Home Latin America II 2001 The Wireless Opportunity…

The Wireless Opportunity…

by david.nunes
Enrique GarcíaIssue:Latin America II 2001
Article no.:1
Topic:The Wireless Opportunity…
Author:Enrique García
Title:President & CEO
PDF size:36KB

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Article abstract

Information and Communications Technologies (ICTs) present an opportunity to leapfrog over historic technology divides and overcome barriers keeping them out of the emerging global economy. ICTs also present a challenge for the region to address many underlying issues that hold back competitiveness and that may be exacerbated by the changes they can bring. Creative, intelligent answers to a host of problems must be identified and pursued by all in the region to ensure that these opportunities become reality.

Full Article

Information and Communications Technologies (ICTs) present a challenge and opportunity for development in Latin America. The opportunity is to leapfrog over historic ‘technology divides’ and overcome knowledge and information barriers that have kept vast portions of Latin America relatively isolated from the emerging global economy. But ICTs also present a challenge for the region to address many underlying issues that hold back competitiveness and that may be exacerbated by the changes they can bring. Creative, intelligent answers to a host of problems must be identified and pursued by governments, private sector, and civil society and multilateral organisations of the region to ensure that these opportunities become reality. Information is valuable, and the ability to access it, manipulate it, and commun-icate it to others is becoming easier and cheaper every day. Technology has reduced prices while increasing quality. One MHz of computer processing capacity cost about US$7,600 in 1970, today it costs about US$0.17. The price for sending information across the world has also dropped and capacity has exploded. Today, all the data that was sent over the Internet in all of 1997 could be sent over a fibre-optic cable in one second. “Information is valuable to the poor and providing access to communications services can have an important impact upon human development.” Technological advances and the development of vast communications networks (the Internet) are making information and communications technologies more and more accessible to populations of Latin America. In so doing, they can break communications barriers that have kept populations isolated and lagging behind global development trends. Communication and information can mean something as simple as being able to call a doctor to get advice regarding a sick child or a farmer consulting commodity markets to negotiate fairer prices with intermediaries. One example of this potential is the case of small farmers of Chincheros, Peru who used to receive some US$110 monthly selling their potatoes in the local market. Using the Internet, a farmers’ co-operative was able to establish contact with a distributor in New York that was interested in organically-grown potatoes. The co-operative now sells directly to the US market and monthly revenues have increased to some US$1,300. Putting the tools of such negotiations in the hands of more people throughout the region can increase market efficiency and fairness. Information is valuable to the poor and providing access to communications services can have an important impact upon human development. This is not to say that such efforts need be charity, the poor often pay dearly for information that is readily available to more ‘connected’ segments of society. For example, a study of the use of mobile phones in Bangladesh has shown that the real savings of a single telephone call can be between three and 10 per cent of a family’s monthly income. Capitalising on these opportunities can be profitable for businesses and for the communities they serve. While the falling costs of accessing and transmitting information will continue to increase the accessibility of technology tools in Latin America, and can overcome some barriers of distance and communication, other barriers will likely remain. With the faster pace of technological change, the ability to efficiently absorb and understand new information and technologies can become the new constraint. Having access to markets and being able to compete competitively in them are two distinct problems and by some indications, Latin America is lagging behind in these terms. For example, according to the World Economic Forum’s Global Competitive-ness Report, many Latin American countries are among the least competitive economies. While ICTs can help over-come information and communication barriers, doing so can expose further underlying problems in competitiveness. The competitiveness of these countries is held back by the need to develop efficient financial systems to promote new businesses, the need to improve transportation logistics to get products to markets efficiently, and the need to overcome bureaucracy and red-tape. The story so far The experience of bridging these communications divides using traditional wire-line technologies has been mixed, but wireless technologies and recent policy reforms present a promising future. – Access – While Latin America lags far behind world leaders in terms of the quality and reach of ICTs, the region is one of the fastest growing in the world. The density of main telephone lines has doubled in the 1990s, and the growth of the Internet in the region is projected to be among the fastest anywhere in the world. But outside metropolitan areas, the story changes drastically and vast segments of society still lack easy access to even a telephone. For example, in Bolivia, the number of telephone lines per 100 people in the capital La Paz is over 10, while in the state of Potosí there are only two per 100 people. – Network Learning – ICTs have yet to permeate through educational systems in Latin America. Most children, but especially those in public schools outside of main cities, are not exposed to these technologies. While over 98 per cent of schools in the United States are linked to the Internet, the comparable figure for Latin America is probably much less than 10 per cent. This leads to a population that is not highly ICT-literate and diminishes the ability to efficiently adopt these technologies in productive processes. – Network Policy – Regulators (deregul-ators), promoters, users of technology and governments play a central role in the use of ICTs in the region. Reform and liberalisation throughout the 1980s and 1990s have unleashed competition and helped to dramatically extend communications infrastructures. Several countries are also leading the use of e-Government to improve service provision and enhance transparency. Several are adopting laws for digital signatures and e-Commerce. Wireless technologies have several advantages over their wireline cousins when it comes to enhancing network access in poorer and more isolated areas. First of all, initial set-up costs are much lower and networks can be more easily expanded as demand grows. For poorer areas with low general levels of demand, wireless can provide service today with the ability to expand to meet tomorrow’s demands. Not having to lay copper or fibre cables has advantages in area with rough terrain; it is also much faster to install. Lucent Technologies, for example, installed 800 base stations in some of the remotest parts of Argentina in just five months. Over US$10 billion has been raised in Latin America just for new mobile cellular licences since 1990 and 60 new operators have entered the region. Recent and pending release of Wireless Local Loop and other spectrum will further add to the competition to reach underserved areas. The number of mobile cellular subscribers has exploded from just 100,000 in 1990 to 3.5 million in 1995, to 39 million in 1999. All this while prices have fallen some 20 per cent between 1996 and 1999. Many countries in the region are just now reaching the point of increasing growth where usage typically takes-off; this seems to happen when penetration reaches around 20 per cent of the population. In part because of new competition from wireless operators, main fixed-line penetration has doubled over the past decade to 13 lines per 100 people in 1999. The past 10 years have seen a real explosion of telecomm-unications activity responding to unmet demand for communications services in Latin America. CAF´s Role The Andean Finance Corporation (Corporación Andina de Fomento) is committed to helping ensure the opportunities presented by ICTs are taken full advantage of in Latin America. CAF will continue to identify and support projects in the region that extend and enhance network infrastructures and that encourage network-readiness in general. Doing so requires a multi-faceted approach with work in many complementary areas such as improving the physical communications and related infrastructures, ensuring a stable and clear legal environment, creating effective trade policy, and fostering an entrepreneurial business environment with a sound financial system to support it: – Infrastructure – improving and extend-ing the reach of the underlying communications and related infras-tructures (electricity, transportation, etc.) that are essential if firms and individuals are to take full advantage of network opportunities. CAF has been involved in operations in excess of US$410 million since 1995 in tele-communications. Some examples of CAF’s work in the area include financing for Celular Móvil in Colombia, Telefónica in Peru, and Infonet in Venezuela. In addition, CAF has provided over US$3 billion since 1995 in electricity, transportation, and other infrastructure projects that are helping to link markets and strengthen sectors complementary to the digital economy. – Human capital – helping prepare the region’s work-force for the efficient adoption and use of new technologies as well as using new technologies to improve the provision of education, especially in remote areas. For example, CAF is developing a pro-gramme to extend Cisco’s Networking Academy to more remote and underserved areas of the Andean countries to help mitigate projected shortfalls of some 625,000 network technicians for the year 2004. – Promoting small and medium enterprise innovation and readiness – the innovative capacity of small and medium firms has long been recognised but for many reasons such companies have difficulty succeeding and are among the slowest to take advantage of new technologies in Latin America. Mechanisms must be enhanced to promote innovative technology firms and to encourage their efficient use of ICTs. – Public Policy and Regulatory Regimes – Telecommunications markets must be constantly monitored to ensure healthy competition. The rapid pace of technological advance puts constant pressure on policy systems in such areas as competition policy, intellectual property, taxation and cyber-crime. In this environment, having a forward looking, flexible policy and regulatory regimes is critical for attracting investment and encouraging network readiness in the region. Further, in this age of integration we have a unique window of opportunity to begin harmonising the rules and regulations affecting the digital economy from the first step instead of after the fact. Conclusion No lending organisation, including CAF, can bring the benefits of the networked world to Latin America on its own. It rather necessitates a concerted and creative effort from policy leaders, telecommunications entrepreneurs, educators, civil society and the day-to-day efforts of small and large businesses throughout the region. The digital age is no silver bullet-it will not solve all the region’s problems and in fact can highlight the need for action in other areas. But I fundamentally believe that we cannot allow the opportunities these technologies present to pass the region by. CAF will do its part-identifying and promoting companies and projects that will extend communications networks and the benefits of the digital age throughout the region, enhancing the effective insertion of Latin America into the global economy.

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