2009 Latin American Broadband and Internet Market

Broadband penetration in Latin America and the Caribbean was about 4.9% in early 2009, well below the world average of 6.1%. The slow uptake of broadband in the region can be attributed to several factors, the main one being the high prices charged by providers. In fact, despite liberalisation, in most countries the fixed-line incumbents dominate the local loop – and hence the ADSL market – and are only challenged by cable modem providers. Other inhibiting factors include low PC penetration, insufficient fixed-line infrastructure, highly unequal income distribution, a lack of economies of scale, and regulatory hurdles.

On the positive side, competition has been increasing and prices have been dropping in most countries. Given the region’s general economic indicators, there remains ample space for expansion. Although the situation varies considerably from country to country, the region as a whole should be a fertile ground for broadband investment. Indeed, Latin America was the world’s fastest-growing broadband market in the fourth quarter of 2008.

The options available in the region are ADSL, cable modem, wireless broadband, mobile broadband, and satellite broadband. ADSL is the prevalent technology, followed by cable modem. Mobile broadband, only two years after launch, has managed to attract about 5 million subscribers. WiMAX, on the other hand, after suffering serious setbacks due to licensing delays, has been further knocked back by the global financial crisis.

Broadband subscribers and penetration – major Latin American countries – 2007 - 2008

(Source: BuddeComm based on industry data with BuddeComm estimates)

Key highlights:

Argentina

Argentina’s Internet market is the third largest in Latin America, after Brazil and Mexico. In terms of Internet user penetration (50.3% per capita), it is well above the regional average and more than twice as high as the world average (which was about 23% in early 2009). Argentina’s broadband market is the most developed in the region and has the highest penetration rate. ADSL is the main broadband technology, but cable modem occupies a significant place with about one third of the subscriber base. The market is divided fairly equally between three players: Telefónica de Argentina, Telecom Argentina, and Grupo Clarín. While the first two offer ADSL services primarily in their regions of operation, Grupo Clarín provides cable modem broadband on a nationwide basis; this has helped to foster competition and reduce broadband prices, which are among the lowest in Latin America.

Brazil

Compared with other economic indicators, Brazil’s Internet penetration is lower than expected, and there is considerable room for growth. In terms of subscriber numbers, Brazil is the regional broadband leader, but it trails neighbouring Chile and Argentina in terms of penetration. Broadband uptake has been stifled by high prices and weak competition. Broadband charges in Brazil have been dropping while speeds have been increasing, but prices are far too high for the Brazilian socio-economic environment. In fact, broadband tariffs are considerably higher than in neighbouring Argentina. ADSL is the leading broadband technology, with 70% market share, followed by cable modem with 25%, and wireless broadband with 5%. The country is considered a world leader by many in terms of e-government, and is also quite active in the area of e-education.

Mexico

Broadband is one of the highest growth sectors in Mexico’s telecommunications market, with revenues continuing to record double digit growth for the fourth quarter of 2008 despite the broader economy posting negative growth for that period. Telmex’s ADSL product, Prodigy Infinitum, continued to post very strong growth rates during 2008. Nevertheless, there remains significant scope for growth, as Mexico’s broadband penetration is merely one-quarter of the OECD average, while its broadband prices are higher than most other OECD nations. High prices and low penetration levels are attributed to a lack of investment and competition due to, in part, foreign investment restrictions and a lack of local loop unbundling. Telmex dominates with approximately 95% of the ADSL market.

Data in this report is the latest available at the time of preparation and may not be for the current year.