When is Cheap, Cheap Enough to Bridge the Digital Divide? Modeling Income Related Structural Challenges of Technology Diffusion in Latin America

SummaryThe article presents a model that shows how income structures create diffusion patterns of Information and Communication Technologies (ICTs). The model allows the creation of scenarios for potential cuts in access prices and/or required subsidies for household spending in Mexico, Uruguay, Brazil, and Costa Rica. One analyzed scenario would require the reduction of ICT prices to as low as 4% of the current price levels (to US$ 0.75 per month), or alternatively, a subsidy as high as 6.2% of GDP (a figure comparable to public spending on education plus health). This is the income reality of the poor. Neither existing technological solutions nor existing financial mechanisms are sufficient to cope with this economic reality. The alternatives, such as a prolonged period of public access, are discussed.