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Competition means affordable broadband

Siddhartha Raja's picture

Multi-segment competition means greater affordability

I was recently looking at broadband markets in Eastern Europe, specifically among the CIS countries. I found interesting data from TeleGeography that shows have increased international connectivity makes services more affordable (Chart 1). Much has been written on this topic, and the table I have compiled below supports earlier work.  

However, I also found another interesting little trend. While increased competition in international access has a positive effect on affordability, the level of competition in the retail market has an even more pronounced effect on affordability (Chart 2). If you look at the two graphs below, you will notice the R-squared value for international connectivity-to-affordability as 0.04, while for a proxy of competition it is 0.12. A higher R-squared value suggests a stronger relationship.


Chart 1

More international carriers leads to affordability

Chart 2

More retail providers leads to increased affordability

 

This is only snapshot data, and the results are constructed using very specific definitions for broadband and for affordability (see below).  

But it certainly reinforces the message that competition across market segments is essential for affordability. Good regulation, which opens up international and domestic connectivity markets, will thus have a positive impact on affordability.

Definitions:

  • International competition: How many international carriers serve the country; does not account for any exclusive contracts among carriers and local service providers.
  • Retail competition: How many retail service providers offer broadband Internet service packages advertized as 1 Mbps downstream (any upstream) with no bit cap.
  • Affordability: Measures how many subscriptions one person can buy. It is the GDP per capita (current US$, 2008) per month divided by the average monthly price of 1 Mbps downstream-no bit cap service in a country. The higher the measure, the more affordable is service.

All data is from TeleGeography as of July 2010, except GDP per capita data which is World Bank as of 2008. Estonia and Croatia included as comparators.

The data for these graphs:
 

Country

International competition

Retail competition

Affordability

Armenia

3

2

4.04

Azerbaijan

5

7

1.66

Belarus

4

7

2.92

Kazakhstan

4

2

0.38

Kyrgyzstan

2

1

0.32

Moldova

6

2

14.91

Russia

23

2

6.04

Ukraine

17

9

4.40

Uzbekistan

3

1

0.04

Estonia

11

9

43.36

Croatia

9

5

58.34

 

 

 

 

 

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