With only 10 percent of the worldwide Internet audience, and less than 9 percent of the gross world product, Latin America could appear to many as insignificant. Yet, shining a spotlight on Brazil, just to highlight one country, provides a radically different picture. Brazil’s population of 200 million, with over 240 million SIM connections, has the highest SIM-to-subscriber ratio (currently at 2.1 to 1), and outperforms any other country in the world in terms of mobile penetration [1].
Brazil is just one example of the potential in this region of the world. A lot has changed in Latin America in the past 20 years and today, with six countries worthy of an investment-grade debt rating by Fitch and S&P (Brazil, Chile, Colombia, Mexico, Panamá and Perú) and a pervasive and notable penetration of both social and mobile technologies, Latin America is a radically different story [2]. Those technology companies that have understood this and learned to do business in the region have benefited handsomely in the past several years.
To add to the conversation, it should speak volumes that São Paulo, Rio de Janeiro, Buenos Aires and Bogotá individually surpass New York City in terms of Facebook, Skype or WhatsApp subscribers and usage. It’s not a surprise that The Wall Street Journal called Brazil, “The Social Media Capital of the Universe” [1].
Looking to the future, the story gathers momentum. IDC, the leading provider for market intelligence, indicated in its May 2014 report that it expects Latin America to connect objects (the Internet of Everything, or IoE) at a much faster rate than the global average. Their estimates show growth to 827 million devices in 2020 compared with just 244 million devices in 2014. This equates to a compound annual growth rate (CAGR) of 22.5 percent, outstripping the 19.2 percent CAGR projected globally, which will lead to 30 billion connected objects in 2020, compared to just 10 billion in 2014 [3].
IDC also estimates that spending on IoE projects in Latin America will reach $8.8 billion (USD) in 2015, up 14.3 percent from $7.7 billion in 2014. To support this statement, one need only look at Chile which alone spent $300 million on IoE projects in 2014 [3, 4].
It is evident that Latin America is a market not to be discounted. Manufacturers should take note for their strategies for 2016 and beyond. The goal of this article is to share evidence of the great business opportunities that Latin America offers to telecom and information technology equipment (ITE) manufacturers by providing an overview of the telecom infrastructure investments, progress in digitalization, and regulatory environment affecting each sector.
Investment in Infrastructure and Digitalization
Broadband and connectivity have been at the forefront of the agenda for all Latin governments and regulators, and strategies are in full action as they move to continue improving their infrastructures and bandwidth capacity to accommodate emerging technologies. The growing spending in infrastructure in Latin America is principally in the expansion of 4G and fiber networks (according to BNDES in their July 2015 report [5, 6].
To give perspective on the size of investment in infrastructure that includes mobile, telephony, and telecom as well as government programs in 2015, Brazil spent $10.5 billion in infrastructure, Argentina $3.1 billion and Mexico $4.4 billion. The 2016 figures are expected to increase as telecom becomes an important component to GDP in all Latin Nations [7].
The recent worries about Brazil’s economic slowdown and recent downgrade in credit rating had many questioning the impact to its future investment in infrastructure and elsewhere in Latin America. However, Brazil’s investment in telecommunications in 2015-18 is forecast to reach 136 billion Brazilian reales (about $35.5 billion USD), some 35 percent higher than in 2010-13. The network improvements in Brazil and many other countries in the region are built on partnerships, between foreign companies and governments which provide a certain stability as their agreements are based on long term commitments [5].
Most of the local telecom players in the different Latin American countries belong to multinational groups which makes them safer since they can seek credit flows and financing from abroad, in addition to their home base. Thus, economic fluctuations are not as worrisome.
2015 has been a catalyst year as the governments in many Latin American countries are achieving their milestones. Companies like L3, Ericsson, Alcatel-Lucent, Cisco, Huawei, and Motorola Solutions have teamed up with the big leading network providers like Telefonica, America Movil and Claro, and have played a big role in modernizing the antiquated networks.
VMware is also a big player implementing virtualization in Latin America, since they say that investment in data center virtualization continues to thrive despite weakening local currencies. VMware’s Latin American office reports that sales continue to enjoy double-digit growth in certain products – like the storage virtualization solution vSAN, software defined data center (SDDC), networking solution NSX and end-user computing solution Horizon. These have enjoyed triple digit growth in some cases [8].
All these efforts by Latin governments and foreign investors are having a positive impact. To illustrate the achievement by some countries in Latin America, the International Telecommunications Union (ITU) ranked several Latin American countries among the 157 countries that have moved up through the ranks in its 2014 Development of Information and Communication Technologies (IDI) report. These are Uruguay ranked 48th, followed by Costa Rica (55th), Chile (56th), Brazil (65th) and Panama (82nd).
In the ITU’s 2015 State of Broadband report on connectivity in developing nations, Caribbean countries ranked high in connectivity relative to their population. Barbados (70.5 percent, 13th place), St Kitts and Nevis (62.8 percent, 17th) and St. Vincent & the Grenadines (58.5 percent, 21st) boast the largest percentage of households with Internet access among developing nations. Uruguay comes next with 57.4 percent connectivity, ranking 22nd [9].
LTE Implementation and the 700 MHz Rollout Factor
The outlook in infrastructure investment for 2016 is expected to gather momentum because carriers who have won spectrum auctions in the 700 MHz band and other bands are committed to invest in infrastructure as governments have made that a requirement in order to operate. Only four countries thus far, Argentina, Brazil, Chile and Venezuela, have fully auctioned services for 4G and LTE services. The remaining countries, including those in the Caribbean, have recently held auctions and others have scheduled auction dates for 2016. This fact only translates into future infrastructure investment in these countries.
Furthermore, many governments are taking the opportunity to improve the connectivity of public places while also improving connectivity in the education sector by attaching conditions to their spectrum auctions. Take Paraguay as an example, where bidding rules include requiring spectrum winners to provide free connectivity and computers to schools, hospitals and police located in underserved areas [10]. In addition, LTE technology will be essential to the deployment for IoE devices by 2020 [11].
In Latin America, according to 4G Americas, the LTE transition has translated to a 488 percent increase in connections since 2013 resulting from spectrum auctions and implementation of the 700 MHz band to accommodate 4G. Argentina, Venezuela, Brazil and Chile have been first this year in the implementation, and these moves have served as a catalyst for other countries to open access to spectrum in the 700 MHz band and offer it to interested parties. Colombia, Nicaragua, Honduras, Bolivia, Peru and Mexico are expected to open spectrum in the 700 MHz band by the end of 2016, and an additional 10 new networks will be available between South America and the Caribbean [11].
Latin America’s decision to adopt the Asia-Pacific segmentation of the 700MHz band will also result in a large pool of devices available once LTE-A and other new technologies such as VoLTE and VoWi-Fi are implemented [13].
Regulatory Agenda by Country for Roll-Out for 700MHz in Latin America
Spectrum, as operators usually say, is oxygen for mobile communications. The ITU recommends that countries have at least 1300MHz of available spectrum for mobile broadband for 2015. However, according to the 4G Americas report, the average amount of spectrum assigned for mobile telecommunications in Latin America had been 314.9MHz as of July 2015, representing less than a quarter of the ITU goal [11].
The efforts have concentrated on making the 700 MHz band available to facilitate 4G technology. Here is a breakdown of 700 MHz spectrum availability in select countries.
Brazil—Brazil has the largest amount of spectrum released for broadband and is the closest to meeting the ITU goal in Latin America. Regulators in that country will tender leftover blocks of spectrum in the 1.8GHz, 1.9GHz, 2.5GHz and 3.5GHz bands, in both FDD and TDD technologies. Bids were expected to be opened at the end of October 2015, with most of the blocks aimed at smaller players, as major operators have topped their regulatory spectrum limits.
Colombia—In May 2015, the country’s ICT ministry MINTIC published a draft document for public consultation on the rules for the auction of spectrum in the 700MHz, 900MHz, 1900MHz, and 2500MHz bands. The tender is expected to take place in 2016. The government is mulling over offering 20MHz in each of the 700MHz and 900MHz bands, plus a 5MHz block in the 1900MHz band and 30MHz in 2500MHz. The latter could be auctioned as a single block, two blocks of 15MHz each or three blocks of 10MHz each.
Mexico—The country is preparing to auction the UHF band (440-450MHz) and the AWS band (1700-2100MHz) before the end of 2015. Some 60MHz will be auctioned in the AWS band, together with 10MHz in the UHF, for use in private communications. In the longer term, Mexican watchdog IFT plans to open up the 600MHz spectrum currently being used for TV broadcasts. There are also plans to free up for auction 68 percent of Mexico’s 2.5GHz band currently used for broadcasts, although no clear timetable has been provided.
Paraguay—Paraguay’s Minister of the Economy Santiago Peña has indicated that the highly anticipated 700MHz band will be auctioned for 4G before the end of 2015. Telecom regulator CONATEL was due to auction 4G spectrum in October 2014 and collect $100 million in license fees, but legal actions have held up the process. The 1700-2100MHz (AWS), 2600MHz and 700MHz bands were all being considered.
Peru—Peruvian investment promotion agency ProInversión recently released bidding rules for 4G spectrum in the 700MHz band. A public consultation was opened until September 2015, with pre-qualification documents to be presented before the end of the year. Auction is slated for 2016 and includes three blocks of spectrum (15MHz+15MHz) in the 698-806MHz range.
Venezuela—Venezuelan telecom regulator CONATEL is exploring auctioning spectrum in the 700MHz, 800MHz and 900MHz bands to boost mobile broadband coverage. CONATEL has launched a public consultation to be conducted in February 2016 to determine its future plans for spectrum auctions.
Digitalization
Emerging markets will reportedly lead in the rollout of the Internet of Everything (IoE). A key factor is the major investment in infrastructure that emerging countries are making in the public sector. This is the prime mover of the IoE, since governments have the need for and willingness to learn and share information.
Current improvements to infrastructure in emerging markets are expected to be a significant benefit since such investments will enable them to leapfrog generations of legacy technology still in place in developed nations. This is expected to help emerging markets become microcosms of innovation that large cities in developed nations should look to. This is according to Joseph Bradley, VP of IoE Practice with Cisco Consulting Services who says that Cisco expects Latin America will constitute an $870 billion IoE opportunity over the next 10 years. This estimate is broken down into five main sectors: manufacturing ($226 billion), public sector ($163 billion), financial services ($58 billion), energy ($38 billion) and transportation ($15 billion), along with others [4, 14].
During the 3rd Latin American Telecommunication Conference in July 2015, government and technology leaders gathered to discuss digitalization and the evolution of IoE. The discussions centered around the preparation and adoption of IoE with governments, manufacturing facilities, healthcare, education, and transportation, key areas where digitalization is expected to occur [12].
Smart Cities
Although digitalization is just getting a start in Latin America, the investment by countries like Brazil and Chile are very evident. In places like Sao Jose dos Campos, a city of 600,000 inhabitants located in the state of San Pablo, Brazil, Ericsson implemented a hub in the civil police, military police and various defense agencies that functions in an integrated manner. In just three years, the initiative helped drive down the local homicide rate from 10.21 to 8.29 per 100,000 inhabitants.
Another example of real impact on security is the inauguration of the Center for Public Safety Management that Telefonica opened in Cusco, Peru which will directly benefit 695 inhabitants and indirectly provide protection to the thousands of tourists visiting Cusco every day. The system integrates a network of more than 100 cameras distributed around the city that monitor activity, and a fleet of emergency vehicles that can respond to incidents.
Ericsson joined the fray in Águas de São Pedro, Brazil, where they partnered with Telefonica to deploy sensors in public parking lots in order to facilitate detection of vacant parking spaces. In Santiago de Chile, Ericsson collaborated with Entel to develop tools for Big Data to improve the management of public transport [15].
Although Smart Grid deployments are currently scarce, consider the case of Megacable which plans to install 160,000 smart meters for the Federal Electricity Commission (CFE) in the Valley of Mexico after winning a contract of $106 million. Numerous initiatives exist elsewhere in Latin America to develop city projects, including Guadalajara, (Mexico), Quito, Guayaquil and Yachay (Ecuador), Medallín (Colombia) and Rio de Janeiro (Brazil) [16].
Wi-Fi Market
As manufacturers dash to join the IoE, creating new types of products, systems, and devices to make lives more efficient and comfortable, it is worth noting that Wi-Fi and LTE will be the technologies that will make it all possible and link devices together. Wi-Fi will connect devices to wireless access points that, in turn, will connect to the web and cloud-based intelligence.
According to Infonetics IHS, carrier grade Wi-Fi equipment sales totaled $336 million worldwide during the last six months of 2014. Most of the revenue came from the sale of access points, while 22 percent was obtained from the sale of Wi-Fi devices.
Hotspots keep growing around the world and it is expected that in the next four years (source Marevedis Rethink) there will be one Wi-Fi access point for every 20 people, compared with one hotspot for every 150 people currently.
In Latin America several deployment initiatives have been taken at the provincial and municipal levels, to ensure full coverage in their communities by the year 2020. Countries like Chile are in full motion, currently providing free Wi-Fi to more than 125 local communities. Paraguay has installed Wi-Fi coverage in community plazas and other public places. Honduras has installed a free Wi-Fi network to benefit 226 schools and public parks. Brasilia (Brazil) will invest $8.5 million to install 220 Wi-Fi access points with Telecom Italia, with more plans of expansion. Mexico is one of the largest winners, with their Mexico Conectado initiative providing more than 65,000 public installations with Telmex and more than 1,125 public areas offering free Wi-Fi.
Regulation Updates Affecting Wi-Fi Networks and IoE Spectrum
In 2015, telecom regulatory agencies in Argentina and Ecuador completely overhauled their regulatory systems to align regulations with technology. Other countries in Latin America followed suit by revising their own telecom legislation to respond to new demands that technology has imposed. Many of the countries are using Wi-Fi and Fiber Optic to connect devices, however new technology and spectrum is needed to fully deploy machine-to-machine (M2M) and IoE in the future. Thus far, only two countries have taken a proactive approach, Brazil and Colombia.
Below is a brief summary of the major developments for 2015 affecting Wi-Fi and IoEspectrum.
Argentina—In April 2015, Argentina announced the creation of its new telecommunication agency AFTIC, taking control of responsibilities formerly executed by SECOM, CNC, and ARSAT. The country’s Communications Nacional Commission (CNC) continues to operate normally without many changes to its regulatory laws. The only change announced in early February 2015 was the implementation of new labeling requirements for products certified by AFTIC.
In the area of IoE, Argentina through its operator Personal Argentina is concentrating efforts to developing an IoE and M2M strategy and committing $6.6 million using GSMA technology [17]. AFTIC has not started any effort yet to allocate spectrum specially dedicated to M2M and IoE.
Brazil—Brazil is not only currently reviewing its broadband telecommunication laws but also considering the creation of new laws directly regulating IoE and M2M technologies. According to data from telecom regulator Anatel, Brazil is currently the fourth largest market for M2M, with 10 million data terminals, a number which is projected to exceed 1 billion terminals by 2020. Accordingly, Brazil’s communications ministry MINICOM formed a committee to work on a national IoE plan that would foster research and aid in the formation of new companies in the sector. The national plan for M2M communication and the IoE was expected to be ready by the end of 2015 [17].
Chile—Chile is fully committed to embracing the new telecom revolution and also looking at their regulatory structure to support this growth in the IoE. The agenda is based on five central goals: access to physical connectivity infrastructure; education and training; innovation and entrepreneurship; services and applications for productivity; and the encouragement of citizen participation.
Colombia—Colombia’s national spectrum agency ANE is also making recommendations on how to leverage this new trend. In September 2015, ANE recommended setting aside 50MHz of spectrum for M2M communication. The current proposal is to use unlicensed mobile spectrum to deploy the services with the hopes that it will drive innovation in applications and create new industries. ANE believes the use of the unlicensed spectrum can have a major social and economic impact as it does not require the purchase of a license fee and since it supports new projects and entrepreneurship.
Ecuador—In early 2015, Ecuador merged three telecommunication agencies, SUPERTEL, CONATEL AND SENATEL, to create a new regulatory agency, ARCOTEL, to provide a more dynamic agency controlling the administration and regulation of telecom services and spectrum control. Thus far, there have not been any changes in regulations affecting compliance for wireless devices or spectrum allocation for IoE.
Mexico—Mexico had an active year by introducing new IFT regulations. On January 7th, 2015, it replaced NOM-151-SCT1-1999 with IFT-004 and NOM-EM-015-SCF1-2015. The new regulations continue regulating terminal equipment for interface to public networks. On October 19th, 2015, IFT replaced NOM-121 -SCT1-2009 regulating frequency bands 902-928 MHz, 2400-2483.5 MHz, and 5725-5840 MHz and replaced it with IFT-008-2015 and NOM-EM-016-SCFI-2015. On October 21st, 2015 it released a new frequency allocation table that will allow Mexico to accommodate new emerging technologies.
Currently Mexico is using Wi-Fi and fiber optic cable to connect devices and implement their Smart City strategy.
Paraguay—In March 2015, Paraguay announced its decision to review its current telecom law to address monopoly situations in the telecom sector and to update their regulations to current needs and is actively looking at strategy for M2M and IoE through its telecom operator Tigo [18].
Conclusion
It is clear that Latin America is a strategic area for manufacturers to consider. Regulators in Latin American countries are moving swiftly to adjust their respective regulatory systems to support the requirements of these new technologies. Investments in infrastructure are expected to continue since there are still many countries working to complete full transitions. Wireless networks will continue to improve to provide full connectivity to all Latin nations by the year 2020. And digitalization and the IoE will be the drivers of future growth, providing attractive opportunities for hardware and software manufacturers.
References
- Omar Tellez, “Understanding Tech Penetration in Latin America,” Tech Crunch, April 7, 2015.
- Trading Economics, Credit Rating World country chart.
- Denise Lund, Carrie MacGillivray, Vernon Turner, Mario Morales, “Worldwide and Regional Internet of Things (IoT) 2014 – 2020 Forecast: A Virtuous Circle of Proven Value and Demand,” May 2014, pages 25, 26.
- Patrick Nixon, BNAmericas, “Emerging Markets Could Lead IoT Innovation,” June 8, 2015.
- Pedro Ozores, BNAmericas, “Can Brazil’s Downgrade affect telecom investments?” September 2015.
- BNDES, Management report – BNDES Systems, 1st half of 2015.
- mediatelecom.com “Las telecom son la alternativa de crecimiento en America Latina en 2015,”
Oct 27, 2015. - Phil Anderson, BNAmericas, “VMware: LatAm investment in virtualization unaffected by exchange rate woes,” June 10, 2015.
- Pedro Ozores, “How did LatAm perform in the UN’s broadband index?” September 22, 2015.
- Patrick Nixon, BNAmericas,
“Paraguay moves forward with 4G action plans,” September 4, 2015. - Berg Insight, “LTE will become the leading technology for cellular IoT devices in 2019,” October 2015.
- Pedro Ozores, BNAmericas, “LatAm spectrum auctions updates,” August 31, 2015.
- Patricia Rey, BNAmericas, “Digitalization: The next step in LatAm’s telecom development,”
July 20, 2015. - Telesemana, “La siguiente generación de los servicios de voz VoLTE y VoWi-FI,” July 2015.
- Phil Anderson, BNamericas, “LatAm connecting objects faster than global average,” July 30, 2015.
- Pedro Ozores “Smart lighting, security are first projects at Huawei Brazil smart city center,” October 9, 2015.
- Andres Krom, Telesemana, “Avanza la digitalización de las ciudades en Latino America,” July 1, 2015
- BNAmericas, “National Plan for the Internet of Things,” June 26, 2015.
Elizabeth Perrier, MTM, PMP, is the CEO of ORBIS Compliance, a regulatory compliance consultancy dedicated to serving manufacturers, module integrators and distributors of telecom and radio devices to obtain regulatory approvals in Latin America and the Caribbean. A native of Latin America and educated in Canada and the U.S., Elizabeth holds a Masters in Telecommunications Management and a Certification in Project Management. She actively participates in the review of new law proposals by Regulators in Latin America and also participates in National Conferences in the U.S. as an expert giving presentations and as a panelist. Recent appearances include the IEEE ISPCE 2014 Conference in Santa Clara, and the March 2015 IEEE EMC-SI Panel of Experts, where she led a discussion on Product Compliance in Brazil and Mexico, Latin American Environmental Laws related to WEEE Compliance, and Take Back programs. Elizabeth can be reached at eperrier@ orbiscompliance.com.
