One of the most effective ways to reduce poverty in developing countries is to extend the reach of the Internet. Over the last 20 years, the online world has created millions of jobs and billions of dollars of economic activity. Entire new sectors have emerged, such as e-commerce, social media, and data analytics. In developing countries, the Internet is even more powerful than it is elsewhere. It can connect people who have known only subsistence to the modern economy, and provide them with opportunities for social and economic advancement. Yet most people in developing countries, some 56 percent of the world’s population, still do not use the Internet.
Most people in developing countries, some 56 percent of the world’s population, still do not use the Internet.
Why has progress been so slow? There is a temptation for policy makers to blame protectionism, especially when the telecommunications sector is involved. From this perspective, some decision makers are constraining Internet development because they fear it will invite foreign competitors, who will compete unfairly with local Internet service providers or telecom operators. These are important issues, but they do not sufficiently explain why so many people aren’t online.
We dug deeper to understand the factors that keep more than 4 billion people unconnected. Using the Internet is daunting for many people in developing countries for three main reasons: Access is too expensive; the Internet lacks content that is relevant to them; and the Internet is too unfamiliar. The consequences are that many people can’t easily connect, they give up trying too soon, or they don’t attempt to connect in the first place because they cannot appreciate how it might help them.
The first barrier, affordability, is the most important — and may offer the most significant opportunity for change. Assuming that Internet usage means consuming 500 megabytes of data per month at current prices, only 17 percent of people in South Asia and 11 percent of people in sub-Saharan Africa can afford to use the Internet. (This amount, although considered reasonable in developing countries, is still less than an average mobile data user consumes in developed countries.) To make the Internet affordable to everybody, global prices would need to fall by an average of 90 percent — which is implausible with current infrastructure costs. At today’s prices, the margins on data are negative for many connectivity suppliers in developing countries.
To remove the affordability barrier, we need to make access cheaper and more efficient. This can be accomplished by modernising the data infrastructure — specifically, by replacing 2G, which was designed for voice and text but not for data, with more up-to-date 4G and 5G broadband systems. The most cost-effective way to upgrade is to repurpose frequencies currently occupied by 2G, which would automatically move existing subscribers to speedier access.
Modernisation also means building more data centres and Internet exchange points (IXPs) in developing countries. This would provide the critical infrastructure that knits together national and international networks, and that makes connections faster and cheaper. At present, the more populous developing world has just a fraction of the international infrastructure of the developed north. In North America, for example, each IXP serves just 4.1 million people. By contrast, in South Asia, each IXP must handle 215 million (see exhibit). If the number of IXPs in developing countries rose, access to information, employment opportunities, and economic growth would also rise.
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