COMMUNICATIONS-LATAM: Boom in Cell-Phone and Internet Use

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 17 2000 (IPS) - The number of telephonesand especially cellular-phoneshas mushroomed in Latin America over the past decade, fuelled by the privatisation of state-run telephone companies, the International Telecommunications Union (ITU) reported at its regional conference.

Latin America also continued at the forefront of growth in Internet use in 1999, despite the regionwide recession.

While the number of households with access to the information superhighway is growing worldwide, Latin America is the fastest- growing region, with 136 percent expansion last year, according to the ITU’s “Americas Telecommunications Indicators” report presented at the Telecoms Americas 2000 conference, which ended over the weekend.

Some 300 companies participated in the grand event last Monday through Saturday in Rio de Janeiro, with presentations on trends and novelties in the sector.

In telephony, the most spectacular progress was made by mobile services, with more than 39 million subscribers in 1999, up from just 100,000 in 1990 and 3.5 million in 1995, reported the ITU.

The number of fixed telephone lines, meanwhile, climbed by 52.2 percent in the past four years, from 43.9 million to 66.8 million.

The “drastic de-nationalisation” seen throughout most of the region, which opened the sector up to competition, made that advance possible, said ITU Secretary-General Yoshio Utsumi.

While private investment drove up the offer of fixed telephone lines and mobile phones, competition and the introduction of new technologies cut the cost of services, making telephones accessible to low-income sectors, he added.

Although the trend towards increasing competition has not yet been threatened by the wave of mergers and acquisitions that has led to ever larger transnational corporations, the ITU is closely watching the process with growing concern, said Utsumi.

Telephony will continue to expand in Latin America, and in the region’s giant, Brazil, the number of fixed lines will double to around 58 million by 2005, said Brazilian Communications Minister Joao Pimenta da Veiga.

In the 10-year period from 1995 to 2005, the number of telephones in Brazil will have risen fivefold, and the number of cell-phones 50-fold, he added.

Brazilian President Fernando Henrique Cardoso, who attended the inaugural ceremony of Americas Telecom 2000, stressed that the privatisation of the national telecoms system in 1998, at a price tag of 26 billion dollars, contributed to “democratising” telephone services.

By 2005, private telephone lines will be available in all towns with more than 300 inhabitants, said Cardoso.

Universal access to telephones, as well as growing access to Internet, are helping Brazil create “the technical conditions for universal access to knowledge,” which today is indispensable to development, the president added.

The de-nationalisation of telephone companies began in 1988, in Chile. Today, in the vast majority of countries in the region, the chief telecommunications operator is totally or mainly owned by private investors, according to the ITU.

The exceptions are Colombia, Costa Rica, Ecuador and Uruguay, where strong grassroots and labour opposition blocked privatisation plans. Uruguayans, for example, voted in a 1992 plebiscite against a bill approved by Congress that would have privatised the state-run phone company.

In Honduras and Nicaragua, the state-owned telecoms companies are to be sold this year, after having been held up by labour and political resistance.

In most cases, the concessions awarded were accompanied by strict requirements on quality and specific targets for the expansion of the telecoms network. Argentina, for example, set a target of 6.5 percent annual growth for whoever purchased Entel, while Mexico set a target of 12 percent.

Peru and Venezuela set the number of new lines to be installed annually at 250,000 and 355,000 respectively.

The wave of privatisations seen in the 1990s came after the economic crisis of the 1980s left many Latin American governments without funds, forcing them to sell off public enterprises to meet their debts to international creditors, the ITU pointed out.

Spain’s Telefónica and US Bell South stood out as the big investors in the region.

Telefónica acquired the fixed telephony company of Brazil’s richest state, Sao Paulo, as well as mobile telephone companies in seven countries, mainly as the result of privatisation processes. Bell South focused on purchasing cell-phone companies – or obtaining concessions – in 12 countries.

Latin America, with more than 60 new companies, was the region posting the greatest growth in cell-phones, said Ben Petrazzini, with the ITU’s Strategic Planning Unit.

In Paraguay and Venezuela, mobile phone subscribers account for 59.5 and 56.8 percent, respectively, of all telephone users. In Mexico, Brazil and Peru, that proportion stands at around 40 percent, but is expected to equal the number of subscribers to fixed lines shortly.

In Venezuela, the number of subscribers to fixed lines dropped in 1998, as more and more people opted for cell-phones, Petrazzini pointed out.

The boom in mobile cellular services in the region was partly the result of Latin America’s enormous and growing informal labour market, in which businesses often have no fixed address.

The introduction of the Calling Party Pays (CPP) system also pushed up the number of cell-phone users, which increased by 150 percent after the system was adopted in Peru in 1996, and by 179 percent in Argentina in 1998.

After Mexico changed from a “called party pays” system to CPP in April 1999, the number of mobile cell-phone subscribers climbed by 1.1 million in just three months.

Another factor that contributed to the boom in cell-phone users was the prepaid service, an option used by 80 percent of subscribers in Mexico and 73 percent in Venezuela.

Telecoms companies benefit by the system, under which a set number of minutes are prepaid, because billing costs are cut, since users purchase the prepaid access cards at any kiosk.

Although the price of the calls is higher under the prepaid access cards, many users prefer the easy access to the cards and the elimination of the uncertainty as to how high the bill will run at the end of the month, Petrazzini explained.

The boom in cellular mobile subscribers was accompanied by a skyrocketing of Internet use in the region.

Latin America was the fastest growing region in terms of Internet access, with 136 percent growth in the number of users last year, followed by North America (74 percent growth), Asia (61 percent), and Europe (30 percent). Africa tailed with just 18 percent growth.

The number of Internet users in Latin America has soared from around 540,000 in 1995 to 10 million today. And even faster expansion is expected: the number should rise to 15 million by the end of the year, said Petrazzini.

The indicators of the growth in Internet and cell-phone use in the Americas show that the “digital gap” between the industrialised North and the developing South is closing, at least in the Americas, he said. But, he added, the difference remains large.

While Internet users represent three percent of the total population of Latin America, they account for 36.3 percent of the population in Canada.

In Latin America, the country that stands out is Uruguay, where 7.6 percent of the population was on-line by late 1999.

The inability to afford a computer and the high costs of the phone bill make access to the Internet impossible for most Latin Americans, despite innovations that are bringing the cost of services and equipment down.

Access to Internet is even low among the middle and upper classes, standing at between 11 and 14 percent in Chile, Argentina and Mexico. The exception is Brazil, where 32 percent of that socioeconomic strata is on-line, according to ITU figures.

Since the rise in the number of people on-line has been recent, and overall access remains low, webpages in Spanish and Portuguese still account for a mere three percent and one percent of the total, respectively, compared to 75 percent in English. However, the proportion of websites in Spanish stood at just one percent three years ago.

The expansion of content offered in local languages, by national companies or international on-line companies like Yahoo, America On-Line or Excite which are translating and adapting their websites, is one of the reasons behind the fast growth in the number of Internet users in the region.

Other factors were the declining costs of telephones and service providers offering access to Internet.

In Brazil, the emergence of portals offering free access attracted 1.2 million new users in the first two months of the year, according to a recent survey.

A wide range of initiatives are aimed at expanding access. The Brazilian government, for example, opened a line of soft credit to finance computer purchases by teachers, while it has been equipping thousands of schools with computers.

Service providers and vendors of computer equipment are forming associations that offer discounts. Some raffle computers among their new clients while others offer free Internet access.

In some countries, public terminals are being set up in remote or low-income communities in an attempt to extend Internet use. In Argentina, a government programme plans to install 1,000 “tele- centres”, and in Chile the aim is to set up Internet access centres in all municipalities by 2006.

In Peru, the non-governmental Peruvian Scientific Network has installed hundreds of tele-centres and thousands of “Internet booths” (similar to phone booths).