Global economic turmoil has permeated many different industries and of course, telecoms has not been the exception. One way governments try to mediate reality is by providing social tariffs, which offer qualifying customers discounted deals for broadband access, acting as a safety net for those who may be struggling to afford it. However, cheaper tariffs are still widely inaccessible in many areas of the world, including the Middle East.
1. The Problem Doesn’t Start with Affordability
Affordability still remains a barrier to mobile internet use for many in the Middle East and digital inclusion in the region is stark. This is largely due to many governments across the region retaining a stronger monopoly over public networks. According to GSMA, 11% of the region is not covered by a mobile broadband network, with a further 50% not connected to mobile internet despite being covered by 4G networks.
The problem of affordability is caused by a lack of network competition, which comes as a result of an exclusive pool of service providers taking over the majority of network control. Not only does this remove the scope for competition, but it also means that investment is not readily incentivised, allowing these bigger service providers to keep network prices high and out of reach for consumers in the region.
It’s clear the issue of social tariffs goes far beyond just affordability and comes down to network inequality. The control of these large private telecom providers over the general network means consumers are at their disposal in terms of pricing. With limited market competition in the region, real digital inclusion appears to still be a distant reality.
Comparatively, in the UK, low-income families can access social tariffs, which provide a discount on network plans. However, uptake for this is just 3% of all eligible households mainly due to poor communication about the existence of such plans with limited advertising. The biggest issue here again is not affordability, but instead the lack of reliable infrastructure to provide adequate connection in low-income areas and regions.
2. Build Networks that Can Cope with the Current Demand
Service providers often avoid investment in certain areas due to the negative cost-benefit and roll-out challenges to provide ubiquitous connectivity. There is a high correlation between access to reliable connectivity and income: 20% of the most deprived areas have community needs that are almost three times as high as the national average. This leads to market failure and requires public sector intervention.
Fibre-To-The-Premises can be used to roll out connectivity on an international scale. However, many rural areas and lower-income countries are not profitable for such deployments as there are no short-term commercial incentives due to a lack of competition. There is a clear need for more diversification of telecoms infrastructure ownership and new deployment models, which aim at prioritising a more competitive telecommunications market with stronger public sector intervention.
The most commonly used public sector investment model for network rollouts is gap funding procuring a private sector partner who will finance, design, build, own and operate the infrastructure. This model has failed to deliver in key areas such as digital inclusion, integrated connectivity, and cross-sector innovation.
3. Investment Has to Be Incentivized
The failure lies in the fact that the existing model for telecoms infrastructure investment model is based on functionally-oriented networks. These operate as un-connected vertical silos, oftentimes not built around user needs. Under this model, digital programs such as fibre, smart cities or digital inclusion are usually not integrated, such that an operational decision made within each program will most likely involve replicating a decision that has already been made by another program – thus, wasting valuable resources, time, and money.
Due to the challenges around integrated infrastructure and the siloed approach of networks, the telecommunications market is currently very closed. Further advancements are required to incentivise market expansion and provide a cheaper alternative to existing deployment models that motivate the public sector to expand their existing connectivity assets.
A solution to these shortcomings is proposing a new model based on Open Access and Infrastructure Sharing. This model gives the public sector more control and power to implement a coherent cross-sector infrastructure strategy that can unlock economic, environmental and social benefits, which works collaboratively not in siloes. However, internationally, we have seen this incentive come to fruition. Projects like the East African Submarine Cable System (ESSAy) which is a consortium of several telecom operators that jointly invested in and shared the first high-capacity submarine cable that connects several African countries. With operators employing various forms of infrastructure sharing, with different implications in terms of risk sharing, access, ownership, and funding it’s a positive example of the industry moving in a more democratic direction.
The Bottom Line
It is clear that these failures in being digitally inclusive stem from a more fundamental issue within the telecoms industry. There is a critical need for investment to build networks able to cope with the growing demand for delivering universal connectivity. Therefore, to solve persisting problems of affordability, the primary action that must be taken is encouraging wider network competition to incentivise investment to make social tariffs more accessible for those in the Middle East and beyond.
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