This article was originally published in Capacity on 23 February 2023.
Connectivity in Latin America is experiencing one of its most exciting yet challenging periods in decades.
There is a bit of everything: new technologies being tested; countries allocating record amounts of spectrum; innovative auctions and beauty contests; new stakeholders interested in connecting more people, things, and industries; several strategies designed to reduce the gap in rural and remote areas; public-private efforts; new players; big, strong incumbents. The region has experienced a variety of approaches, and even though it only accounts for around 8.3% of the world’s population, LATAM is successfully establishing itself as a laboratory for connectivity. However, the perpetual question regarding the cost of spectrum remains, as well as uncertainty over investments and the never-ending challenge of eliminating the digital gap.
Policymakers are facing some of the most pressing challenges in the tech world. Recent data suggests that around 35% of Latin Americans are yet to be connected to broadband Internet – most of them in poor, rural, or remote areas. However, the remaining 65% seem to be as multicoloured as the Caribbean Sea: some have connectivity comparable to those of developed countries; some have satisfactory connectivity levels that could be improved further; and some others have just been connected and are yet to fully realise the benefits. Ultimately, conversations about people and tech must recognise the diversity of people’s experiences.
Stakeholders are yet to fully seize the opportunities presented by the current situation, yet connectivity in Latin America should not be achieved at all costs. Let’s address some of the most persistent policy issues.
Spectrum is the most valuable resource for wireless communications, especially given its scarcity. Scrutiny over spectrum cost has always been a topic in LATAM’s digital agendas, but uncertainty over the ‘right’ or ‘best’ approach is starting to become troublesome. This is not good for the sustainability of connectivity.
Like many other factors in a production system, the valuation of spectrum should always consider the world’s best practices, using data to ensure that the values set by regulators are as fair and objective as possible. In most cases, spectrum lacks a direct substitute. However, that’s just one part of the equation. In LATAM, spectrum’s value comprises many different additional factors that often turn out to be even more challenging than the mere valuation of a certain frequency band. For instance, intense levels of competition in auctions can drive bidding to the point where market forces determine spectrum’s value. The rules and design of an auction can also increase the cost to a point where it cannot be allocated, while incumbents’ market strategies and the emergence of a new player further drive prices up. Frequent renewals, hidden costs, and a lack of certainty over the availability of spectrum can exacerbate these issues. Sadly, there is not enough evidence to assess if a secondary market for IMT spectrum would reduce or increase its value.
Among these various circumstances, policymakers should maintain a balance between the business and the policy. As stated above, spectrum is a production factor used to provide services that generate revenue (ARPU) for companies that, in most cases, operate across several jurisdictions. It is worth remembering, however, that the services these companies provide can be truly life-changing for many people.
Pandemic aside, financial inclusion, the massification of online education, entrepreneurship, e-commerce, the upskilling of women and youth, and many other social benefits have all been possible because of the rapid growth of mobile Internet in Latin America. Evidence suggests that many people in rural (and not so rural) areas can only access broadband Internet because of mobile networks. Fibre has never been an option in the Amazonia, the highest mountains in the Andes, or the Caribbean Islands. Satellite Internet is only just starting to gain recognition as a viable, efficient option (kudos for that!). Ultimately, the connectivity levels we have now are those that policymakers designed 13 years ago.
Within this context, the minimalistic policy briefing I’d be tempted to share on LinkedIn would state that connectivity policies should promote profitable business cases that actually improve people’s lives. A bit clichéd, perhaps. But that’s the key to sustainable connectivity in LATAM.
As for why, the valuation of spectrum is as vital as the obligations or means regulators can use to pay for it. As explained earlier, spectrum will empirically cost whatever the market (not the regulator) decides. Limiting policy actions to a pecuniary payment in cash would jeopardise the long-term social benefits that spectrum can offer. If regulators in LATAM set long-term obligations to eliminate coverage no-spots, update networks and technologies, and increase fibre rollouts (all under clear and certain conditions), competition will likely increase and a better quality of services, innovation, and user intake will result. Regulation should be consistent and avoid adding additional non-ICT taxes. This will also provide relief over the CAPEX of MNOs, adding more control over the TCO. Sustainable upgrading of networks will prevent over-reliance on legacy technologies. Evidence also suggests that there are regions in LATAM with just a few inhabitants (a couple of thousand at most), making them less attractive/lucrative as markets. If not for obligations, these areas are unlikely to ever be connected.
Nevertheless, even if the efforts made over recent decades by IMT companies have convinced me that broadband connectivity in LATAM has become more inclusive, the future of connectivity must include non-terrestrial satellite networks. I can think of different technologies that will finally achieve coverage in the Amazonia, the highest spots of the Andes, and the Caribbean islands. Direct-to-Handset communication will shape an agenda where both mobile and satellite companies collaborate so that all users can access broadband Internet with their smartphones, regardless of their location – maybe with HAPS, HIBS, UAV, and EnodeB emulators in LEO constellations. The connectivity roadmap in Latin America is as exciting as it could be, with a multitude of opportunities for stakeholders to promote a digital landscape that is both fairer and broader: one where new technologies such as 5G, the metaverse, and Industry 4.0, can thrive; one where all inhabitants have access to affordable broadband Internet.
Lastly, I firmly believe that connectivity policies should promote innovative, profitable business cases that truly help improve people’s lives. But this cannot be done at all costs. LATAM’s long-term success may be determined by the policies set in the next couple of years. Thus, policymakers must question themselves regarding both the present and future of connectivity. Do they ask themselves what connectivity requirements users need? Do they understand what kind of connectivity new industries need? Are there any new users or industries that need to be heard? Have they thought of the potential new markets and stakeholders that might require spectrum? Will connectivity policies benefit all stakeholders on fair terms? Only time will tell.