Snapshot: update on the affordability of Internet service in the Caribbean in 2014

A 2014 update of how affordable Internet broadband service is across the Caribbean.

Since May 2011, and following on from our most recent Snapshot of Internet speed and pricing, we have been regularly assessing the affordability of Internet broadband service across the Caribbean. In recent years, there has been growing emphasis by Internet Service Providers (ISPs) and policy makers on the Internet, as it is seen as a critical driver of competitiveness, along with economic and social development. However, in order to narrow the digital divide, and to promote greater use and innovation by a wider cross-section of our citizens, the Internet access must be affordable. Here, we update our findings on affordability, and discuss some of the changes that have occurred since the last exercise.

Approach

In our most recent Snapshot: 2014 update of Internet speeds and pricing across the Caribbean, we examined the variation of fixed-line Internet download speeds and monthly pricing for select Internet plans across a number of Caribbean countries. Specifically, and focusing on a sample of ISPs, we:

  • determined the best monthly rates for a fixed broadband Internet service plan with an advertised download speed of 2 Mbps
  • identified the best fixed broadband Internet plan by advertised download speed for up to USD 60.00, and
  • compared the monthly rates for a 2 Mbps fixed broadband Internet plan against those recorded in 2013.

Having examined monthly pricing, this review focuses on the affordability of those Internet plans. The prices captured in the Internet spend exercise have been compared against estimated monthly income, for which per capita Gross Domestic Product (GDP) figures, sourced from the International Monetary Fund and United Nations, have been used as a proxy. The resulting ratios, which have been expressed as percentages, indicate the proportion of a person’s income that would be spent on the stated plan, and hence indicates the extent to which it might be affordable to the average consumer.

How affordable is Internet service in 2014?

Similar to our recent Internet speed and spend exercise, we have increased the countries assessed from 17 to 19, by including Aruba and Curacao from the Dutch Caribbean. Nevertheless, in 2014, there is still a wide variation across the region in the proportion of a person’s monthly income spent on Internet service. Figure 1, shows the percentage of monthly income that could be spent on an Internet service plan with an advertised download speed of 2 Mbps. It is highlighted that the ISPs included from Bahamas and Guyana, did not offer 2 Mbps Internet plans, and so have not been included.

Figure 1: Portion of monthly income as a percentage for a 2 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)
Figure 1: Portion of monthly income as a percentage for a 2 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)

The proportion of income consumed ranged from 1.2% in the Cayman Islands, to 30.3% in Belize and 12.6% in Saint Vincent and the Grenadines. Across the region, the proportion of a typical monthly income that could be expended on a 2 Mbps plan when averaged across the countries assessed is approximately 5.7%. Without Belize, which it could be argued unduly skews the results, that average drops to 4.2%. For an Internet plan with an advertised download speed of up to 4 Mbps, only nine of the 19 countries offer such a plan, as shown in Figure 2. The impact of this plan ranged from as little as 1.2% of the typical monthly income in the Cayman Islands, to approximately 49.3% of the typical monthly income in Belize. The average across that small group is 11.8%, and excluding Belize, it would be in the region of 7.1%, of a person’s monthly income.

Figure 2: Portion of monthly income as a percentage consumed by a 4 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)
Figure 2: Portion of monthly income as a percentage consumed by a 4 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)

With regard to Internet plans with advertised download speeds of 8 Mbps, again nine of the 19 countries examined offer such an option. Figure 3, shows the percentage of monthly income such a plan would consume in those countries.

Figure 3: Portion of monthly income as a percentage consumed by an 8 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)
Figure 3: Portion of monthly income as a percentage consumed by an 8 Mbps Internet plan in select Caribbean countries as at May 2014 (Source: ICT Pulse)

For the countries included in Figure 3, an 8 Mbps plan would cost between 2.3% and 88.5% of the typical monthly income, in the Cayman Islands and Belize respectively. The average across that grouping, excluding Belize, would be approximately 7.9%, but with Belize that figure would jump to 16.9% of a typical person’s monthly income.

How has affordability changed since May 2012?

Since May 2012 and across all of the countries reviewed, there has been some change in the portion of monthly income that a 2Mbps Internet plan would consume, as reflected in Figure 4. The exceptions are Aruba and Curacao, which are new entries to our review, and Guyana, for which pricing for a 2 Mbps Internet plan could not be readily found. Between 2012 and 2014, the most significant changes were registered: in Saint Lucia, where the portion of monthly income spent decreased by -4.4%; Barbados, where that percentage dropped by -3.4%; and Anguilla, where the percentage dropped by -2.3%. Conversely, only four countries registered an increase in the portion of monthly income that would be spent on 2 Mbps plan over the same two-year period. The most significant increase, +1.7%, was recorded in the Turks and Caicos Islands, followed by Dominica at +0.6%, and the British Virgin Islands at +0.5%.

Figure 4:  Comparison of share of month income consumed by an Internet plan with an advertised download speed of 2 Mbps between May 2012 and May 2014 (Source: ICT Pulse)
Figure 4: Comparison of share of month income consumed by an Internet plan with an advertised download speed of 2 Mbps between May 2012 and May 2014 (Source: ICT Pulse)

Within the past year, between May 2013 and May 2014, there was a general decrease in the portion of monthly income that would be spent on a 2 Mbps plan. The largest drops were recorded in Suriname, -3.7%, followed by Trinidad and Tobago and Anguilla, at +2.1% and 1.1%, respectively. On the other hand, increases in the portion of monthly income that would be spent on 2 Mbps plan, were recorded in the Turks and Caicos Islands, +1.7%, the British Virgin Islands, +0.5% and in Saint Vincent and the Grenadines, +0.3%.

A few thoughts…

Over the period in which we have been tracking the affordability of fixed-line broadband Internet service, since May 2011, generally, pricing for Internet service have been falling and so is consuming less of an average person’s income, as reflected in Table 1. Across the Caribbean (again excluding Belize and Guyana), the averaged proportion of monthly income spent on a 2 Mbps fixed broadband Internet plan is continuing to decline, though the rate appears to be slowing.

Table 1:  Portion of monthly income spent on an Internet plan with an advertised download speed of 2 Mbps averaged across the Caribbean between 2011 and 2014 (Source: ICT Pulse)
Table 1: Portion of monthly income spent on an Internet plan with an advertised download speed of 2 Mbps averaged across the Caribbean between 2011 and 2014 (Source: ICT Pulse)

Having said this, it is important to highlight that ISPs have been increaasing the download speeds offered. In some instances the prices for a particular plan, e.g. a 2 Mbps plan might be reduced; however, ISPs appear more inclined to maintain the price point but increase the speed. Hence, while the price per Megabit per second might be dropping, overall, the pool of persons who can afford to subscribe for service might not necessarily be widening at an heighten rate as expected.   ____________

8 Comments

  • Given the fact that in most countries in the Caribbean the local loop is bundled with broadband access, these figures are somewhat misleading. For example, in Barbados the cost of the landline service is another USD$21.98. Hence, the real cost of Internet service is $30.00 + $21.98 = $51.98. I believe the same scenario is quite standard across most of the countries in the region. $0.02

    • Hey nielharper,

      As I indicated for this same comment under last week’s article on Internet speed and pricing, while I generally agree with you regarding the principle of the local loop and local loop unbundling (LLU), do recall that it has been stated that the comparison would be limited to the monthly subscription rate payable for fixed Internet service only. There may be additional costs and fees payable, but those were not being considered in the assessment conducted.

      However, please also note that LLU is more about providing competitors with access to the local loop, i.e. the last mile from the closest exchange to the customers, thus eliminating the need for other players to fully replicate existing infrastructure. In the USD21.98 you are quoting for the landline service, that is a retail price, which not only includes the cost of the local loop, but also a broad range of other elements and costs, e.g. the infrastructure from the local exchange to main exchange, as well as call origination, interconnection and termination charges . Hence, in my opinion, the figures that you providing are also misleading…

      On another note, and as mentioned before, your comment suggests that it is not possible to have Internet service at home without having a landline service, i.e. a fixed-line telephone, but that is really not the case.

      In many of Caribbean countries, you can have your landline services from one provider and your Internet from another. Also, with regard to billing for Internet service (only), typically, it would not necessarily include a separate charge for the “landline” per se, especially if the Internet is the only service that is being accessed. Instead, the cost for the cabling (and of the local loop) would be incorporated into the month subscription rate advertised, along with the installation/activation fees that might be payable…

      • The goal of LLU is more than providing equal access to the local loop. It is also about reduction of shared loop prices (up to 75% in some jurisdictions), driving innovation and affording greater choice to consumers. The USD$21.98 that I quoted was for a basic landline with no extra features (IDD, call forwarding, call waiting, etc.), and was basically a hidden cost in the overall pricing of LIME’s Iegacy Internet service — legacy as in copper pairs and not wireless local loop or FTTx. The only viable competitor for LIME in Barbados is Flow, and their coverage map for FTTx is not the greatest, as illustrated in the following URL:

        http://discoverflow.co/barbados/service-availability

        Hence, there are large catchments in the country where my statements would hold true. And once again I reiterate, there are many other countries in the Caribbean where this scenario is replicated. Am I wrong?

        • Hi Neil-Harper.

          Actually, in Jamaica there is significant choice in terms of whether or not Broadband and land line services are bundled. Indeed, many persons take their internet service from one provider via cable even while maintaining fixed line from another. In any event, one way to look at it, is that what is important in assessing the cost of broad band is the incremental charge for the service. So if you already have a land line that is a legacy arrangement and a cost which you are already bearing. In that event, what you will need to determine in electing to opt for Broadband Internet is the incremental cost of getting that service. So for purposes of comparison, this is the cost that should be compared with equivalent cost if it is obtained from a competing provider.

          I agree with the claim that access to the local loop is not an end in itself but rather it the completion benefits that it can generate. In that regard I am not seeing what is the point of disagreement.

          • AnsordEarl – I suggest that you read my last comment, and you would see that I was speaking to the Barbados experience. There are also countries like Dominica, St. Kitts & Nevis, St. Vincent, Anguilla, etc. that have similar issues with bundling of the local loop. My point is simply that the figures provided maybe somewhat misleading, even with the caveat tendered “the comparison would be limited to the monthly subscription rate payable for fixed Internet service only.”

  • Have you done this analysis in terms of disposable incomes and an assumption on say a real or notional minimum wage?

  • Neilharper,

    I read all your comments including “I believe the same scenario is quite standard across most of the countries in the region.” My intervention was simply to speak to the situation in Jamaica and also to say that that for the purposes of the analysis provided it is the “incremental cost that is at issue”

    Selah

  • The incomes also can be expressed in purchasing power parity (PPP) a common denominator, so to speak to really show the comparative impact from island to island. Jamaica, for example, using PPP may result in a higher % of income than expressed here due to their exchange rate and purchasing power of the dollar. PPP attempts to bring all the currencies on an even keel

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