According to a recent ECLAC and CAF report [1], Latin America is one of the regions of the world lagging furthest behind in telecommunications development, second only to some African and Asia-Pacific sub-regions.
This lag represents an enormous investment, regulation and modernization challenge that must be met during this decade, demanding a colossal effort from governments, social organizations, associations and the industry in general.
What is Required to Accelerate the Development of Telecommunications in Latin America?
By: Gabriel E. Levy B.
The CAF Digital Ecosystem Development Index for Latin America is 49,9 (on a scale of 0 to 100), according to the annual analyses provided by Telecom Advisory Service [2], which are endorsed by multiple international organizations such as ECLAC and the UN, which use it as an indicator for various studies and public policies.
Only the regions of Africa (35,05) and Asia Pacific (49,16) are below, with a very significant lag compared to Western Europe (with an index of 71,06), North America (80,85), Eastern Europe (52,90) and the Arab States grouped around the acronym MENA (55,54) [3], which is aggravated by the annual growth rate of the index, which is one of the lowest in the world [4].
The Digital Ecosystem Development Index for Latin America and the Caribbean shows a 6,21% compound annual growth rate between 2004 and 2018. This is the lowest among emerging countries, with the exception of the Arab States [5].
The Urgency of an Updated Regulatory Framework
One of the main causes of the lag in the region is the evident lack of an updated regulatory framework, either due to the need for deregulation of traditional media and platforms or, paradoxically, the urgent need for regulation of the new digital media and platforms, especially the Internet, which can be summarized in simple terms as an effective leveling of the playing field, so that all players can compete on equal terms.
Deregulation:
One of the trends in global regulation is the elimination of entry barriers to the Telecommunications markets, i.e. changing the concession and bidding systems for enabling titles, which, instead of being a complex awarding process by the state, is just a simple registration process with the fulfillment of minimum conditions, which should apply equally to any of the communications services. Another key factor is the simplification of requirements, standards and conditions, by consolidating the regulatory framework, eliminating obsolete regulations and simplifying processes.
In this regard, the Association of mobile operators, associated with the GSMA at a global level, as a group specialized in mobile communications, states that:
“Policies need to be planned with clear objectives, general principles and be future-proof. The first step should be a reform aimed at regulatory simplification that can lead to sector expansion and connectivity. Technology has always moved faster than policies and that is why it is fundamental to simplify the current frameworks and focus on general principles, aimed at strengthening legal certainty, with ex-post interventions when necessary” GSMA [6].
Several countries such as Mexico, Ecuador and the Dominican Republic have made significant progress in this area, but Colombia is undoubtedly leading this process in two ways, first with the issuance of Law 1979 of 2019[7] which simplified all processes in the telecommunications sector and subsequently the CRC, the convergent regulator, eliminated one out of four existing rules for the sector, making the regulatory framework much more competitive[8].
In the case of Mexico, everything seems to indicate that the missing advances in this matter have slowed down under the current government, and now that López Obrador has announced his intention to abolish the Federal Telecommunications Institute (Instituto Federal de Telecomunicaciones: IFT), which could threaten the entire competitiveness of the telecommunications sector in the Aztec nation[9].
In Peru, political instability has taken its toll on the communications sector; the weakness of the institutional framework, especially in the executive branch, has postponed many of the important discussions on regulatory simplification and modernization of the ICT sector.
Chile is close to the celebration of a National Constituent Assembly, which could be the opening gateway for the modernization of the sector, or on the contrary for a significant setback; and although at the beginning of the decade it was one of the countries with the greatest advances in Telecommunications, a deceleration has been evident in the last few years.
Uruguay is a case apart, the excellent operation of the state-owned telecommunications company and the traditionally protectionist model of the country could be defined as a successful native scheme, which operates under its own logic due to the particular conditions of the southern nation. Even the Audiovisual Services Law approved in the middle of the last decade seems in many aspects more like that of a European than a Latin American country [10].
The Urgent Need to Regulate OTT Platforms
In contrast to the previous scenario, the telecommunications market that operates over the Internet, that of the so-called OTT platforms, demands urgent regulation on key issues that allow a real balance on the playing field, but above all, ensure the protection of users’ interests.
The lack of requirements for OTT (Over the Top) platforms such as Netflix, Facebook, Amazon, Disney and many others, disadvantage Latin American Telecommunications. OTTs use their infrastructure without paying for traffic, with little or no taxes or considerations, without being subject to regulation of screen quotas, customer service, telephone support, quality indicators, content slots, among many other factors.
All of the above constitutes unfair and parasitic competition, which must be corrected as a matter of urgency, without stopping the creative impulse that OTTs have brought to the sector, since thanks to them, paradoxically, the content creation industry is at its best moment.
In this regard, the countries that have made the greatest progress in this area are Brazil and Argentina, which during previous governments created a framework of minimum conditions for the operation of the so-called OTTs in these countries.
Colombia is one of the countries with the greatest delays in the regulation of OTT platforms, apart from the collection of sales taxes. These platforms simply do not exist in Colombian legislation, but in real life, they further erode the advertising market and in general the entire traditional telecommunications sector every new day, a situation that is repeated equally in Chile, Peru, Ecuador and practically all of Central America.
In conclusion, the greatest challenge facing Latin America in the coming decades is a perfect paradox, i.e. to increase regulation for some players, while continuing to reduce the regulatory burden for others, always seeking to create equitable market conditions so that all players can compete on equal terms, always seeking, of course, to protect the interests and rights of citizens.
[1] ECLAC Report on the State of Digitalization in Latin America
[2] Telecom Advisory Service Annual Report
[3] Telecom Advisory Service Annual Report
[4] ECLAC Report on the State of Digitalization in Latin America
[5] Telecom Advisory Service Annual Report
[6] GSMA Mobile Report for Latin America 2018
[7] Law 1978 of 2019 on modernization of the ICT sector
[8] Telesemana article on the CRC’s regulatory simplification process
[9] AP News article on Lopez Obrador’s intention to do away with Federal Institutions
[10] Audiovisual Services Law of Uruguay
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