2013 Latin America - Telecoms, Mobile and Broadband Overview

The mobile broadband boom in Latin America

BuddeComm’s annual publication, Latin American Telecoms, Mobile and Broadband Overview, provides a comprehensive overview of telecommunications in Latin America and the Caribbean (LAC), a region that includes some of the world’s most important emerging markets.

Most telecom markets in the LAC region have been both privatised and liberalised. Those that are still monopolies are striving towards an open market, but the privatisation trend has been reversed. Two countries (Venezuela and Bolivia) have renationalised their telecom incumbents, while other countries (Costa Rica, Ecuador, Honduras, Paraguay, Suriname, and Uruguay), where the main telco is still state-owned, are showing no interest in selling it to the private market.

All governments in Latin America have introduced some form of liberalisation, especially in the value-added and mobile markets. A few countries still have a monopoly in the local fixed-line telephony sector, notably Guyana, Paraguay, and Uruguay.

In the broadband sector, most incumbents have secured a virtual monopoly in the delivery of ADSL access. The only competition is across technologies, from cable modem and mobile broadband. Local Loop Unbundling is rare in this region, and wholesale activity not very well developed. The concern governments face is the shortage of fixed line infrastructure, tied to the fear that operators will cease to invest in their network if they are forced to unbundle their local loop or lower wholesale prices.

Fixed broadband market

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%.

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. In other LAC markets, the cost ranges between 1.3% (Uruguay) and 19.5% (Nicaragua) of GDP per capita – while in countries such as Spain and France, 1Mb/s connection costs 0.18% and 0.06% of GDP per capita respectively.

On the positive side, bandwidth has been increasing in most countries, leading to higher speeds and lower prices, while regulators seek measures to promote competition. Given the region’s general economic indicators, there is ample room for expansion.

Mobile broadband market

At end-2012, an estimated 10 million Brazilians used mobile broadband modems connected to their laptops or PCs (4.9% per capita penetration). Indeed, mobile broadband has become an important option for broadband services in the LAC region. The service is commonly used with either a USB modem that plugs into a computer, or with netbooks, notebooks, or laptops that have a built-in receiver.

Practically all LAC markets have operating UMTS networks with the exception of Belize, Cuba, Suriname, and a few Caribbean island nations. UMTS technologies in Latin America include HSPA, HSDPA, HSUPA, and HSPA+. Most operators use HSPDA to provide mobile broadband, multimedia downloads, mobile games, and video calling. Several companies also offer mobile TV.

Long Term Evolution (LTE) networks, dubbed 4G, have been deployed in four Latin American countries, and more are either planned or in trial. The region’s first LTE service was launched by AT&T in Puerto Rico, in November 2011. Another four companies followed suit in December 2011: Claro, also in Puerto Rico; Sky Telecom in Brazil; UNE/EPM in Colombia; and ANCEL in Uruguay.

Market Highlights

• Telefónica and América Móvil are gradually consolidating mobile and fixed operations under the Movistar and Claro brands respectively.
• The Brazilian government has issued a broadcasting law opening the cable TV market to fixed-line telcos and foreign investors.
• The Mobile Virtual Network Operator (MVNO) market has finally burgeoned in a few LAC countries – including Brazil, Chile, Colombia, Costa Rica, and Mexico. Virgin Mobile has launched MVNO services in Chile, and plans to enter Brazil and Colombia in 2013.
• Chile’s Tower Act, devised for health and environmental reasons, is helping to promote MVNOs and infrastructure sharing.
• Argentina has become an important manufacturer of cell phones and provides about 80% of all devices sold in the country. Driven by Twitter and Facebook, the combined penetration of smart phones and social phones has overtaken traditional devices in Argentina.
• Argentina, Chile, and Paraguay launched Mobile Number Portability (MNP) in 2012, later than most of the other major LAC countries – Mexico and Brazil introduced MNP in 2008, Ecuador in 2009, Peru in 2010, and Colombia in 2011. Bolivia has passed a law for the introduction of MNP; but Venezuela and Uruguay have yet to approve MNP legislation.
• To encourage customer mobility after the introduction of MNP, Chile’s regulator has banned the sale of carrier-locked handsets, and ordered operators to unlock devices free of charge.
• The Brazilian government wants all major cities to have 4G/LTE services before the 2014 FIFA World Cup.
• Fibre-optic backbone networks are being deployed in Brazil’s major cities as part of a National Broadband Plan.
• With an investment of US$600 million, Colombia’s National Fibre Optic Project aims to deploy over 15,000km of fibre cable.
• Peru's national broadband plan aims to provide internet connectivity via a fibre-optic backbone to the more remote regions; it could boost broadband penetration from 4% in 2011 to 9% in 2016.