil society and academia, which work to bring about the policy reforms needed to bring down broadband prices. Extensive research and on-the-ground experiences have highlighted three key policy areas with the potential to lower industry cost structure and reduce broadband costs in Africa: (1) infrastructure sharing; (2) a balanced approach to taxation of ICT goods and services; and (3) the effective use of Universal Service and Access Funds (USAFs).
The use of open access and shared infrastructure models can enable the efficient, effective and transparent development of a shared backbone infrastructure, and is an important strategy for reducing capital expenditure, operating costs and ultimately retail broadband prices. Government policies that provide incentives or subsidies to mobile phone operators and other internet service providers to share infrastructure and provide open access to existing infrastructure are critical to lowering overall capital expenditures. More importantly, this can make internet services more affordable for citizens.
A recent study by A4AI member APC estimated that if, on average, three operators had shared all fibre cable deployments in Africa between 2010 and 2013 (equivalent to approximately 23,000km of cable), each participating operator could have saved around $300 million8. Given these benefits, and the significant investment that is is still required in Africa, it is important for policymakers and regulators to create an environment where infrastructure sharing is encouraged, and is perceived as attractive by the operators.
Open access policies are also critical to reducing operator costs and redundant backbone infrastructure, and therefore to driving down the cost to connect for consumers. The construction and maintenance of fibre cables and other ICT infrastructure requires significant investment; policies that ensure that new market entrants or other operators can access this infrastructure will result in lower overall capital expenditure requirements, a reduced risk of underused network capacity, and a quicker return on investment. These outcomes can result in more service-based competition and greater affordability for the consumer.
A number of countries across Africa are pursuing policies of open access and infrastructure sharing and are implementing guidelines and, where necessary, supporting regulations to encourage increased collaboration between operators. The Government of Nigeria, for example, has implemented guidelines on passive infrastructure sharing, which state that requests for infrastructure sharing can only be refused on technical grounds, or as a result of a lack of capacity. The guidelines further empower the Nigerian Communication Commission to act as an intermediary to resolve disputes and facilitate agreements between operators. Similar guidelines issued by the Communications Authority of Kenya state that operators evaluating their infrastructure requirements should consider site sharing (i.e., tower sharing) as a priority option; the guidelines also state that if a request to share a site is denied, operators must explain their reasons for doing so.
In São Tomé and Príncipe, the national regulator and the country’s incumbent operator worked together to ensure open access to the Africa Coast to Europe cable infrastructure that was managed by the incumbent. These conditions led to the entry of a second major operator to the market in 2014, increasing both competition and the likelihood of lower internet prices and an increase in broadband use.
Taxation and telecommunications
Taxation has a significant impact on consumer affordability for all goods and services. However, the temptation to focus solely on potential short-term revenue gains encourages many governments to tax ICT products and services heavily. As a result, devices like mobile phone handsets are often classified as luxury goods and are taxed at very high rates. This is common in Africa and, according to one 2011 study by the GSMA and Deloitte, the continent had the highest level of taxation as a proportion of the cost to own a mobile handset (29%)9. These high taxation levels result in a tax regime that often undermines the government’s overall goal of using ICT to drive social and economic development. A balanced taxation policy for the telecommunications sector that considers the positive medium- to long-term socio-economic impacts of increased ICT device consumption and internet use is critical to reducing the cost to connect and enabling more people to come online.
When it began work in early 2014, the A4AI-Ghana Multi-stakeholder Coalition identified high taxation levels in the ICT sector as a primary barrier to increasing affordable internet access. At the time, taxes accounted for 35% of the total cost of a smartphone and so the Coalition focused initial advocacy efforts on the removal of the 20% import duty. As a result of their work, the Government of Ghana announced in November 2014 its intention to abolish this duty, which will lower the costs of smartphones in the country and produce additional secondary benefits, like a reduction in illegal smartphone imports10.
A similar effort is underway in Mozambique, where the A4AI-Mozambique Multi-stakeholder Coalition is working to reduce the custom duties on telecoms equipment and devices from 7.5% to 2.5%. They are doing this by demonstrating that the loss of revenue for the government in the short term would be offset by duties from increased consumption of these devices ‒ made possible by cheaper device prices ‒ and, more importantly, other multiplier effects that follow from the increased diffusion of ICTs in the economy, such as economic growth, innovation and new business opportunities11.
Finally, a less recent but more indicative example is that of Kenya. In 2009, the government decided to remove the imposition of VAT on mobile handsets. What followed was an estimated 200% increase in handset purchases and an increase in the mobile penetration rate from 50% to 70%12.
Universal Service and Access Funds
Thus far, we have implied that the costs of internet services will decrease and use will increase once governments create appropriate incentive and regulatory structures, and private companies invest accordingly. However, this logic may not follow for all segments of the population; this is particularly the case for women, low-income populations, and for those that live in areas (e.g., rural communities) where businesses may perceive the provision of services as unprofitable or unsustainable without ongoing support. For these communities, the price of an internet connection is often completely out of reach, and so they remain offline.
Universal Service and Access Funds (USAFs) have been used by governments for several decades now as a way of addressing the communication needs of these underserved communities. USAFs are typically financed by contributions from telecommunications companies, and the money collected is used to fill existing gaps in the market-based provision of services, through a combination of subsidies or incentives.
As the importance of addressing factors on both the demand and supply sides has become more evident, so too has appreciation of the role that USAFs can play in facilitating broadband access and adoption. As a result, governments are increasingly incorporating USAFs into their national broadband plans. Clear plans, designed to complement specific needs within each country (e.g., digital literacy and awareness programmes), and targeted at those populations that have been excluded from the digital revolution as a result of economic or cultural factors, tend to be the most successful in promoting affordable and equitable access.
Funds are often used to support infrastructure development. This is the case in Côte d’Ivoire, where the government is currently implementing a National Broadband Program that aims to establish a 7000km fibre optic backbone network throughout the country, with an emphasis on rural areas13. In addition to large national efforts, local investments are also needed to improve connectivity in rural areas. The Ghana Investment Fund for Electronic Communications has provided funding for a range of small-scale projects that address the last-mile connectivity and equipment needs of libraries, schools, post offices and prisons. The Universal Service Provision Fund in Nigeria (one of the largest in Africa in terms of financing) has also invested in a range of projects to support rural last-mile connectivity.
Given the large amount of money involved, it is important that USAFs have significant autonomy and can operate in a highly transparent and open manner. This transparency is critical both to eliminate possible corruption, and to allow for effective monitoring and evaluation of USAF operations. Finally, collaboration with stakeholders is also important for effective fund management. In Morocco, for example, operators are allowed to propose their own universal service projects for approval by the Comité de Gestion du Service Universel des Télécommunications (CGSUT), which manages the USAF in that country14. This can be an attractive option for operators who are able to have a direct say in how their universal service contributions are used.
Making affordable internet a reality
Increasing affordable internet access is essential if countries are to achieve the social developments and inclusive knowledge-based economies they desire. Many of the challenges in improving internet affordability require both innovative policies and methods to make these strategies a reality. Indeed, while several of the best practices mentioned above are well known, many countries are yet to adopt them. By highlighting a few important best practices that have worked to reduce costs and charting how these policy shifts occurred, we hope to encourage more countries to consider implementing similar policy and regulatory reforms.
We recognise that policy change is neither a straightforward nor an easy process. What our experiences at A4AI have shown is that the effort to create change can be augmented by national multi-stakeholder coalitions. It should be clear that many of the above mentioned strategies will require partnerships between the public sector, operators, and civil society groups to be successful, even where government leadership in shaping policy is essential. Indeed, while these policy tools will be finalized and used by government, holistic understanding of the problems and the solutions can only be achieved through collaboration between all stakeholders. Uniting a wide range of actors around the common goal of more affordable internet access will be critical to the successful implementation of these best practices, and to connecting the billions that remain offline today.
About the Organization
The Alliance for Affordable Internet (A4AI – a4ai.org) is the world’s broadest technology sector coalition working to drive down the cost of internet access in less developed countries. Comprising over 70 member organizations from across the private, public and not-for-profit sectors, A4AI works through a blend of international advocacy and on-the-ground engagements to support policy and regulatory reforms proven to help reduce industry costs and improve broadband affordability. The World Wide Web Foundation, founded by Web inventor Sir Tim Berners-Lee, initiated the Alliance in 2013. A4AI global sponsors include Google, USAID and the UK DFID.