The cost of data services, both wireless and fixed, is a significant factor in the digital divide in Bangladesh. As a low-income country, where a substantial portion of the population earns below the poverty line, high internet costs pose a barrier to accessing essential services like education, healthcare, and financial services. This high cost restricts millions of people from gaining affordable access to the digital economy, worsening social and economic inequalities.

How do we fare comparatively?

As per data analysis done by cable.co.uk in 2023 average cost of 1GB data in  Bangladesh is $0.23; which is $0.28 in Indonesia, $0.41 in Thailand, and $0.29 in Vietnam. For Fixed Broadband the average rate is $13.53 per month,  $28.05 per month, $22, and  $8.72  per month respectively. 

As per data from theGlobalEconomy.com, Gross Domestic Product Per Capita in 2023 was for Bangladesh $2,529, for Indonesia $4,940, Thailand $7,171, and Vietnam $4,346 (the World Bank, the global economy.com). This shows that Bangladesh faces a disproportionately higher burden of data costs comparing income level. 

Some of the factors contributing to high prices and compromised quality

1. High spectrum pricing for mobile network operators

According to GSMA, consumers in Bangladesh spend around 6-7% of their monthly income on mobile data, far above the global affordability benchmark of 2%. 

Bangladesh imposes high spectrum prices on mobile network operators (MNOs), which significantly raises operational costs. According to GSMA, spectrum pricing in Bangladesh is among the highest in the region. This forces operators to focus on recovering costs rather than investing in network upgrades.

2. Taxation and revenue sharing

Both MNOs and internet service providers (ISPs) in Bangladesh face a wide range of taxes and revenue-sharing mechanisms, which inflate the cost of data services. The tax burden for telecom providers includes:

Value-Added Tax (VAT): A 15% VAT is levied uniformly across telecom services, affecting both MNOs and ISPs.

Supplementary Duty (SD): An additional 10% SD is applied to mobile services.

Surcharge (SC): A 2% surcharge on total revenue of MNOs adds more financial strain.

In addition to these taxes, MNOs are required to share around 5.5% of their revenue with the government, while ISPs share about 3-5%. Additional revenue-sharing and tax arrangements apply to other layers of the telecom architecture, such as Gateways, Transmission, and Terrestrial layers. These cumulative costs ultimately increase the retail price of data, making it more expensive for consumers.

3. Inefficiencies in the IIG market

Bangladesh's telecom sector suffers from fragmentation due to too many licensed International Internet Gateway (IIG) operators. With around 40 IIGs, the market is highly inefficient, leading to higher latency and routing inefficiencies. This fragmentation discourages global Internet Content companies like YouTube and Meta to invest in Content Delivery Networks (CDNs) in the country. Countries like Vietnam and  Thailand have fewer IIG operators and enjoy better-quality data services.

4. High wholesale transmission costs and NTTN market dominance

The Nationwide Telecommunication Transmission Network (NTTN) market in Bangladesh is dominated by a few major players.  The BTRC has made efforts to standardize NTTN tariffs, setting rates between Tk 200-300 per Mbps for basic capacity in metropolitan areas. However, these rates remain significantly higher than those in countries like Vietnam, where 1 Gbps (1,000 Mbps) of transmission capacity costs about $20 (Tk 2,400). In Thailand, the same service costs $30 (Tk 3,600), and in the Philippines, it's priced around $25 (Tk 3,000). The disparity is largely due to the competitive markets in these countries and their more efficient utilisation of public infrastructure.

(Sources: BTRC,ITU, ADB). 

In contrast, Bangladesh's NTTN pricing structure is hindered by limited competition and the inefficient use of public assets. The government's licensing policies have prevented offering Info-Sarker infrastructure directly to access network providers, ISPs and MNOs, which could otherwise lower costs. Revisiting these policies and enhancing the use of public infrastructure is essential for reducing transmission costs and ultimately lowering consumer prices.

The path forward

Bangladesh has the potential to lower data prices and improve service quality through regulatory reforms. Lowering spectrum prices, revisiting the tax structure, and improving the efficiency of public infrastructure utilization are critical steps. Addressing the NTTN duopoly and relaxing licensing restrictions for ISPs could foster competition, which would in turn lower prices for consumers.

By reforming these key areas, Bangladesh could significantly narrow the digital divide and enhance the accessibility of digital services across the country.

Abu Nazam M Tanveer Hossain is a telecom policy expert.

The opinions/views expressed in this article are of the author's own and does not necessarily reflect the editorial stances of the newspaper.