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2013 Latin America - Broadband and Internet Market

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Last updated: 26 Jun 2013 Update History

Report Status: Archived

Report Pages: 166

Analyst: Lucia Bibolini

Publication Overview

This report covers developments in the Broadband and Internet markets of Latin America and the Caribbean. The countries covered in this report include:

Argentina, Belize, Bolivia, Brazil, Chile, Columbia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Suriname, Uruguay, Venezuela and the small Caribbean island nations.

Researchers:- Lucia Bibolini, Henry Lancaster
Current publication date:- June 2013 (10th Edition)

Executive Summary

Growth inhibitors and growth drivers in Latin America’s Broadband market

Broadband penetration

Estimated fixed broadband penetration in LAC was 8.4% at end-2012, slightly below the world average of 9.2% but ahead of other developing regions such as South Asia and Africa. Nevertheless, Latin America has a long way to go before it can catch up with North America and Western Europe, where broadband penetration is over 30%.

There also exist wide differences between countries within the region itself. While some – St Kitts & Nevis, Barbados, Trinidad & Tobago, Uruguay, Chile, Argentina, and Mexico – have fixed broadband penetration ranging between 11% and 30%, others – like Haiti, Paraguay, Nicaragua – have barely 1% or 2% penetration rates. Generally, higher broadband penetration can be found in the Southern Cone countries and some of the wealthier Caribbean islands, while the lower rates are prevalent in Central America and in the poorer countries on the northwest coast and interior of South America.

Growth inhibitors

Hurdles in the Latin American broadband market include:

  • weak competition and insufficient bandwidth (hence, expensive and/or slow services);
  • inadequate fixed-line infrastructure (hence, service unavailability in many areas);
  • low PC penetration, poverty, and unequal income distribution (hence, limited demand).

All of Latin America suffers from insufficient international connectivity, both between countries and with the rest of the world, as submarine cables are inadequate to meet the escalating need for bandwidth. This has pushed up broadband prices. In Bolivia, the most expensive country for broadband, 1Mb/s connection costs a staggering 55% of GDP per capita.

Growth drivers

On the positive side, bandwidth has been increasing in most countries, leading to higher speeds and lower prices, while governments seek regulatory measures to promote competition. An important development for Latin America as a whole is the construction of a new submarine cable network – the Atlantic Cable System (ACSea) – which is being developed by Brazil to link with the USA, Europe, Africa, and several other Latin American countries. When completed, the 24,000km ACSea submarine cable will substantially increase bandwidth and reduce prices for broadband in the region.

Substantial investments and regulatory reforms are being implemented in preparation for the 2014 FIFA World Cup and 2016 Olympic Games being held in Brazil. These should have a positive effect on the broadband market so that we expect to see robust broadband growth in the forthcoming years.

One of the region’s main growth drivers for both fixed and mobile broadband is social networking. Seven Latin American countries are among the world’s top thirty in terms of Facebook users. Brazil has the highest number of active users in the region, while Chile has the highest ratio of users per capita. With penetration upward of 52%, more than one out of every two Chileans is, in fact, an active Facebook user.

National broadband plans

Most nations in Latin America have adopted some form of national broadband plan, as governments begin to realise the strategic importance of high-speed internet for GDP growth and socioeconomic development. Countries involved in plans to expand broadband access include Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, and Uruguay.

Under Brazil’s National Broadband Plan, more and more un-served and under-served municipalities are being connected to the internet. Implementation, however, has been slower than expected due to budget cuts, bureaucratic delays, and sluggish demand for services.

ADSL versus cable modem

ADSL has emerged as the clear technology leader, but low teledensity limits its availability. Cable modem access has been gaining popularity thanks to triple play solutions comprising voice, Internet, and video over Hybrid Fibre-Coaxial (HFC) cables. The largest proportion of cable modem subscribers can be found in Chile, where this technology accounts for about 49% of the broadband market.

Broadband competition

Although several countries mention Local Loop Unbundling (LLU) in their telecom laws, only Colombia and Brazil have introduced apposite regulations. Colombia did so in 2007 through the so-called Convergence Decree, while Brazil approved a General Competition Plan in November 2012 that regulates wholesale services and infrastructure sharing – such as LLU and bitstream access.

Although wholesale broadband markets do exist in Argentina and in a few other nations, most Latin American incumbents charge excessively high access fees, rendering the business of ADSL resale unviable. As a result, ADSL is usually available only from the fixed-line incumbents. Some countries have more than one regional incumbent, but they only offer ADSL services within their region of operation, therefore there is no competition. In fact, the only meaningful fixed broadband competition in Latin America is across technologies, primarily between ADSL and cable modem.

LAC – broadband growth and penetration − 2007 - 2013

Year

Annual change

Penetration

2007

+53%

3.5%

2008

+36%

4.7%

2009

+26%

5.7%

2010

+17%

6.5%

2011

+17%

7.7%

2012

+16%

8.6%

2013 (e)

+13%

9.7%

(Source: BuddeComm based on World Bank data)

Market Highlights

  • Broadband penetration in LAC is slightly below the world average.
  • Weak competition and insufficient bandwidth have pushed up fixed broadband prices.
  • Most nations in Latin America have adopted some form of national broadband plan.
  • The popularity of social networks is driving growth in fixed as well as mobile broadband. 

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

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