3G and WiMax spectrum auctions in Latin America will trigger massive broadband subscription growth, from 9 percent at year end 2008 to 70 percent at year end 2014, according to a new report from Pyramid Research.
Fixed broadband penetration in Latin America, which stood at 5.0 percent at year-end 2008, is roughly 30 percent below the global average of 6.5 percent, while 3G mobile penetration, at 3.4 percent, also ranks well below the global average of 7.8 percent, notes Jose Mario Lopez, Research Manager at Pyramid Research and co-author of the report.
“Understanding the link between broadband adoption and economic development, governments throughout Latin America have made broadband deployment a central theme of their political agendas,” he says. “Regulators now look to accelerate the award of broadband spectrum, specifically WiMax and 3G, to close the connectivity gap and inject additional competition into the market — this will, in turn, reduce prices, extend coverage to underserved areas, and make more bandwidth capacity available for the introduction of robust Internet applications,” he adds.
Much of the spectrum that regulators have awarded has ended up in the hands of the region’s two main operators, Telmex and its international spinoff Telmex International. In an attempt to encourage the entry of new players in the market through upcoming 3G and WiMax auctions, regulators in Venezuela, Chile, and Mexico are establishing strict limits on incumbents or current frequency holders, encouraging participation by new market entrants.
“The impact of new players will come less from their direct contribution to overall line buildouts but rather from the response that they will elicit from existing, larger market players,” says Lopez. “By introducing services targeting new geographies and new customer segments, and potentially stealing customers away from larger market players, new entrants will force existing operators to lower prices to extend their network reach and to innovate with new services and applications,” he explains. The result will be an expansion of Latin America’s broadband subscriber base from 48 million at year-end 2008 to 426 million at year-end 2014, a compound annual growth rate of 44 percent. Pyramid Research expects a full 87 percent of broadband net additions to come from mobile platforms, either 3G or WiMax.