Executive summary
Costa Rica’s mobile market gaining effective competition
Costa Rica’s telecom industry is on the brink of a sea change as it struggles to implement liberalisation of its internet, VoIP, and mobile telephony markets. The transformation is not an easy one. Of all Latin American countries, Costa Rica has possibly been the most resistant to either the privatisation or liberalisation of its telecom sector. The new regulator, Sutel, faces a challenging task.
State-owned ICE and its subsidiary Racsa have been the monopoly providers of virtually all telecom services in Costa Rica except for pay TV. ICE provides fixed and mobile telephony, ADSL access, and corporate solutions. Racsa offers broadband via cable modem and WiMAX, internet dial-up, WiFi, prepaid internet cards, and corporate services including internet via satellite. Though ICE has achieved better fixed-line coverage than any other operator in Latin America, it has proved itself inefficient in the mobile telephony business, with month-long waiting lists for mobile services.
ICE has displayed the typical reluctance of private incumbents towards competition, submitting objections against the issuing of authorisations, stalling interconnection negotiations, and criticising most of Sutel’s policies. In this, it has had the support of political forces averse to foreign enterprise. As a result, the liberalisation process in Costa Rica has been marked by a conspicuous lack of cooperation and dialogue among parties.
Sutel began to issue authorisations in 2009 to new companies interested in providing internet, VoIP, and corporate telecom service. It took a whole year, however, for ICE to sign interconnection contracts, and then only after Sutel’s intervention. The first alternative operators were finally interfaced in mid-2010. By then, Sutel had awarded 86 telecom authorisations.
Mobile telephony is expected to keep grow strongly given the market entrance of two competitors, Claro and Movistar, in late 2011, and the existing low cellular penetration compared with other Latin American countries. However, poor regulatory mechanisms have made it difficult for these new players to build their mobile infrastructure, creating delays in roll-out schedule as set out by the regulator.
Costa Rica’s broadband market is the most developed in Central America, with the highest broadband penetration for this sub-region. Geographical distribution however is unequal, with a much higher digital gap than in the case of telephone services. Compared with the whole of Latin America, Costa Rica’s broadband penetration lags behind Chile, Argentina, Uruguay, and some Caribbean islands.
The DTT market was underway in mid-2012, with the first digital broadcast. The switch to DTTV is expected to be completed by the end of 2017.
Key telecom parameters – 2010; 2012
Sector
| 2010
| 2012 (e)
|
|---|
Subscribers to telecoms services (thousand):
|
|---|
Fixed-line telephony
| 1,520
| 1,590
|
Fixed broadband
| 350
| 420
|
Mobile
| 2,340
| 2,320
|
Penetration of telecoms services:
|
|---|
Fixed-line telephony
| 33.3%
| 34.2%
|
Fixed broadband
| 7.7%
| 9.2%
|
Mobile SIM (population)
| 79.0%
| 87.0%
|
(Source: BuddeComm)
- Market highlights:
- In early 2010, Sutel implemented a price cap system for all services, including mobile and fixed-line telephony, text messaging, internet, and IP telephony. ICE’s existing rates were adopted as price caps. At the time, some of these tariffs were very low by Latin American standards.
- Sutel has adopted the Long Run Incremental Costs (LRIC) model to calculate access and interconnection rates between operators. All network operators in Costa Rica must grant interconnection to other network operators on a non-discriminatory and transparent basis.
- The first companies to reach access/interconnection agreements with ICE, in 2010, were cable TV company Tigo, public telephone operator BBG Global AG, and three VoIP providers: Ticom, CallMyWay, and Intertel Worldwide. Tigo was finally able to launch its own cable modem service, becoming the operator to offer internet access in competition with the incumbent.
- ICE’s prepaid service recycled the accounts of GSM customers that migrated to 3G, but even the number of lines have since proved insufficient.
- The government plans to move the management of the telecoms sector from the Ministry of Environment, Energy and Telecommunication (Minaet) to the Ministry of Science and Technology (Micit) by the beginning of 2013. The move was first proposed in 2010.
- RACSA contracted a Swedish firm to build a fibre network enabling ICE to offer triple play services.
Henry Lancaster
February 2013
Data in this report is the latest available at the time of preparation and may not be for the current year.
This report provides a comprehensive overview of trends and developments in Costa Rica’s telecommunications market. With its long-awaited liberalisation, Costa Rica is an attractive market for telecom investors. The report analyses the mobile, internet, broadband, digital TV and converging media sectors. Subjects include:
- Market and industry analyses, trends and developments;
- Facts, figures and statistics;
- Industry and regulatory issues;
- Infrastructure;
- Major players, revenues, subscribers, ARPU;
- Internet, IPTV;
- Mobile voice and data markets;
- Broadband (FttH, DSL, cable TV, wireless);
- Convergence and Digital Media;
- Broadband market forecasts for selective years to 2020.
Key developments:
Claro Costa Rica and Movistar Costa Rica granted extension to network rollout deadline; telcos’ financial and operating data to Q1 2012; market developments to February 2013.
Companies covered in this report include:
Instituto Costarricense de Electricidad (ICE), RASCA, Tigo, Cable Tica.
This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Costa Rica. It provides further information on:
- Market liberalisation and regulatory issues;
- The impact of the global economic crisis;
- Telecoms operators – privatisation, acquisitions, new licences;
- Mobile data market developments in coming years in light of spectrum auctions and new license awards;
- 3G developments, regulatory issues and technologies including HSPA and LTE;
- Broadband migration to an FttH architecture;
- Historical and current subscriber statistics and forecasts;
- ARPU statistics and forecasts.
