Internet Access Payment Methods in Colombia

How does one access the Internet from home?  First, one must have a computer at home.  Then this computer must be connected to a telephone line (note: we are ignoring broadband access for this article).  The user dials the telephone number of the Internet service provider.  When connected, the user can proceed.  In this process, there are two service providers -- the telephone company and the Internet service provider.  The issue here is how the telephone company and the Internet service provider are to be paid.  There are a number of configurations, but we will stick to the most common ones:

1. The user pays for the telephone calls and the Internet service provider together (i.e. the telephone company and the Internet service provider are one and the same);
2. The user pays for the telephone calls and the Internet service provider separately (because they are completely different companies);
3. The user pays for the telephone calls only (e.g. the Internet service may be paid by his/her company/school, or this is a free Internet service);
4. The user uses a a prepaid card to pay for both telephone calls and Internet service

We will now refer to the 2004 TGI-EGM Colombia study.  Within this survey, there were 1,487 survey respondents between the ages of 12 to 64 years old who access the Internet via the telephone from their homes.  Here is the distribution by method of payments:

1. 49% pay for the telephone calls and the Internet service provider together;
2. 22% pay for the telephone calls and the Internet service provider separately;
3. 17% pay for the telephone calls only;
4. 13% use prepaid cards

Why do people choose different methods of payment?  The following chart shows the incidences separately by socio-economic level.  

(source: 2004 TGI-EGM Colombia)

So the explanation is as follows.  Typically, the solo package is going to be the most expensive one and involves a large payment to the telephone company every month, but it does have the advantage of convenience.  Therefore, affluent persons are more likely to choose the solo package.  The separate packages allow one to mix and match cheaper (as well as technically more desirable) services, and therefore there is less of a socio-economic skew.  Those who pay only for the telephone calls but not the Internet access skews towards the less affluent.  And finally, those who use prepaid cards will skew towards the least affluent.  These various configurations probably came about as marketing responses.  Once upon a time, Internet access was marketed as an upscale communications technology.  In order to broaden the market, it was necessary to device various financial configurations that enable people of lesser means to gain access.

(source: 2004 TGI-EGM Colombia)

The fact that there are costs associated with the telephone calls as well as Internet access time implies that there ought to be differences that are reflected in the usage levels.  Indeed the above chart shows the average time spent.  The solo package users are the ones who can best afford the longest time spent, whereas the other three groups spent less time.

Eventually, one would like to see that both lower technology costs as well as increased market competition should lead to universal Internet access, much as electricity and television sets are available now. 

(posted by Roland Soong, 12/06/2004)