The Myth of Population Density and ICT Infrastructure

Mobile phones have become a significant platform for the delivery of information services in developing economies. Therefore, a sufficiently developed mobile telecommunications infrastructure is an important element in the economic development of these countries. This paper examines the factors that affect the quality of the mobile phone infrastructure in a country. One classic argument for limited infrastructure is a low population density. In theory, fewer people in a region means fewer customers to cover the fixed costs of the infrastructure. This paper tests the link between population density and mobile infrastructure. The results contradict the classic argument. The paper then argues that the challenge actually lies in the financial markets. If the financial markets demand a higher rate of return from the infrastructure, then the telecommunications firms will invest less in the infrastructure.