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Diversifying Network Development: Microtelcos in Latin America and the Caribbean

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. The Problem. Fixed Teledensity in Argentina

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Diversifying Network Development: Microtelcos in Latin America and the Caribbean

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  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 Hernan Galperin François Bar

  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) R2=0.82 Hernan Galperin François Bar

  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 LA&C • Limited funds • Political risk • Sustainability Hernan Galperin François Bar

  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.) Hernan Galperin François Bar

  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) Hernan Galperin François Bar

  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 Hernan Galperin François Bar

  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) Hernan Galperin François Bar

  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 Hernan Galperin François Bar

  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) Hernan Galperin François Bar

  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 Hernan Galperin François Bar

  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 Hernan Galperin François Bar

  12. Are the Poor Poorly Served? Fixed Teledensity in Argentina: Cooperative Territories vs. Total Teledensity (1998) Hernan Galperin François Bar Source: SECOM (1998)

  13. Are the Poor Poorly Served? Quality Factor Scores in Colombia by Company Size (2001) Hernan Galperin François Bar 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 Hernan Galperin François Bar

  15. Development Impact • Microtelcos as development engines: • Community portals • Free connectivity to schools and libraries • Training programs • Studies underway in Brazil and Paraguay Hernan Galperin François Bar

  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 Hernan Galperin François Bar

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