The COVID-19 crisis has hit the Latin America and Caribbean (LAC) region harder than any other region in the world and has brought the need for a resilient and inclusive recovery into sharp focus. Greater digital access—in support of distance learning, digital cash transfers, telemedicine, and online public services—is the cornerstone of this agenda and requires both an ambitious policy and regulatory agenda as well as increased infrastructure investments. This is particularly important as the region gears up for 5G auctions and continues its 4G expansion.
The case for digital access is clear. Digitization boosts social and financial inclusion as well as learning and health outcomes. Almost half of LAC’s adult population is currently unbanked. Around 170 million students across the region were affected by school closures during the pandemic. And 71% of countries experienced disruptions to the delivery of care for noncommunicable diseases during the first months of the COVID crisis.
Today, less than 50% of LAC’s population has fixed broadband connectivity, and only 9.9% has high-quality fiber connectivity at home. While 87% of the population lives within range of a 4G signal, actual usage and penetration remains low (37%). And only 4 out of 10 rural Latin Americans have connectivity options compared with 71% of the population in urban areas.
Data plans and internet-enabled devices are not affordable for the region’s poor. On average, a measly 1GB data plan costs 2.7% of monthly household income in LAC (or 8-10% for the bottom quintile in some countries), well above the International Telecommunication Union’s 2% affordability threshold. In addition, the cheapest basic smartphone available costs between 4 and 12% of average household income in much of the region, and as much as 31-34% for people in Guatemala and Nicaragua or even 84% for people in Haiti.
With these cost burdens weighing disproportionately on vulnerable populations, uneven digital access could give rise to new forms of inequality in what is already the world's most unequal region.
Addressing the digital divide
Tackling the digital divide is imperative and will require policy actions to reduce cost, expand access, and incentivize greater private-sector and citizen participation, especially in four areas.
- First, LAC governments should pursue inclusion through service provision and legal and regulatory reform. This may include rolling out foundational digital identification systems for all citizens to allow secure and trusted access to public and private platforms; promoting infrastructure sharing among network operators and access to “dark fiber” owned by governments, utilities, and others; increasing competition in a highly concentrated market of mobile operators to stimulate innovation and investments by promoting open access, technology neutrality and greater security options; attaching network build-out obligations for underserved areas to 4G and 5G spectrum licenses; and streamlining administrative and approval processes. On average, LAC countries with clear, predictable regulations attract almost 50% more investment in ICT (and 64% more when coupled with good institutions).
- Second, policymakers should consider, direct or indirect financial incentives for both digital customers and operators as appropriate. On the demand side, subsidizing internet costs for the poorest and reducing taxes and customs duties on low-cost internet-capable devices can help bring down prices that exclude the poor. On the supply side, governments can use minimum subsidy concessions or temporary investment tax incentives to induce network operators to extend service into underserved regions. Similar initiatives could also encourage private firms and investors to scale up other digital infrastructure such as local data centers. LAC is currently home to only about 4% of the world’s data centers and total data center capacity in the region is estimated to be smaller than the capacity installed in Northern Virginia.
- Third, 0.12% of the region’s annual GDP; deploying 5G in first- and second-tier metropolitan centers, 0.17%; and achieving OECD levels of connectivity, 0.62%. In a region that under-invests in public infrastructure, the digital infrastructure gap is cheaper to close than gaps in transport, energy and other infrastructure sectors. . Over the next decade, universalizing broadband access in LAC is estimated to cost
- Fourth, digital expansion should not operate in a connectivity silo. Complementary measures such as digital skills training, need to be accelerated. Only 5-15% of adults in most LAC countries have medium or strong computer and problem‑solving skills in technology‑rich environments (vs 29.7% in OECD countries). Digital capacity building is beneficial to students and workers, as well as policymakers and regulators seeking technical expertise in digital infrastructure and related areas (data privacy, cybersecurity, digital tax, etc.).
. Multilateral institutions can help.
The World Bank, for instance, is helping provide some 1,300 public institutions with broadband connectivity in Haiti and assisting the Colombian government with policy and regulatory improvements for expanded broadband access.
While most LAC countries will continue to focus on the pandemic response in the near future, now is the time to seize the digital opportunities that will enable to region to unlock a greener, more resilient and more inclusive future.