BY LATIN AMERICA ADVISOR
Mexico-based regional wireless provider America Movil last month secured $1.5 billion in financing to help upgrade its network in order to provide high-speed Internet access to mobile customers. Other regional telecom companies, like Spain's Telefonica, have also indicated they see mobile Internet as one of the region's fastest growing markets. How are Latin Americans using mobile Internet technology and, more importantly, can many more of them afford it? What factors could stand in the way of greater 3G penetration in Latin America?
Wally Swain, senior vice president for emerging markets at the Yankee Group: All Latin American operators are enjoying big success with mobile broadband, primarily laptop modems. In fact, we estimate that in 2008, 60 to 70 percent of all 3G sales were for laptop connectivity. In Brazil, some operators even marketed 3G as a substitute for fixed broadband connections—a practice we do not recommend because mobile networks are not designed for heavy downloads or continuous use. So far then, the market has been dominated by early adopters, the kind of customers who can afford a laptop and a wireless data plan for the pleasure of accessing the web anywhere they want. The explosion of laptops and now netbooks in the region has also been a driver. The price of a data plan can be up to five times average carrier revenue per user so while the base may be small, the revenue is important and worth investing in. We also see long-term potential in connected devices—like having your video camera connected to the web for real-time 'broadcast.' But data traffic is growing faster than either subscribers or revenues and flat-rate plans only encourage this to keep growing. We simply don't think operators can maintain the 'all-you-can-eat' model without their investment costs spiraling out of control as well. Just to survive, they must introduce 'pay-as-you-go' plans or flat-rate plans with low monthly download caps. These could have the effect of broadening access to other socio-economic groups. Mobile voice took off in Latin America when operators introduced prepaid, lowering the 'entry' cost of service to nearly zero and providing budget-conscious customers absolute control over their expenditures. The same should happen with mobile broadband.
Juan Ignacio Fernandez, research director of Carrier Network Infrastructure at Gartner: The process of implementing 3G networks in the region began late in Latin America. About three years ago we saw the initial deployments in most markets, but since then most country markets have gradually adopted 3G networks that are designed primarily to offer a reasonable mobile Internet experience. Currently, the number of mobile Internet users remains modest in the region. Gartner estimates approximately 4.8 million subscribers for W-CDMA-based 3G networks, and around 2 million EV/DO users region-wide at the end of 2008. Mobile Internet is too expensive for most prepaid users and the penetration of laptops and 3G smartphone users is still relatively low although growing. Most applications for mobile Internet remain basic web connectivity although there are a number of other applications available in smartphones that will begin to gain importance as these devices become more widespread. Bringing smartphones into the market at lower price points is a key for expanding the use of the mobile Internet in Latin America. Additionally, network capacity will need to improve, particularly for the backhaul of base stations and core network improvements.
Michael Minges, senior market analyst at the Telecommunications Management Group: Mobile Internet is growing rapidly in Latin America. It is an attractive alternative to existing fixed broadband options in the region, which often are limited and expensive. According to the GSM Association, mobile is often the fastest broadband option in Brazilian neighborhoods. According to 3G Americas, the number of Universal Mobile Telecommunications System/High Speed Packet Access (UMTS/HSPA) subscribers in the region stood at 4.7 million in 2008, an increase of 75 times since 2007. Though much focus has been on HSPA, there are actually more people in the region using CDMA2000 1xEV-DO (5.9 million according to the CDMA Development Group). The two greatest barriers to higher 3G penetration in the region relate to spectrum and pricing. Certain operators believe that more spectrum is urgently needed to handle the growth in mobile Internet. Continual delays in assigning spectrum may mean that operators will ration mobile Internet use. Otherwise they risk congesting their networks with data, impacting quality and call success. In fact, many operators already ration mobile Internet use through monthly download caps and tiered pricing packages. Regulators should institute measures that provide for more spectrum and enhance competition. In addition, pricing remains a significant factor to increased use of mobile Internet technology. While mobile Internet has often been used with a USB card to connect laptops, the availability of new handsets, particularly the Apple iPhone—now available in 20 markets across Latin America—is spurring demand for mobile Internet from portable devices. However, the prices of these devices are still beyond the reach of most of the region's mobile users. In order to increase 3G penetration and mobile Internet use, cheaper Internet-enabled handsets are needed.