A recent industry report claims that competition among triple- and quadruple-play providers is driving the adoption of fixed-line broadband services in Latin America, and recommends that service providers should provide both connectivity and content services.
I have no beef with the general conclusions drawn by Ignacio Perrone, senior consultant at Frost & Sullivan Information & Communication Technologies, but I think that drive for adoption is more like a slow crawl.
The numbers presented by Perrone look promising. In 2013, revenues for the Latin American fixed-line broadband services market were $11.75 billion, and, according to Perrone, they are set to reach $18.40 billion in 2018. The study encompasses DSL, cable broadband, fixed wireless, and fiber-to-the–home (FTTH), the latter being the most promising in the growth figures.
But why hasn't this grown faster and earlier? One reason cited is cost. Licenses for concessions, network deployment, marketing, sales, and international connectivity take a big bite out of profitability.
When I read the recommendations in the report that traditional telecom companies must become sole service providers by providing both connectivity and content services, I couldn't agree more. However, based on my experience of having lived recently in both Costa Rica and Chile, I also think that income per capita and the lack of customer service are going to hamper any such developments.
Given the average income in most of these countries, how fast could this adoption be? Here's a rundown of monthly minimum wage (2010) in US$ in Central and South American countries:
- Argentina, $457
- Bolivia, $110
- Brazil, $300
- Columbia, $261
- Costa Rica, $388
- Ecuador, $254
- El Salvador, $81
- Guatemala, $186
- Honduras, $279
- Nicaragua, $133
- Panama, $371
- Paraguay, $192
- Peru, $200
- Uruguay, $294
- Venezuela, $303
I'll concede that these figures are out of date. Let's say, for argument's sake, that in the past three years, these figures have doubled. In Costa Rica, I paid $75 per month in 2013 for a very good Internet service, which I needed to be able to work. In Chile, for the same level reliable service in 2014, the cost is pretty much the same, although in both countries, it's possible to find basic service in the $25 to $40 per month range. Imagine what the price would be for an FTTH service. Therein lies most of the disconnect.
In addition to the percentage of income that these broadband services will eat up, there is a second challenge. So far, in my limited experience, customer service is not really understood as a concept in Latin America.
The company from which I purchase residential WiFi in Chile asks that I deposit the amount I owe monthly directly into its bank account -- at the bank. After many months I am still awaiting my first invoice, and I am hoping that I will be able to pay online. However, since I had to give them cash for the first month and the installation, I am not very hopeful. One of my friends moved into a high-rise apartment building with WiFi, and it took more than three weeks to be connected. Lead times for satellite service are eight weeks. And, by the way, my small town of 25,000 residents does have fiber installed -- it's just not being used yet.
I just don't see the huge demand, ability to pay, or infrastructure in place. Certainly, fixed broadband demand will no doubt explode in Latin America at some point, as the economies in the region are growing. Today, however, that explosion is pretty hard to spot.
— Carolyn Mathas, contributing editor, special to Light Reading