New Trends in Mobile Communications in Latin America

In October 2005, the Annenberg Research Network on International Communication (ARNIC) at the University of Southern California (USA) held a workshop - "Wireless Communication and Development: A Global Perspective" - as part of a multi-disciplinary effort to study the emergence of new communication infrastructures, examine the transformation of government policies and communication patterns, and analyse the social and economic consequences. This 24-page paper, by Judith Mariscal and Eugenio Rivera of Mexico's Centro de Investigación y Docencia Económicas Telecommunications Research Program Telecom (CIDE), was one of the 12 delivered at the workshop. It analyses the expansion of the mobile sector in the Latin American region, identifies the driving forces behind this growth, and provides the market context in which it is occurring.

According to Mariscal and Rivera, Latin America's mobile telephony sector "has experienced a growth pattern that vastly surpassed all expectations." They note that, after 1998, the average annual growth of mobile telephony users during the 2000-2003 period was 33% in the region, while growth in the case of traditional telephony was only 7%. In fact, "in Latin America the level of mobile penetration has grown with such magnitude in the past few years that it has left fixed telephony behind: today the penetration of mobile telephony is twice that of fixed telephony and the perspectives for growth seem to point towards a further increase in the gap between the two." Paraguay constitutes an exceptional case in the sample, followed by Venezuela. While in 1997 none of the countries surpassed the proportion of subscribers to fixed lines, in 2002 only 5 out of the 20 were in the same situation.

What factors explain this dramatic growth in mobile telephony? The authors note that the growth is partially a result of technological change. Specifically, before the invention of the cellular telephone, mobile telephony could only use a specific frequency, thereby severely limiting the number of potential users. With cellular telephony, the frequency can be re-utilised by using a hexagonal network of interconnected cells, allowing for an uninterrupted frequency. Despite the importance of such developments, the authors stress that growth in this sector is centrally due to regulatory, entrepreneurial, and social aspects. To that end, the first section of the paper discusses the transformation of Telefónica and Telmex into central actors in the regional market as a result of particular policies that were instituted in their countries of origin and the strategies that were developed by these firms to secure this position.

Because of such circumstances, Mariscal and Rivera report, the mobile telephony sector has developed into a more competitive environment than fixed telephony, attracting an increasing number of users within the lower income groups. In fact, "Today, mobile telephony provides the only source of access to some of the poorest segments of the population." These groups enjoy changes such as not having to finance incoming calls, which has "translated into a major increase in demand and contributed to a major growth on coverage" and the introduction of prepayment (the user has no fixed monthly charges but can determine its level of expense and usage).

Examining the case of Mexico in particular, the authors cite data provided by PRM International that indicate that by 2005 the mobile telephone had become a common tool among the lower income sectors in that country. While in 2003 only 9% of the individuals classified within the two lowest socioeconomic levels were users of mobile telephony, by 2005 the number had tripled and now reaches 27% of the population within those income brackets. In the higher income sectors, on the other hand, the number has not changed significantly.

The authors stress that, in addition to the social benefits of mobile telephony in general, in the case of rural areas there are additional benefits. Increased capacity to communicate is key, particularly in light of the fact that many members of rural Mexican families have migrated to larger cities within Mexico or abroad looking for better salaries, employment and educational opportunities. Commercial opportunities constitute an additional benefit: "As is documented by Oestman and Dymond (2004), the revenues of rural operators are mostly the result of charges on incoming calls. In Chile, for example, these revenues amount to 60% of total revenues..."

The authors conclude by noting that, besides mobile telephony, another potential solution is the use of mobile payphones in an effort to provide universal access. In Mexico, the regulating body COFETEL allows for public mobile telephony; in addition to providing access to rural and low-income users, "this technology is increasingly being used in tourism zones where it has been identified as a good business opportunity."

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