Given the many demands for public resources in the region, public telecommunications policies, especially policies on broadband Internet, should encourage effective private-sector participation in the development of infrastructure and broadband services. The role of the state in this scheme should focus on regulatory reform geared at increasing technological convergence,24 guiding investment, and addressing co-ordination failures. It should also make complementary investments to maximise positive externalities, ensure social equity objectives are met and promote competition. In particular, the regulatory sphere must be modernised and adapted to the environment of technological convergence (see Table 5.1). However, private investment in telecommunications infrastructure is insufficient to maximise the benefits of the broadband system. There are a number of factors that generate investments below what is socially efficient and delay the deployment of high capacity networks, blocking efforts towards social inclusion.25 These include: i) non-linear relationships among providers that require minimal levels of adoption to maximise broadband impact (referred to by economists as a ‘big push’);26 ii) the existence of externalities in production and consumption of broadband that cannot be captured by the private sector; iii) economies of scale and sunk costs in the deployment of fibre-optic networks; and iv) problems in the identification and aggregation of demand in marginal zones.27

Inter-Sectoral Co-Ordination

Broadband development initiatives that do not include a strategic vision weaken the co-ordination of the different sectors involved and make an efficient allocation of resources more difficult. National plans for broadband development require a high level of political commitment, the establishment of mechanisms of checks and balances and accountability, the specification of realistic goals and the clear definition of responsibilities. This ensures funding for the medium- and long-term, so that goals may be met. Similarly, consultation with a wide range of private stakeholders (especially those involved in the provision of infrastructure and service operation), civil society and other government agencies prevents duplication of efforts. 

Public Investment

Public investment in basic telecommunications infrastructure must complement the investments made by the private sector. For instance, public investment in interurban data-transfer networks under an open-access and non-discriminatory model can boost private investment in the last-mile segment.28 In particular, national, sub-national and metropolitan infrastructure plans must take into consideration fibre-optics deployment. 

Public investment must focus on non-competitive segments and areas where potential private profitability is low or non-existent. For example, state investment in alternative data transfer networks is an effective tool for dealing with bottlenecks that appear in certain market segments (especially in backbone networks). Furthermore, public investment can help close social gaps and meet regional development objectives in poor areas or low-density regions, where difficulties in aggregating demand and capturing externalities result in private-investment deficits.29 It is possible to identify different financing strategies aimed at minimising the impact of direct public-investment initiatives on fiscal accounts in Latin America. Generally, these initiatives focus on backbone networks and are funded with central government resources, although occasionally local governments take charge. Many of these strategies do not increase direct public spending but rather mobilise existing resources and make use of the government’s own connectivity needs. 

Table 5.1. Role of State in Development of Broadband Systems

Areas Objectives Tools
Systemic complementarities Correct failures in co-ordination for articulation between sectors and the development of synergies. National broadband strategy. Demand incentives and the promotion of absorption capacity. Promotion of e-government services and local content.
Equity in access & use Massify access and use to take advantage of positive externalities, including network effects. Public investment in backbone networks. Redesign and use of resources from universal service funds. Programmes for computer purchase and public access.
Resource management Efficiently allocate and manage resources, such as the radio spectrum, easements, domain names and numbering. Liberalisation and flexible use of spectrum. Usage of state infrastructure. Facilitation of access to lamp posts, pipelines and rights of way.
Rules and regulations Modernise and adapt the regulatory environment to an environment of technological convergence. Streamlining and flexibilisation of the granting of licenses. Technological neutrality (sole license). Sharing of infrastructure strategy. Definition of the IP interconnection regime.
Spreading technological innovation. Accelerate learning processes. increase the capacity for innovation and dissemination of the best technological practices to enable advances in the development process. Digital literacy programmes and human capital formation. Support for the adoption and training of micro and small enterprises. Promotion of links between academia and the ict industry.
Public policy Adapt the public policy approach to a highly dynamic, evolving and innovative environment. Regional co-ordination of policies and standardisation. Mechanisms for monitoring outcomes. Reduction of the tax burden on the telecommunications sector.

Source: Jordán, Galperin and Peres (2010).

Mobilising existing assets reduces investment needs and makes it possible to take advantage of technologies that increase the transmission capacity of the broadband system without deploying new physical networks. Using fibre-optic networks that have already been deployed at the state level makes use of underused public assets and reduces the need for new investment. Examples of this are recent initiatives in Brazil and Mexico to use fibre-optic networks initially deployed for the control and monitoring of the electricity grid.30 Similarly, using other existing infrastructure and infrastructure that is currently under construction, such as roads, which could house certain elements of broadband networks, would also reduce investment requirements. 

Public investment in the state’s own access networks reduces future connection costs and increases trickle down to the rest of society if these networks are also usable by homes and businesses. In all countries, the State is the largest user of connectivity due to its need to connect government departments, libraries, universities, hospitals and schools throughout the country. The development of its own infrastructure is sometimes a necessity in areas that do not attract private investment. 

The resources accumulated in universal service funds can be redirected to investments to reduce the risks associated with last-mile connectivity initiatives. Financing local last-mile segment micro-operators would accelerate use of funds, share risks with private stakeholders and optimise the use of resources based on local demand for connectivity.31 Internationally there is a tendency to expand the funding base of these universal funds with the aim of increasing broadband access.32 

Convergence Regulation

Regulatory models that are not adaptable to technological convergence and the limited deployment of fibre-optics largely explain Latin America’s lag in broadband access with respect to OECD economies. Latin America’s broadband penetration is on average a quarter of that of OECD economies, with prices 50% higher and about one tenth the speed. To favour convergence, regulatory frameworks in Latin America must adapt quickly to the current technological context. Furthermore, a greater deployment of fibre-optics would generate the bandwidth required for the services most valued by society. Given the dynamics of improvements in technologies associated with the broadband system, it is necessary to permanently revise and adapt regulatory and legal frameworks to accommodate new technological developments. Regulations must be sufficiently flexible to constantly adapt and respond to the speed with which technological changes take place.33 An appropriate regulatory framework facilitates private investment and directs it towards those segments identified as priorities. It also must be structured in such a way that it guarantees legal security. The legal systems of most countries in the region remain oriented towards a service by- service regulation, which does not fully adapt to the needs of technological convergence (see Annex 5.1). Convergence presents a series of challenges, such as the sustainability and scalability of networks and services provided by operators. These challenges can only be addressed by modifying regulations to deal with telecommunications services comprehensively, avoiding segmenting measures that may cause asymmetries and regulatory distortions. This means considering granting broadband Internet access the same regulatory treatment as other services of public interest. 

In this respect, regulations should facilitate an efficient, orderly and progressive transition from existing networks to next-generation networks, based on their individual technological and socio-economic characteristics. Investment for fibre-optic deployment in interurban and urban ring connections, which facilitate last-mile service, can be encouraged through a regulation of these access networks following a common carrier model. This would enable them to be used by broadband service providers, fostering competition and avoiding unnecessary duplication of infrastructure investment. 

Efficient Management of State-Owned Resources

Latin America’s geographic and demographic characteristics limit the development of fixed networks. Thus, just as mobile telephones led to the massification of voice services, mobile broadband is expected to have a similar effect in areas with low demand density. Mobile broadband presents several important advantages for the region. These include its lower initial investment requirements, the speed with which networks can be deployed and the scalability and adaptability of its infrastructure investments. In addition, it provides the opportunity to leverage the already massive existence of mobile telephone networks and terminals, which have reached much greater levels of coverage than fixed telecommunications networks. 

Resources such as the electromagnetic spectrum are essential to the development of mobile telecommunications. The provision of mobile services depends heavily on spectrum availability and access to it determines the costs of infrastructure deployment and the competitive structure of the market. Therefore, the state must manage the spectrum efficiently to prevent the generation of artificial barriers and to grant concessions that promote competition. 

Efficient management of the spectrum is a key policy issue given the scarcity of spectrum available to current and potential operators. This limits network deployment and the quality of mobile broadband services. Given that the majority of the “premium” spectrum34 is already assigned, it is increasingly difficult to expand existing uses or create new services. However, evidence suggests that this scarcity is partially artificial, as certain segments of the spectrum used by operators in other regions of the world are not utilised or are underutilised in Latin America and the Caribbean. In urban areas a combination of shared, open-access fibre-optic rings with regulated rates and functional segmentation is an option to exploit the capacity of fibre and the versatility and competition of mobile solutions. 

Adequacy of Public Policy Approaches

The State can act as a catalyst for broadband demand by promoting the use of government e-services. Valuable experiences in tax administration, public procurement and the pension system are particularly relevant for countries in the region and many countries have made significant progress in these areas. Plans to encourage the purchase of equipment and terminals can boost the adoption of communication technologies for common use. The adoption of broadband requires complementary investments by the users, which includes purchasing terminals. Several countries in the region have taken initiatives in this area, providing tax incentives and improving access to credit for purchasing computers,35 measures needed in order to expand the existing stock. In addition to the gap in broadband access, there is also a gap in demand, comprised of households and businesses that have not become users despite having the necessary resources and potential access. Digital literacy initiatives, labour force training and promotion of technical careers seek to reverse this phenomenon by creating the human capital necessary to take advantage of the benefits associated with broadband. The countries in the region have adopted multiple initiatives in this area, which create the possibility of sharing successful experiences and developing joint initiatives on a regional level. 

Part of the demand gap is due to a deficit of content and services adapted to the preferences and needs of households and productive units in disadvantaged regions or with a population that is not attractive to private suppliers. Consumers’ preference for local contents generates opportunities to develop policies to stimulate its local generation, as well as applications to increase broadband demand. For example, there are interesting experiences of governments stimulating the production of content in indigenous languages and information systems for rural producers. Shared broadband access will continue to have an important role in the region in the medium term, despite sustained growth in the number of individual subscribers. The guiding role of the state is necessary in order for public access centres, particularly those that receive public funds, to also function as spaces for building skills and for encouraging the adoption of electronic services and the generation of local content. Experiences in the region reveal the potential of these centres to foster broadband demand, while also having positive effects on labour skills and academic performance.36