Hernan Galperin

1
Diversifying Network Development Microtelcos in
Latin America and the Caribbean

• Hernan Galperin
• François Bar
• Annenberg School for Communication
• University of Southern California

Wireless and Development Workshop Marina del Rey,
8 October 2005
2
The Problem
Fixed Teledensity in Argentina (1991-1998)

• Reforms during the 1990s resulted in access gains
  across the board
• But, persistent (many cases increasing) gaps
  within countries

Source SECOM (1998)
R20.82
3
The Traditional Answer

• Public subsidies and incentives to large private
  operators
• Problems with USFs (among others)
• Difficult to design and administer
• Weak regulatory capacity in LAC
• Limited funds
• Political risk
• Sustainability

4
The Microtelco Alternative

• Variety of small-scale providers already service
  high-cost and low-income areas
• Most of them do not rely on public subsidies, but
  rather on
• Local entrepreneurship
• Mobilization of local inputs (labor, rights of
  way)
• Hybrid arrangements
• Innovation (business models, low-cost technology,
  etc.)

5
Research Questions

• Importance and trends?
• Types of microtelcos?
• Business models?
• Quality/price and performance?
• Policy environment?
• Development impact?
• Is this just hype? (or really an alternative way
  to build and operate ICT network)

6
The Theoretical Case

• Provision of ICT service involves several
  possible production functions (K,L)
• Large operators lack incentives and flexibility
  to find combinations better suited to service the
  rural poor
• Microtelcos have both
• Combination of inputs likely to be different in
  each case

7
Microtelcos are Growing

• Colombia from 7 to 11 fixed lines
• Argentina 8 fixed lines
• Jujuy (Argentina) 53 fixed lines
• Municipal and cooperative WISPs across region
• Micro-resellers

Fixed Line Share () of Small Telcos in Colombia
(1994-2002)
Source CRT (2004)
8
Growth Factors

• Market liberalization
• Strengthening of regulatory capacities
• New low-cost technologies
• WLAN
• VoIP (35 of global traffic)
• WLL (corDECT)
• 3G (CDMA450)
• FLOSS
• Some financing

9
A Variety of Microtelco Models

• Local entrepreneurs
• Teleocsa (Colombia)
• Local government
• Pirai Digital (Brazil)
• SICOMU (La Pampa, Argentina)
• Cooperatives and CBOs
• Telephone Cooperatives (Argentina)
• Chancay-Huaral project (Peru)

10
Business Strategies

• Economies of scope and bundling
• Different price/quality points (e.g., VoIP)
• Scalable, flexible networks
• Build (and reveal) demand (e.g., training
  activities, develop local application)
• Federation (interest representation, learning)
• Co-production strategies

11
The Co-production of Broadband Access in La
Pampa, Argentina
Local Government
Fiber backbone E-government applications Lead user
Private Sector
Civil Society
Service retail Tech expertise Access to capital
Applications Training Labor
12
Are the Poor Poorly Served?
Fixed Teledensity in Argentina Cooperative
Territories vs. Total Teledensity (1998)
Source SECOM (1998)
13
Are the Poor Poorly Served?
Quality Factor Scores in Colombia by Company Size
(2001)
Source CRT (2001)
14
Policy Environment

• Lack of tech neutrality discourages low-cost
  solutions
• Spectrum rules for WLAN
• VoIP rules
• Cumbersome and discriminatory licensing
  procedures
• Slow enforcement of interconnection rules
• Lack of access to financing

15
Development Impact

• Microtelcos as development engines
• Community portals
• Free connectivity to schools and libraries
• Training programs
• Studies underway in Brazil and Paraguay

16
Conclusions

• Microtelcos play an important role in extending
  access to underserved areas
• Despite a less than favorable policy environment
  ? calls for further reforms
• Variety of strategies (no one size fit all) that
  depend on local conditions (primarily
  institutional)
• Validates support for further experimentation
  with microtelco model