Puerto Rico, U.S.V.I. could benefit from zero rating

Two of the United States’ insular territories in the Caribbean, the U.S. Virgin Islands and Puerto Rico, could benefit from wireless companies using zero rating policies. Think of zero rating as the “1-800 number” business model for 21st century broadband. Under zero rating, a wireless carrier allows a subscriber to access certain content without additional charges to a customer’s data cap. Former U.S. Congressman Rick Boucher, the honorary chair of the Internet Innovation Alliance, writes an insightful article spelling out the benefits of zero rating, especially for low income consumers. For low income consumers, access to free content acts like a discount on the price of accessing information.

Puerto Rico and the U.S. Virgin Islands have plenty of consumers in the low income category, a fact often overlooked by their fellow Americans living on the mainland who think of these territories as merely great beach front property.

According to data from the Central Intelligence Agency’s World Factbook, while Puerto Rico has a low fixed line penetration ( 23 fixed line subscribers per 100 residents), the island has a high wireless penetration level (89 wireless subscribers per 100 residents). The unemployment rate was 13.7% in 2014 according to the CIA while the poverty rate stood at 46.2%.

Puerto Rico’s sister territory to the east, the Virgin Islands, fare a little better on the poverty level statistic (28.9%) with unemployment hovering around 13%. Internet penetration is abysmal, however, with only 55% of the territory’s households connected to the internet.

The territories are in dire need of diversification of their economies and boosts in their output. For example, gross domestic product per capital in the Virgin Islands has been falling annually. According to the C.I.A., GDP registered at $40,500 in 2011; $39,500 in 2012; and $36,100 in 2013.

The U.S. Census Bureau reports Puerto Rico’s per capita income at $11,394 and median household income at $19,350. Approximately 45% of Puerto Rico’s population aged 16 to 64 participate in the labor force. How dismal these numbers are is apparent when compared with the United States on average where per capita income is $28,930; median household income is $53,889; and the labor force participation rate is 63.3%.

Moving into the burgeoning knowledge economy may help in its efforts to diversify, but an aggressive move into the knowledge economy requires digital access to knowledge in order to compete. Broadband access may be cost prohibitive for a significant portion of the population due to poverty and unemployment, which makes zero rating an important policy to pursue.

Making wireless connectivity to digital content more affordable exposes low income consumers to services they would not have otherwise explored if it meant taking a  hit to their data caps.Providing the poor with discounted access to digital content may also serve wireless carriers by creating additional subscribers to existing and new digital services.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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