November 26, 2014
Concentrated broadband Internet market leads to poor service
The country’s broadband Internet access is growing at a speed that is among the highest in the region. But the 7.3 million subscribers to the service have to deal with a concentrated market that has few big players, which, tied with a limited fiber optic network means the sector is not growing as fast as it could and the quality of the service —particularly outside the country’s top cities — leaves a lot to be desired. That could change when the government inaugurates a new national fiber-optic network that seeks to boost connectivity in under-serviced areas, which is scheduled for launch before the end of the year.
For now though, the dichotomy in the market seems evident in a report released by the Inter-American Development Bank (IDB) this week that ranks Argentina as eighth out of 26 countries in the region in terms of broadband Internet penetration, coming in behind Chile (the Latin American leader), Barbados, Brazil, Panama, Uruguay, Colombia and Mexico.
“The ranking is done considering not only the quality of the service but also public policies implemented by the government as well as general telecommunication strategies,” Enrique Carrier, a telecommunications and technology consultant, told the Herald. “Other countries have more competition between companies than Argentina, which must be improved here.”
On a scale from one to eight, with the latter indicating the highest development of broadband connectivity, the country’s overall rating was slightly below the average of 4.87, coming in at 4.53. For infrastructure, Argentina was awarded 4.03 points, while in applications and knowledge it got 4.25 points. Argentina fared slightly better in speed than the regional average of 2.68, while market penetration for fixed broadband connections per 100 citizens was high for the country at 6.72, compared to the regional average of 3.83.
“Seventy percent of Argentines, concentrated only in 30 percent of the territory, have an OK connection, which is not above the regional quality standards. But the remaining 30 percent of the people who occupy the largest part of the country have a really low-quality connection,” former Communications secretary Henoch Aguiar told the Herald. “Many small cities have a connection that is 10 to 20 times worse than the largest urban areas.”
Grupo Clarín’s Fibertel, Telefónica’s Speedy and Telecom’s Arnet are the three main operators in the country and offer their services in most of the provinces, holding more than 80 percent of the market.
According to figures provided by the companies to the Herald, Speedy leads the market with 1.8 million clients while Arnet has 1.7 million clients and Fibertel comes in at third place with 1.6 million clients.
The market concentration has largely discouraged smaller companies from entering the market, which means people do not have a lot of choices when it comes to choosing an Internet service provider. Meanwhile, since the companies focus their fiber-optic networks where they have the most customers, those in more remote areas have grown used to a lower quality of service that is much more expensive.
Studies have shown that in areas where there is only one Internet service provider, prices are much higher, according to Aguiar.
“The two main companies, Telefónica and Telecom, have taken advantage of this context and have excessive prices in provinces that are not reached by the fiber-optic networks, crushing small and medium companies and not allowing them to grow,” Aguiar said.
Still, that does not mean all is lost. If the government were to give smaller companies tools and help to grow, “we could have a competitive market,” the former Communications secretary added.
The IDB came to a similar conclusion in a 2013 report on Internet connections in Argentina, noting the country “has reasonable levels of broadband internet penetration” but warns about “a clear disparity between the largest metropolitan areas with more economic power and the other areas of the country, especially the northern provinces.”
The government’s plan
The lack of a high-quality Internet access led the federal government to create the programme Argentina Connected (Argentina Conectada) in 2010, which seeks to build a nationwide network through an open market.
So far, 15,453 kilometres of the network have been built and 4,494 kilometres have been bought from other companies. In addition, agreements have been signed with Telecom and Telefonica to have access to 8,305 kilometres of their network. That adds up to 28,252 kilometres, a figure that is actually larger considering provincial governments are also laying down cables.
“The policies implemented by the federal government led to higher levels of broadband Internet penetration,” the IDB says in its report. “The digital gap has been reduced but the quality of the connectivity still has to be improved.”
The government is seeking to officially turn on the national network before the end of the year, which could lead to several key benefits, including lower prices for broadband Internet. Plus, free wireless Internet access will be provided in parks, schools and libraries nationwide thanks to the network.