“Between 2012 and 2015, Latin American mobile operators paid US$8 billion for 4G spectrum licenses. They also have invested US$96 billion in network deployments over the past five years, and we estimate that they will invest US$193 billion between 2014 and 2020.”
Sebastián Cabello(*)/ Latin America, April 2015
We are living in a time when the fourth generation (4G) of mobile technology is being deployed throughout our region at a rate that is even higher than 3G initially presented. According to the latest GSMA intelligence data, which were presented at the 2015 Mobile World Congress in Barcelona, 4G coverage will be available to 76% of the population in Latin America by the end of 2020, a significant increase over the 35% observed in late 2014. This means that 4G will represent 28% of the 889 million mobile connections projected for 2020, which is equivalent to 245 million.
However, these estimates always seem to fall short. The cell phone is the most important global phenomenon of the past few decades. It is changing all of our lives, growing more than expected, and creating great opportunities as it does. Scale and interoperability are the pillars of an industry that promotes an increasingly more prolific ecosystem ahead of and behind its value chain. This has allowed it to challenge the achievements of all other private and public services with massive drive. In late 2014, there were 709 million connections in total and over 300 million mobile broadband connections, exceeding fixed broadband connections by over five times on average.
User demand and machine-to-machine (M2M) communications also drive this continuous growth and necessitate increasing investment. The proliferation and increased accessibility of smartphones that allow for Internet use created an unprecedented level of data traffic on the networks. This has the potential of saturating those networks unless there are long-term capacity expansion plans with a clear horizon for channeling investments. Between 2012 and 2015 alone, Latin American mobile operators paid US$8 billion for 4G spectrum licenses. They also spent US$96 billion on network deployments over the past five years. We estimate that US$193 billion will be invested between 2014 and 2020 (La Economía Móvil de América Latina 2014).
Closing the Digital Divide through Intelligent Use of the Spectrum
Mobile devices are the main mode of Internet access in our region. In order to achieve universal Internet access, which we call closing the digital divide, it is necessary to focus on the advance of these networks and services. A great deal has been achieved thus far, but there is still a need for increased coordinated and collaborative efforts between the private and public sectors in order to reach remote areas where it is not profitable to do so through traditional networks. There is thus a need to provide incentives for sharing infrastructure, facilitating access to buildings and roadways, developing joint projects (known as PPPs), and, fundamentally, using the key resource that is the radio spectrum in an intelligent manner.
The upper part of the UHF band (the 700MHz band) was identified by the International Telecommunications Union for use for mobile data services in 2007. This spectrum had been assigned to broadcasting services, which would require less spectrum frequencies after digitalization and could use lower ones. The spectrum that would become available following TV digitalization was called the “digital dividend.” A consensus was quickly reached by the administrations of our region and the world regarding the importance that this process could have for providing greater geographic coverage for wireless broadband services. This was due to the fact that it is a lower band, which allows for greater propagation of the signal, even more than existing 2G and 3G services planned at 850MHz. In other words, if the existing infrastructure was used to provide services using the 700MHz band, the frontier of coverage would immediately expand beyond its current reach. According to a study by Raul Katz and Ernesto Flores-Roux in 2011 (“Beneficios Económicos del Dividendo Digital para América Latina”), mobile broadband could increase coverage up to 20 percentage points for several of the countries studied.
The clear result is that the digital dividend is a necessary condition for a country to be able to reach its connectivity goals through national broadband plans or digital agendas. This regional consensus regarding the importance of the 700MHz band for the provision of mobile broadband services was reflected in the fact that the entire region changed the assignments and the majority of the countries proposed channeling the harmonized band in consonance with the proposal made in the Asia Pacific region. This allowed for important gains of scale and the avoidance of problems of interference. Though it meant following a path other than the one taken by the United States and Canada, it had very valid justifications in greater use of this key spectrum as a limited resource.
Progress in 4G Deployments and Perspectives on the Use of the Digital Dividend
As of March 2015, there were 57 4G-LTE networks in 22 countries of the region. These deployments were conducted in different frequency bands, mainly the AWS band (1700-2100MHz tendered in 9 countries) and the 2.6 GHz band (2500-2690MHz used mainly in Chile, Colombia, Venezuela, and Brazil). However, 2014 was the year in which the 700MHz band began to be tendered more and more, beginning with Chile and followed by Brazil, Argentina, Panama, and Jamaica, which followed the assignments that had been made early on in Bolivia and Ecuador. The importance of this 700MHz band was reflected in the amount of money paid for its use, which totaled US$3.7 billion. This is equivalent to 44% of the total paid for 4G spectrum even though it only represents 19% of the MHz tendered.
In the future, data services like 4G will have to be provided by operators using a combination approach in order to offer greater capacity (high bands) as well as greater coverage (low bands). As such, we must not think of the spectrum as an element that could generate income, because this could prevent the development of investment projects designed to provide responses to the pressing growth in this area. Another key element related to making the digital dividend a reality sooner rather than later is the clean-up of the 700MHz band, which involves removing existing services, many of which are precarious and lack scale. The experience of Brazil in this area may provide many important lessons. This is reflected in the degree to which the frequencies auctioned off last year can be used.
Katz and Flores-Roux’s study also discussed the opportunities and socio-economic impact that the use of the digital dividend could have for the region. Specifically, they indicated that it could contribute up to US$14.8 billion to the Latin American economy, broadly surpassing (up to four times) the impact that using this spectrum for other services such as radio broadcasting could have. It is very important that public policy in this area come from the State, transcend individual governments, and take advantage of current opportunities, maximizing the potential of the spectrum for the good of future generations. Access to Internet democratizes opportunities, generating individual and collective capacities, and offering a great tool for diversifying voices.
* Director of GSMA for Latin America