The Information and Communication Infrastructure ICI: Perspectives for Latin America

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The Information and Communication Infrastructure
(ICI) Perspectives for Latin America
Financing the Information Society in Latin
America Challenges and New Models ECLAC
Santiago, Chile July 23th, 2003
Pierre Guislain Manager, Global ICT - Policy
Division The World Bank
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Agenda

• The Role of ICI
• ICI in Latin America
• Overview
• Strengths, weaknesses and obstacles
• Regulatory Priorities
• Universal Access
• Promoting Investment
• Conclusions

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The Role of ICI

• Information and communication infrastructure
  (ICI) The telecommunications, Internet,
  broadcasting and other networks through which
  information is transmitted, stored and delivered
• There will be no Information Society without a
  competitive information and communication
  infrastructure
• The I (of information and communication
  infrastructure) come before the E (of
  e-government, e-commerce and e-services)

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ICI in Latin America Overview
Economic recession and sector crisis has
constrained demand and investment
Source WDI, PPI Database. Investment excludes
acquisition of government assets
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ICI in Latin America Overview
Fixed telephony

• Fixed lines are in decline

• Countries where total fixed lines contracted
  during 2001-2002
• Uruguay
• Paraguay
• Panama
• Chile
• Belize
• Dominican Republic

Source ITU, only countries with data available
included
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ICI in Latin America Overview
Cellular

• Took over regional fixed line penetration in 2002
• Still some room for growth, especially in rural
  areas

• More than half of the countries in LAC had more
  cellular than fixed lines in 2002
• (mobiles per fixed line)
• Paraguay (6.1)
• Venezuela (2.3)
• Chile (1.9)
• Mexico (1.7)
• Belize (1.7)

Source World Development Indicators
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ICI in Latin America Overview
Internet Access
In 2001, leading the other regions

• Broadband development has started slowly
• Not seen as a priority
• Lack of applications
• Information society is very under developed
• IT equipment cost is still high (only 3 countries
  in LAC have signed WTO IT agreement)

Computers per 1000 people Internet users per 1000
people GDP per capita (1995 USD)
Source WDI

• Penetration rates (estimated accounts)
• Narrowband 2
• Broadband 0.7
• Internet ready population (top 15 income) 20
  (emarketer, 2000)

(Pyramid, 2002)
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ICI in Latin America Overview
Private participation

• Some governments still own and operate companies
• Privatization strategy needed
• Companies require capital to modernize
• Value of companies willdecrease in future

• Countries with state-owned incumbents
• Colombia
• Costa Rica
• Honduras
• Ecuador
• Paraguay
• Uruguay

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ICI in Latin America Strengths

• Strong cellular market driven by
• Limited fixed line access
• Highly competitive market
• Calling-party-pays and prepaid modalities
• Relatively young population (about 50 of
  population is under 25)
• Regulatory framework in place
• Governments awareness of importance of ICI (e.g.
  Colombia, e-Mexico)

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ICI in Latin America Weaknesses
Latin America relative to the World
return
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ICI in Latin America Weaknesses

• IT literacy and human capacity are weak (figure)
• Perception of risk is high in many countries
• Contracts not respected
• Regulators are not fully independent
• Political gridlock

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ICI in Latin America Obstacles

• Metered local rate
• Sources of financing for the sector
• Operators Weak financials
• Local financial markets still not developed
  Banks are limiting their lending
• Limited regional integration

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Regulatory Priorities

• Strengthen regulators to foster competitive
  environment
• Give incentives to cable operators to provide
  Internet access (cable modem)
• Focus on service rather than investment
  obligations
• Offer class-licenses
• Regulate only the dominant operator
• Eliminate foreign ownership restrictions

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Universal Access

• Access not enough, human capacity is essential to
  take advantage of ICT
• Re-orient National Development Funds to new
  priorities from public phones to ICT deployment
  and training programs
• Use of minimum subsidy scheme (OBA) to extend
  rural access
• Subsidy to foster large-scale broadband deployment

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Promoting Investment

• Scarce investment flows will go where regulatory
  environment is clear, simple and
  business-friendly
• FTAA will be the driving force
• Need to prepare
• Countries will compete for investment and those
  lagging in the sector should expect to be
  relegated
• Form regional and intra-regional ICI market
  integration
• New corporate demand for services

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Promoting Investment

• Improve investment climate
• Government as main promoter of investment to
  expand connectivity
• Private and public sector partnerships
• Development of national e-strategy to signal
  confidence to investors
• Create mechanisms to subsidize access to ICTs for
  low-income groups

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Promoting Investment
The World Bank Group can assist countries

• Policy and regulatory advice
• Output-based-aid (OBA) for rural access
• Pre-privatization loans
• Partial risk and MIGA guarantees
• IFC investment for private companies

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Conclusions

• Eliminate regulatory hurdles that hold back
  investment
• Continue with second generation reforms (e.g.
  promote competition in all market segments)
• Establish public and private partnerships to
  increase access to ICTs, especially in rural
  areas
• Create enabling environment for e-applications
  (e.g. e-commerce) to develop the information
  society

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Thank you
To learn more about how the World Bank Group can
assist you please contact us Global
Information and Communication Technologies
http//www.worldbank.org/ict/ pguislain_at_worldbank.
org