September 19, 2021

The digital divide – New frameworks can unlock the funding gap

Case Study By

Mr. Denis O'Brien

Chairman of Digicel Group

State of Broadband 2021

As Commissioners we have all long known the problem of the digital divide. 3.5 billion people in the developing world remain unconnected to Broadband networks.
The IMF reports that only 28% of Africans use the Internet and Internet usage is as little as 17% in some low-income countries according to the World Economic Forum. More of the same policies by Governments and Regulators will not change this. The Broadband Commission estimates that the cost to address the broadband gap in Africa alone is US$100bn.
Fundamentally, all stakeholders must play and pay their part. The growth of digital platforms over the past decade, and especially during the Covid-19 pandemic, is well documented. The platforms that dominate the Internet need to contribute a share of their revenues to solve the digital divide. Unfortunately some prefer to live on another planet (or spend money trying to get to one) instead of helping to solve the problems on this planet.

The old funding model is broken as revenues from digital services do not flow back to infrastructure. The Broadband Commission’s ‘Connecting Africa Through Broadband’ report concluded that as digital services are increasingly provided by non-network operators, contributions from them to the US$100 billion needed to fund new infrastructure costs (on a direct or indirect basis) are required to close the funding gap. As online platforms continue to side-line network operators, vital investment in building and maintaining infrastructure is becoming unsustainable.

The question then is how can we enable all players to play their part and contribute? Potential initiatives include:

  • A portion of any new tax receipts from digital service providers should be earmarked for investment in critical digital infrastructure. The recent G7 proposal may only be part of the solution. Many jurisdictions, including countries such as Kenya and a number of US States, are introducing digital service taxes as they are no longer prepared to wait for the OECD process or do not believe that it will benefit them.
  • In countries where the broadband gap is acute agencies such as the World Bank, the EU, USAID and others could help frontload the investment in the infrastructure and receive a return over a 25-year period. In order to achieve this return Governments, Regulators, and Tax Authorities could require digital platforms to pay a 10% revenue share of their local revenues.
  • In Australia, digital platforms are required by law to negotiate and agree commercial terms with local companies for the use of locally produced content. A similar approach could require digital platforms to agree commercial arrangements with local infrastructure partners.
Now is the time for bold and urgent action if we want to avoid a two tier digital world and if are going to bridge the digital divide by 2030. There are useful examples of frameworks that could be followed. Everyone who benefits economically or commercially from connecting the unconnected must contribute to making these connections.