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TITULO: Affordability of Mobile Phone Service in Latin America

AÑO: 2007
ETIQUETAS: regulation, affordability, regulatory framework, mobile operators

This study aims at contributing to the discussion about the regulatory tools that could improve access to telephone services by the poor. We analyse the costs and alternatives the poor face when buying telephone services, as well as the level of expenditure this represents in their consumption basket. In other words, we seek to evaluate the affordability of telephone services (and of mobile telephony in particular) among the poor. Further, we also try to identify changes in the regulatory framework and business practices of the operators that could expand the current market frontier.

This research is based on our own review of tariffs for fixed, mobile and public telephony in the largest Latin American countries, as well as on income and expenditure data collected by the respective national statistics institutes. In this first stage, we collected data from Argentina, Brazil, Chile, Colombia, Mexico, and Peru, which represent 78% of the total mobile regional market. In each market, we collected prices for every tariff plan (both pre- and post-paid) offered by the major mobile operators. In addition, we collected data about fixed and public telephony tariffs for the incumbent operators in each country.

The results confirm that the poor have to pay higher prices to access telephone services in the main Latin American markets. This is reflected in the price differences that exist between the pre-paid system, used by the vast majority of low income users, and the post-paid systems. Although competition has stimulated the reduction of tariffs in the mobile sector, there is still a wide tariff differential with respect to fixed and public telephony. However, the paper shows that the fixed-mobile tariff differential is lower than expected when using the basket methodology as opposed to unit prices. This means that the preference of the poor for mobile telephony is not only due to convenience factors (expenditure control in the pre-paid system), but also to the tariff structure for each of these alternatives.