Spectrum auctions for next generation mobile services have two different strategic implications for our region. First, in developing markets such as Latin America, mobile broadband is a crucial, cost-effective opportunity to increase broadband penetration, fulfill local governments’ goals of digital inclusion and bring digital connectivity to a larger proportion of the population. The AWS (Advanced Wireless Service) band carries large socioeconomic benefits by allowing increased coverage of broadband services, which is so far very limited in Latin America. In fact, due to the limited infrastructure both in copper and cable networks, the region has one of the lowest fixed broadband penetration percentages in the world: only 9.6% on average.
Second, from the telecom operators side, some of the major challenges they currently face include providing convergence, integration and innovation in services and applications. The Latin American user is increasingly attracted to those providers that can offer integrated fixed-mobile services and the possibility of accessing sophisticated applications and technology, such as high-speed internet, social networking, video calls, digital content in HD and a variety of new services.
The number of applications and the speed required to offer these high quality services increase network traffic and therefore the use of available spectrum.
Spectrum auctions are, therefore, vital not only for the growth of mobile broadband but also for providing innovative mobile applications and services as well as converged solutions. The telecommunications operator that does not have this infrastructure is going to be severely limited in meeting the increasing needs of Latin American users in terms of bandwidth and services.
Having said this, it is not surprising that upcoming spectrum auctions all over the region are considered crucial to mobile operators as well as fixed industry players.
Let’s consider the situation in Colombia. The Colombian ICT ministry scheduled a 4G spectrum auction for early 2012, but it has been postponed several times because of the implications for industry participants that disagree with the bidding rules.
The main dispute is whether dominant operator Claro should be allowed to bid and if so, under what circumstances. Claro Colombia held 67.3% of the country’s mobile lines in service as of 2011, while the second operator Movistar held 21.7% and Tigo (part of Millicom) had a 10% market share.
In this scenario, the main concern was that Claro’s dominance would be inevitably transferred to the data segment if the company was awarded spectrum.
It is debatable whether or not preventing Claro from participating in the auction is excessive regulation as the company has argued, but what is true is that in a market highly concentrated in a single operator, encouraging the entrance of new operators and adding dynamism to the competitive environment translate into significant benefits for end users, not only in terms of reduced tariffs but also in terms of the availability of innovative mobile applications.
It was finally decided that Claro will have a limited bidding option, being able to bid only in the 2.500 MHz band. Local fixed telecom operator UNE EPM, had recently won a bid for 50 MHz block in the same band and is one of the few operators in Latin America currently deploying a LTE network and the only one in Colombia.
The auction will take place in February 2013, and the government is hoping this process will bring the country one step closer to its goal of achieving 8.8 million broadband subscribers and covering 50 percent of the households in the country by the end of 2014.
Lastly, we can only conclude that whatever happens, there is a lot at stake for both the government and market participants in this process, and it will be fundamental to the future of the telecommunications industry in Colombia.
Gina Sanchez is ICT Industry Analyst at Frost & Sullivan
Be sure not to miss:
- Colombian telecom operators complain about Claro’s wireless monopoly
- Colombia postpones LTE auction to February, allows Claro to bid
- Feature Report: Colombian mobile opportunities abound
Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
