Why Fiber Matters

Cobus Venter

Clearly, this post will not be about keeping you regular. Rather, it's about the economic rationale of having uncapped, high-speed, and quality fiber internet becoming ubiquitous in the informal settlements found everywhere in the developing world.

We all know the internet has positives and negatives, but the positives outweigh the negatives. We all take being connected largely for granted. This is simply not the case for most people. Having access to the net is different from being able to fully utilize its full benefits. So while it is true that most of Mzansi's people can get online via mobile data, it's also true that they need to get offline pretty quickly due to cost factors.

As an economist, we tend to obsess about two things: the alignment of incentives and lowering the costs of pretty much everything. It is here that fiber internet comes into its own. Global development, especially in the developing world, really gained traction in the second half of the last century but started accelerating madly as supply chains went global and the digital era fully entered an exponential phase from the 1980s onwards. The internet made location less important, and countries were better able to exploit their comparative and competitive advantage. This growth did lead to societal changes that became fully exposed during and after the great financial crisis. Globalization got a bad reputation, but there is no getting away from the reality that it allowed massive economic growth, especially in the developing world. Unfortunately, it is also true that the "lead" of the more developed countries, or those that owned and controlled the supply chains, remained fully entrenched.

At the same time, the advantage that some developing countries had in terms of cheap and often well-schooled labor supplies came to a startling realization. Digitization and automation constantly decreased the relative value, and hence importance, of physical labor. It became a race to constantly increase the quality of human resources to be able to climb the labor ladder, so to speak.

Many started feeling alienated and left behind. Social media placed a blazing spotlight on the differences between the rich and poor. It feels as if there is trouble brewing, and this is before the coming impacts of AI gain traction.

But even if those in the poor areas wanted to better their situations, they were hamstrung by being dependent on their respective governments to improve education and infrastructure, simply to give them access to better opportunities. But once they got access, the reality is that they were still behind their developed nation peers.

Nothing levels the playing field like having access to the same resources as any other human being. And nothing provides this like fiber internet. Economics obsesses about the allocation of scarce resources, and the immediate demands for healthcare, security, education, and infrastructure mean that providing internet to the poor does not feature at the top of the list of most government agendas.

Fiber is rolled out in developing countries to those who can pay, and they and their families then enjoy the same benefits as those in rich countries. The gap between the rich and the poor extends further.

Traditional financing models require off-take agreements and credit tools like debit orders and credit cards. These mostly don't exist in the informal market.

Cash is a wonderful frictionless tool to transact with. It does not lose its value (short-term), and there are no transaction costs associated. But in the townships of South Africa, crime is rife. Dealing in cash has massive risks. The costs associated with cash handling and losing your day's takings due to getting mugged imply deadweight losses (no pun intended) to the system. A better way of dealing with this problem takes the form of various forms of electronic payment platforms/e-wallets, of which Vulacoin is but one. But Vulacoin is specifically designed to allow very small micro-payments and carries no cost to

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