Investing in Infrastructure in Developing Regions: Innovative Strategies and Policies

Abstract

Recent innovations in technology and policy are significantly increasing access to basic telecommunications services in the developing world. For example, in many developing countries, there are now more wireless lines than fixed lines; for many new subscribers, their mobile phone is their first and only phone. This dramatic growth in connectivity is due partly to the advantages of wireless technologies in fast deployment of new networks, but perhaps more to the innovations in regulation and policy that have fostered investment. Where countries have introduced competition in wireless/mobile services, rates have come down, and wireless carriers have introduced features such as rechargeable cards and inexpensive text messaging. The result has been dramatic growth in access to basic communications. However, access to the Internet is still very limited in most developing regions, and broadband is almost nonexistent. Where access is available, the price is often beyond the means of most potential users and bandwidth is extremely limited, severely hampering exploitation of the Internet’s potential for social and economic applications – in commerce, education, health, and other services. This paper will examine how technological and regulatory innovations might increase Internet access and bridge the broadband divide. For example, new technologies such as Wi-Fi are being used in industrialized countries to establish "hot spots" for high-speed access in businesses and cyber cafés. This approach may be more attractive in terms of cost and fast deployment than wireline or cable. Fixed wireless may also be used to extend last mile access. Small satellite terminals (VSATs) may be the least cost solution in isolated and remote areas. Yet access to the backbone network may still be expensive unless regulatory policies that allow or even foster competition in the national network. At the local level, competition is needed so that users can choose an alternative to the incumbent network such as a VSAT or wireless network. The paper will also examine how targeted subsidies may be used to increase broadband access. A policy of providing discounts or other funding to end users may be more effective than the more traditional policy of subsidizing the carrier of last resort. This model has been successfully used in the U.S., where schools, libraries, and rural health centers are empowered through universal service subsidies to solicit bids for services from carriers. The paper will conclude with a summary of lessons learned from these innovations in technology and policy that could help to accelerate access to affordable and reliable Internet access in developing regions.