Diversifying Network Development: Microtelcos in Latin America and the Caribbean

In October 2005, the Annenberg Research Network on International Communication (ARNIC) at the University of Southern California (USA) held a workshop - "Wireless Communication and Development: A Global Perspective" - as part of a multi-disciplinary effort to study the emergence of new communication infrastructures, examine the transformation of government policies and communication patterns, and analyse the social and economic consequences.

This 28-page paper (16-page PowerPoint presentation) from that event makes the case that "microtelcos" - small-scale telecom operators that combine local entrepreneurship, municipal efforts, and community action - can play an important role in extending information and communication technology (ICT) services in Latin America and the Caribbean, particularly in rural, economically depressed areas that large private operators have dismissed as "unattractive". In fact, the authors show that a variety of microtelcos (no "one size fits all") are effectively servicing many of these areas. The paper examines the theoretical case for microtelcos as an effective alternative to address the ICT needs of the economically poor, presents examples of microtelcos drawn from across the region, and suggests how existing regulatory obstacles for microtelcos may be removed.

The authors explain that there are a variety of microtelco models, which draw on:

• Local entrepreneurs (e.g., Teleocsa in Puente de Piedra, a rural town near Bogota Colombia)
• Local government (e.g., Pirai Digital in Brazil or SICOMU in La Pampa, Argentina)
• Cooperatives and community-based organisations (CBOs) (e.g., telephone cooperatives in Argentina or the Chancay-Huaral project in Peru)

Microtelcos operate in a less-than-friendly policy environment and enjoy little access to public subsidies; most countries (82%) in the region authorise unlicensed use in 2.4 band, but under tighter restrictions in power and services, and only the upper portion of the 5GHz is available in most cases. Less than half (38%) have authorised voice over internet protocol (VoIP). Despite these constraints, microtelcos are growing, such as from 7% (in 1994) to 11% (in 2002) fixed lines in Colombia. Market liberalisation, strenthening of regulatory capacities, and the introduction of new low-cost technologies (recent innovations in wireless communication and service applications, such as wireless local area networking, or WLAN) have all contributed to this growth.

A key advantage of microtelcos is their capacity to take advantage of co-production, the potential complementarities that exist between different organisations in the delivery of a service. In each case, the authors claim, the optimal combination of inputs contributed by local government, civil society, and the private sector will vary according to local condition; the most effective co-production arrangement for the provision of ICT
services to the economically poor will depend on the institutional attributes of each community - and community-based microtelos are well-positioned to address this. While large operators are very efficient at building networks and operating services in large urban areas or building network backbone, their advantages tend to diminish in remote areas with low incomes or highly volatile incomes. In contrast, microtelcos have incentives and flexibility to find combinations better suited to rural people living in poverty.

To illustrate these advantages, the authors provide a number of case studies, including:

1. Telephone cooperatives (Argentina) - With over 600,000 subscribers, cooperatives account for about 8% of the Argentine fixed telephony market; in many of the economically poorest and more isolated provinces, however, their market share is much higher. Difference in teledensity between the areas served by the incumbents and the areas served by the cooperatives is relatively small, and average prices for services tend to be similar or lower than those of large operators. Further, "cooperatives have a significant involvement in ICT training and dissemination activities (which also serve to boost demand for value-added services), while many cooperatives have also engaged in local content development (typically community portals) in association with various CBOs and local governments."
2. CBO-driven networks (Peru) - CEPES, a Peruvian non-governmental organisation (NGO), established an agricultural information and communication system to provide farmers with training and access to information that would enable them to make better decisions, and to facilitate communication among the irrigation commissions to improve water management. A Wi-Fi network was deployed joining 12 villages and connecting them to the internet. "The adoption of IP telephony and the scaling of the network reveals the ability to rapidly adapt to community needs....Inter-local cooperation has also been critical, for each village is responsible for local network maintenance, with training provided by CEPES. In addition, new WLAN technologies have allowed flexibility in terms of service provision and scaling of the network with a modest initial investment."
3. Municipal networks (Brazil and Argentina) - In Piraí (Rio de Janeiro, Brazil), a community committee was formed which included municipal authorities and representatives from CBOs and the private sector to chart a plan that would extend wireless connectivity to much of the territory. "The community committee proved critical in securing partnerships with universities, NGOs, and private firms, which contributed to the project with equipment, application development, and expertise in the deployment and operation of the municipal network....To date, the network has over 50 broadband nodes, connecting all local government offices and most of the public schools and libraries. There is also a growing number of public access points, and a private company with majority municipal ownership has been formed to commercialize services to households and businesses."

Following a section exploring regulatory barriers to entry in the ICT markets of Latin America and the Caribbean, the authors conclude that "a level playing field for microtelcos vis-à-vis large private operators is lacking. There is however evidence that the mood in governance is changing. Principles such as technological neutrality, open access to essential facilities, and a public good rationale in certain ICT network components are beginning to take hold. There is also increasing recognition among policymakers that, alongside with traditional operators, public-private-community partnerships have an important role to play in extending networks and services to the poor."

Click here to access PDF download options for the final version of this paper, which is titled "The Microtelco Opportunity: Evidence from Latin America" and which was published in the journal Information Technologies and International Development (ITID) (Vol. 3, No. 2, Pages 73-86, Winter 2006.)

Click here to access an earlier (October 2005) version of the full paper in PDF format, which was titled "Diversifying Network Development: Microtelcos in Latin America and the Caribbean". Click here to access a PowerPoint presentation of that October 2005 version.