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A Spatial Econometric Analysis of Cell Phone Coverage in Sub-Sahara Africa

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Determinants of a Digital Divide in Sub-Saharan Africa: A Spatial Econometric Analysis of Cell Phone Coverage
WPS # 4516

March 2008,  Piet Buys[1], Susmita Dasgupta, Tim Thomas, David Wheeler

 In the past few decades, Information Communication Technologies (ICT) have transformed the world. By connecting people and places, ICT has played a vital role in national, regional, and global development, and holds enormous promise for the future. Targeted public support may be necessary to expand coverage to low density areas in Sub-Saharan Africa.

The empirical literature on a link between telecommunications and growth is now extensive, and there is a reasonably strong consensus that telecommunications rollout has large potential benefits in furthering sustainable development.[2]Figure 1 In addition, there is mounting anecdotal evidence from country studies that access to telecommunications in rural areas enhances development. The economic benefits of rural ICT access are primarily due to access to information, markets, and increased business opportunities.[3]

Africa’s ICT situation is by and large poor by international standards

Most Africans do not yet have access to the basic ICT services needed to make or receive a simple telephone call, while the rest of the world is dominated by advanced digital telecommunication systems and the Internet.

Although almost all Sub-Saharan countries are poor by international standards, they exhibit great disparities in coverage by cell telephone systems

Statistics on country-level percentages of urban and rural populations within range of cell phone towers in March, 2004 revealed variation in coverage from 0 to 100%. Rural coverage was negligible or nonexistent in 17 countries [4], but above 47% in the top quartile; urban coverage was below 56% in the lowest quartile, but above 98% in the top quartile. 

In this research, the authors investigate the determinants of these disparities with an econometric model that employs locational information for cell-phone towers across Sub-Saharan Africa. The analysis divides the region into close to one million geographical squares, and investigates the likelihood that each square contains at least one tower. A probability model has been estimated that relates the likelihood of cell-tower location within a grid square to potential market size (proximate population); installation and maintenance cost factors related to accessibility (elevation, slope, distance from a main road, distance from the nearest large city); and national competition policy.

As expected, the analysis indicates strong, significant results for the supply-demand variables, and very strong results for the competition policy index. The probability of a GSM cell tower location in a grid square increases significantly with population and the degree of competition, and decreases significantly with higher levels of installation and maintenance cost factors (higher elevation, steep slope, longer distance from the main road, longer travel time to the nearest major city). Figure 2

To assess the potential implications of pro-competitive policy on improving connectivity, a simulation was conducted, based on the econometric results.

Figure 2 plots the full simulation results for Sub-Saharan Africa, showing the probability of cell-tower location in each grid square.  Higher-probability squares are colored red; lower-probability squares yellow.

Overall, results suggest that a generalized improvement in competition policy to a level that currently characterizes the best-performing states (Benin, Botswana, Namibia, Uganda and South Africa) in Sub-Saharan Africa could lead to huge improvements in cell-phone area coverage for many states currently with poor policy performance. For nine countries, the policy improvement translates to a coverage increase greater than 100%, and for all countries whose CPIA was below 4 in 2004, the predicted increase in coverage is 96%.

These results provide striking evidence of the power of policy reform to improve public access to telecommunications in Sub-Saharan Africa. Feasible reforms may include enactment of formal regulations, privatization of incumbent operators, introduction of competition with attention to licensing, direct access promotion, interconnection, allocation of scarce resources (e.g., numbering and spectrum) and pricing. While outcomes of progressive policies are very hopeful, the research ends with one cautionary note. 

Competition policy reform alone will not be sufficient to ensure universal coverage in Sub-Saharan Africa

Inspection of the simulation map in Figure 2 suggests that competition policy reform alone will not be sufficient to ensure universal coverage in Sub-Saharan Africa.  On the map, coverage is concentrated in areas with relatively dense populations, near main transport arteries.  The large swaths of brown and black reveal the extent of coverage exclusion for low-density rural populations that are off-road and uphill.  Provided that economic cost-benefit analyses suggest viability of ICT investments in such areas, targeted public support may be necessary to expand coverage to low density areas. Further research is warranted on the selection of country specific cost effective intervention strategies.

Notes

1.  This research is dedicated to our colleague and co-researcher Piet Buys, who died in a tragic accident during the latter part of the research.

2. World Bank. 2006. Information and Communications for Development 2006: Global Trends and Policies.

3. Grace, J, C. Kenny and Christine Zhen-Wei Qiang. 2004. "Information and Communication Technologies and Broad-Based Development: A Partial Review of the Evidence." World Bank Working Paper No. 12.

4.  Djibouti, Angola, Congo, Comoros, Somalia, Guinea, Guinea, Sudan, Central African Republic, Mali, Eritrea, Niger, Guinea Bissau, Sierra Leone, Chad, Ethiopia and Liberia.




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