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Contents

Executive Summary _____________________________________________________________________________________________ 3
1. Introduction: Digital divide, a wide world ________________________________________________________________________ 8
2. Objective. Connectivity Objectives 2020 and the investment needed __________________________________________________ 9
3. 2020 Challenge: The analysis model ________________________________________________________________________ 10
4. 2020 Challenge: Regional conclusions _______________________________________________________________________ 21
5. About AHCIET ___________________________________________________________________________________________ 37
6. About Convergencia Research ______________________________________________________________________________ 38









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Executive Summary

The studys objective is to estimate the investments needed to bridge the digital divide in Latin
America.
In order to achieve this objective, different options were analyzed to narrow the definition of digital divide. We
chose to analyze the accesses or adoption gap between the region and a control area. A set of 25 European
countries was established as control area.
We preferred to compare the accesses gap because the number of accesses is a robust indicator, compared
to others such as coverage, typically used to analyze investments. Coverage is often an approximate
measurement. Moreover, the coverage of an area is a necessary but not sufficient requirement for
individuals/households to get connected. At least two additional aspects would be needed for an
individual/household to get connected: the installation / last mile equipment and the capacity / willingness of
people to hire the service.
Adoption levels were defined in terms of fixed broadband penetration per 100 households and mobile
broadband per 100 inhabitants. They were projected for the set of 25 European countries and compared to
those predicted for Latin America in 2020.
Depending on the context of each country, the AHCIET 2020 Challenge was defined for fixed
broadband in households and mobile broadband for individuals setting a value that would drive the
disparity between Europe-25 and each nation to 0 or failing that, to the minimum possible.
The investment in telecommunications was then analyzed for each country from 2000 to 2011 for fixed and
mobile services wherever information was available or through estimations in those countries where
information on total investments only exists.
Investments on maintenance and network upgrade and on coverage expansion in terms of the customer
base and new clients were then calculated.
All this information was the basis for calculating the investment needed to achieve the AHCIET 2020
Challenge for fixed broadband and mobile broadband access. Variations in average annual investment for
service in absolute and percentage terms, per capita and as a percentage of the GDP were analyzed.
Investments were calculated for three scenarios:
a) projecting the trend growth in the subscriber market and the investment pattern arising from the model
proposed in this report (trend investment),
b) the capital that would be required to bridge the gap with Europe-25 (Gap 0) and;
c) the investment needed to meet the AHCIET 2020 Challenge when the accesses target is lower than what
would enable achieving Gap 0 compared to Europe-25.
They were compared to the targets set by the various national broadband plans and/or digital agendas. The
evolution of these plans and their link to the AHCIET Challenge 2020 was contextualized.







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The evolution of fixed and mobile broadband speeds for each country was studied, it was projected to 2020
and, although no speed targets were set, we analyzed whether they would be sufficient for the efficient use of
the different types of applications (three categories: basic, advanced and total).
Finally, the investment in fixed and mobile devices required to maintain a fleet of terminals in keeping with the
technological evolution was calculated. This was done by setting a target or quality factor, defined as the time
it takes to replace the fleet and at least one high-quality device per connection.
In order to match Europe-25 in 2020, the countries should achieve a penetration of 75% in fixed broadband in
households and a penetration of 95% in mobile broadband among the population.
The following chart presents the targets of fixed broadband penetration (in households) and mobile broadband
penetration (among the population) according to the AHCIET 2020 Challenge. While no targets for fixed and
mobile phone services are set (voice services), attention should be drawn to the fact that investments in voice
services are included in the calculation of investment, since it is assumed that networks are also used for
these services.

Based on the access targets set by the AHCIET 2020 Challenge, the studys findings indicate that
most of the analyzed countries would come very close to bridging the gap in access to mobile
broadband compared to Europe by 2020 or at a near later date. This would replicate what took place in
the case of mobile voice communications versus fixed communications where mobile technologies
enabled universality. Regarding fixed broadband, the convergence towards Gap 0 compared to
Europe differs in degree of difficulty depending on the country.
Under the penetration targets set by the AHCIET 2020 Challenge, Uruguay and Argentina would aspire to
achieve access Gap 0 in fixed and mobile broadband compared to Europe-25 in 2020. Chile and Brazil could
reach Gap 0 in mobile broadband access and would achieve substantial improvements in fixed broadband
penetration.
Fixed Broadband Penetration in households
2020
Trend
AHCIET 2020
Challenge
Bridge
Divide with
Europe-25
2020
Trend
AHCIET 2020
Challenge
Bridge
Divide with
Europe-25
Argentina 62% 75% 75% Argentina 74% 95% 95%
Brazil 52% 63% 75% Brazil 85% 95% 95%
Mexico 55% 64% 75% Mexico 68% 71% 95%
Chile 56% 67% 75% Chile 78% 95% 95%
Colombia 48% 52% 75% Colombia 60% 66% 95%
Venezuela 44% 54% 75% Venezuela 71% 84% 95%
Peru 33% 39% 75% Peru 45% 57% 95%
Ecuador 41% 52% 75% Ecuador 49% 67% 95%
Bolivia 9% 30% 75% Bolivia 57% 70% 95%
Paraguay 15% 46% 75% Paraguay 60% 74% 95%
Uruguay 73% 75% 75% Uruguay 84% 95% 95%
Average 44% 56% 75% Average 66% 79% 95%
Mobile Broadband
Penetration among population







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Mexico, Colombia and Venezuela will almost bridge the divide in mobile broadband but will still have a deficit
in fixed broadband.
Peru and Ecuador could reduce the gap to 30% compared to Europe in mobile broadband penetration (from
100% in 2012). Peru could reduce its gap in fixed broadband penetration from over 100% today to 50% and
Ecuador from 80% to 30% compared to Europe.
For Bolivia and Paraguay reducing the gap of fixed broadband access will be more complex. However, they
will greatly reduce the mobile broadband gap and it will probably be this technology platform that will also
enable connecting households.
The calculation model of the investment needed to meet the AHCIET 2020 Challenge implies that as
accesses grow, coverage must also grow and the cost of this expansion is implicit in the investment amounts.
Moreover, the investment has a strong impact on maintenance and upgrades for more customers and
increased bandwidth consumption in all cases.
In order to achieve the penetration targets for fixed and mobile broadband involved in the AHCIET
2020 Challenge, an average USD 44.378 million should be invested in telecommunications in the
period 2013-2020 for all eleven countries. This would amount to USD 355.825 million of accumulated
investment between 2013 and 2020.
The investments to achieve the AHCIET 2020 Challenge represent 10% more than what the industry
would normally invest following its historic rate of growth in number of accesses and the respective
investment patterns. But we should keep in mind that this 10% is highly significant, since merely
maintaining the growth trend in accesses means doubling the average annual investment of 2007-2011
(the fastest growing period for connectivity in Latin America).

This increased investment, both in the business as usual scenario and in the scenario to achieve the
AHCIET 2020 Challenge, is due to the effect involved both in expanding coverage, and supporting an
increased demand for bandwidth both from existing subscribers and those who are still to get
connected.
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2013 2014 2015 2016 2017 2018 2019 2020
I
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AHCIET 2020 Challenge
Annual investment in telecommunications (fixed + mobile)
Comparative: Challenge vs. Trend
USD Million 2013-2020 (11 countries)
Challenge Trend
Source: Convergencia Research Analysis
Annual Average
2013-2020







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In the business as usual scenario the average annual investment in fixed and mobile networks is expected to
grow at a compound rate (CAGR) of 3.83% and on the AHCIET 2020 Challenge scenario at 4.65%. These
values are high compared to the industrys revenue rate of growth projected for the period 2013-2020, which,
depending on the source, approximate a compound annual rate of 3%. This means that both scenarios require
public policies that make investments more efficient.
Depending on the country, the average annual investment in dollars per capita may more than double
compared to the last five years, in part due to the effort of maintaining a larger base of connected individuals
and households.
The average for the five years between 2007 and 2011 was $ 40. In order to achieve the AHCIET 2020
Challenge, the average ratio from 2013 to 2020 will be $ 66. Beyond the possible variation of the per
capita investment in the future, it is important to note that in half of the countries analyzed, the
historical series shows that telecommunications investment per capita has grown steadily. With some
losses between 2008 and 2010 product of the effect of the global financial crisis.
When analyzing the series of investments it is also important take into account that there may be onetime non-
recurring investments that make the investment per capita increase significantly in a given year, due to
reasons such as technological updating, investments made by a new entrant, among others.
In terms of investment in telecommunications infrastructure as a percentage of the Gross Domestic Product
(GDP), the effort is being partly affected by the projected economic growth of each country. The average for
the five years between 2007 and 2011 was 0.60%. When interpreting this ratio it is important to take two
issues into account: the first is that the decade that began in 2000 was of significant economic growth for most
countries, except during the period between 2009 and 2010 when the effect of the global financial crisis was
felt in the region with a negative impact on investments and on the economy but in different magnitudes.
In order to achieve the AHCIET 2020 Challenge, the average ratio from 2013 to 2020 will be 0.71% of
the GDP. The ratio of investment as a share of the GDP towards the future shows the impact of network
maintenance and upgrade, as well as a greater number of connected individuals. However, we should also
keep in mind that in general growth projections of the GDP are typically proposed in moderate scenarios,
which again raises the ratio.
The investment in devices that users must make based on the assumption of quality implied on this paper,
except for the case of Chile, is a higher proportion/ratio of the total investment (networks plus terminals) than
the real investment destined historically to network infrastructure.
According to the proposed model, which includes specific taxes on terminals, in order to achieve the goal of an
updated device fleet, the investment in devices share of the total investment will be increased. The model
predicts that for every dollar invested in telecommunications networks an investment of $ 1.6 in
devices will be required to maintain an updated fleet. Lowering the purchase barrier for devices will be
necessary so that the new networks and applications can be used and a virtuous circle in the use of
ICT is generated.
Future applications known today will demand more bandwidth and the investment in networks, according to
the analysis of speed evolution, is geared to meet this need to a greater or lesser extent.
Almost every analyzed country has a master plan for bridging the digital divide and, although they may differ in
their scope and time-related objectives, in most cases they include actions on most of the aspects
recommended by the industrys international agencies and organizations.
The large investments required to achieve the reductions in the access gap outlined by the AHCIET
2020 Challenge are both a challenge and a historic opportunity.







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Making the most of this historic opportunity will only be possible if the efforts of companies and governments
are coordinated, with each undertaking different roles. Companies (whether private or State-owned) are to
invest and innovate while governments should define the regulatory framework, incentives to the digital
ecosystem and the deployment of infrastructure.
The challenge posed by the investments needed to bridge the divide, and even more so, to generate new
social and economic welfare based on connectivity, is a process that needs to be accompanied by a number
of conditions such as:

1. A stable and favorable regulatory framework,
2. Legal certainty and a climate of confidence that encourages public-private cooperation
3. Simple and moderate tax levels
4. Measures to facilitate the deployment of infrastructure such as those aimed at reducing costs, appropriate
regulations for the use of antennae, simplifying the system of permits, facilities for the use of public media and
infrastructure, rights of way, etc.
5. And first and foremost, a planned, predictable and reasonable horizon of spectrum allocations, costs and
requirements, since bridging the digital divide in Latin America will be achieved mainly through mobile
broadband.

We hope that the information presented in this study will be used to create a shared agenda for the public and
private sectors, that enables debating how to meet the challenge of bridging the digital divide ensuring
sustainability through regulatory frameworks that make possible market structures that promote economic and
financially solid companies, able to provide more and better connectivity to a larger number of people, both in
the short and long term.










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1. Introduction: Digital divide, a wide world
Telecommunications infrastructure is one of the key elements for economic and social development in the 21
st

Century. Over the last 20 years, Latin America has made great strides in voice communications, mainly as a
consequence of the development of mobile networks. Now the region, like the rest of the world, aims to
achieve universal access to data communications, which currently means mainly Internet access.
The objective of connecting every individual to broadband entails the idea that in order to achieve this, a path
must be followed with gaps that need to be bridged, commonly known as the digital divide.
The concept of digital divide is broad and complex. Industry organizations, governments, academics,
consultants and other actors have conducted in-depth research in order to organize its multiple aspects,
causes and impacts and recommend actions to reduce it as much as possible. Governments, operators,
equipment suppliers and the industry in general have already started working on this process.
Convergencia Research considers that the analysis of the digital divide includes at least the following
aspects:
Infrastructure or coverage gap: Communications networks must achieve full coverage of the population,
including cities but also rural areas.
Adoption or access gap: This is the gap that exists between those who have access to a networks services
and those who contract them.
This gap is a consequence of socio-economic differences. Reducing this gap could, in turn, contribute to
generate more economic and social development and, eventually, less inequality
1
.
Network coverage is a necessary condition to eliminate the adoption or access gap. Within this gap there are
at least two additional key problems: affordability of service and devices (a gap in the ability to pay) and
motivation, which is related to cultural and educational aspects, such as considering that being connected
makes sense and is beneficial.
Gap in use: Once connected, the gap in use is the difference between available applications and those that
are used. It also includes cultural barriers. Applications (software) must be known, but they must also be
useful in some sense and be available at reasonable prices.
In the particular case of the Internet, disruptive uses often appear such as social networks, or others
generated by the network users themselves.
Some of the limitations in the use of available applications are related to network speed and robustness, for
example, applications in the cloud, insofar as they continue to expand, will demand speedier solutions, with
lower latency and higher security.
These aspects of the digital divide are interdependent and categorizing them is just a way of simplifying them
to be analyzed and to sort the starting point of this study.
This investigation is focused on the adoption gap and within this on the investment. In the interest
of simplification it does not go into issues related to affordability or price.

1
For a more in-depth analysis of the affordability gap we recommend reading studies by Raul Katz on the economic impact of broadband.







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The analysis of investments made is of interest because, among the many approaches to the digital divide,
there is little information regarding the investment needed to bridge it. This led AHCIET to decide to carry out
this study, almost unique in its approach, to provide new data and approaches to the market.

2. Objective. Connectivity Objectives 2020 and the
investment needed
The studys objective is to determine the investment in telecommunications networks needed to
reduce the adoption gap. In order to do this, Convergencia Research developed a two-stage analysis
model:
a) The definition of a target number of households and individuals connected by 2020 for eleven Latin
American countries. Brazil, Mexico, Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay
and Venezuela.
b) The calculation of the investment in networks needed to meet those connectivity targets.
Although under adoption gap it should be necessary to include an analysis of service prices or demand
elasticity, we have left this aspect out of the scope of our study to focus specifically on investment. However,
throughout the study, some parameters related to the populations ability to pay will be mentioned.
The investment required to connect a greater number of households and individuals is a starting point to think
about the industry models that may result in a profitable equation.
From the user's perspective investment includes the acquisition of the devices. For this reason we also
calculated how much should be invested in devices to achieve the 2020 Challenge of connected households
and individuals. This was done under the assumption of a quality factor that guarantees an updated terminal
fleet.
By adding the investment in both devices and networks, you get an idea of the effort it takes for society as a
whole to aim to bridge the digital divide.
Average speeds are projected as a complement, since in the future it will be necessary not just to be
connected but to have access to speeds that will enable one to use existing applications.
The aim of the study is that its results contribute data and analysis that enable a debate, but more
importantly, that they generate public and private collaborative efforts to reduce the digital divide and
facilitate a sustainable and fertile framework for telecommunications to continue providing social and
economic value.








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3. 2020 Challenge: The analysis model
a. Starting point
At the end of 2012 Latin America had an average fixed broadband penetration of 34% of households, a fixed
teledensity
2
of nearly 20%, mobile penetration of 115% and 18 in every 100 inhabitants contracted Internet
access via a mobile device (mobile broadband).
The first stage of this report is to determine the target number of households and individuals
connected to broadband by 2020, to then calculate the necessary investment in networks and devices.
It was decided to set a target of households with access to fixed broadband and another of individuals who
contract Internet access via a mobile device (smart phone, USB or data cards and tablets), rather than
establishing a single target of number of individuals connected .
This is because we consider that evolution towards the digital home, with multiple devices connected
simultaneously, will require a type of home-centered connectivity offer while, in parallel, individuals will
demand what may be thought of as a ubiquitous personal connection.
The services are divided into fixed and mobile, under the assumption that in general households and
businesses will be served by fixed networks
3
and individuals by mobile networks. Only broadband services are
analyzed. No targets are established for mobile lines or fixed lines.
The option to analyze the impact of machine-to-machine communications (M2M or Internet of things) was
discarded, since the objective of the analysis is focused on reducing the gap in current connectivity between
people.
In order to define the 2020 Challenge we decided to establish a control group. We chose to analyze
the connectivity indicators for the average of a basket of countries that includes the 25 European states
4
that
constitute the OECD (Organization for Economic Cooperation and Development).



2
Fixed teledensity= landlines/population / Mobile teledensity: Mobile subscriptions / population.
3
Eventually LTE can be substituted by fixed networks but we preferred to set aside this discussion for reason of simplicity. Moreover,
although access to personal Internet (mobile) can eliminate the need to hire household connectivity, we consider that from the perspective
of the infrastructure the objective of high-speed networks to reach homes (fiber) must still be kept in mind.
4
Some of the countries analyzed are not part of the European Union







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We decided to define as control the aggregated values for all 25 of these European countries because we
considered the structural characteristics of their network development model and their regulatory system were
compatible with those applied in Latin America.
The comparison shows that:

Mobile subscriptions: The levels of penetration are practically the same in both regions with average values
that approach 120%. This does not mean, however, that 100% of individuals have contracted the service in
either case, but rather that there are users with more than one phone, machine to machine lines and, in the
case of Latin America, the prepaid segment, which may have very low traffic lines. In any event, what the data
shows is that in both regions, the mobile voice service is almost universal, as well as text messaging.
Fixed telephony: In Latin America, at the end of 2012, teledensity was nearly 20%, while in Europe-25 it was
40%. This is because in Latin America mobile telephony exploded before the fixed networks reached their
potential and a substitution effect was generated. In contrast, while in Europe-25 fixed telephony is
decreasing, in our region landlines either remain constant or grow at a similar rate as the population growth,
included as part of packages with other services. While adoption targets for fixed lines have not been set,
when thinking about the 2020 Challenge the coverage of the telephony network is one of the thresholds of
potential broadband coverage.
Fixed broadband (FBB): The FBB penetration in the 25 European countries reached 67% in 2012. Since
2006, broadband accesses (taking all 25 countries together) have diminishing marginal growth.
In Latin America household penetration has reached 34%, i.e. half that in Europe-25. The growth rates hover
between 15% and 20% depending on the country the net highs have different behaviors depending on the
penetration levels achieved in each Latin American country.


Even with double-digit growth rates the fixed
broadband adoption gap between Europe-25 and
Latin America is increasing instead of falling.
Broadband began to spread in both regions more or
less simultaneously. Its evolution was different,
however. Partly because of issues related to
purchasing power and other Latin American social
and geographical characteristics. It is expected,
therefore, that the digital divide will be bridged mainly
through mobile networks.
For this reason, for the AHCIET 2020 Challenge
for fixed broadband the aim is to achieve
household penetration that is as close as possible
to the 2020 average of the 25 European countries
analyzed in this report (Europe-25).
Fixed broadband is also often used to connect small businesses. It generally represents 10-15% of all
connections. However, in order to simplify the calculations, no targets regarding small and medium enterprises
(SMEs) will be established in this report.
Mobile Broadband (MBB): The mobile broadband penetration in all 25 European countries analyzed was
estimated at 49% of the population by the end of 2012 while in Latin America by the same date it had reached
18%. 3G networks started to be deployed in Latin America only in 2007 and the cost of the service and the
terminal are the main barrier.







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Technological developments themselves will lead to contracting internet in mobile devices and to the lowering of
their prices. It is for this reason that the 2020 mobile broadband challenge also aims to match the
European penetration projected for 2020.
By matching the penetration of services to Europe-25, the gaps between different socioeconomic levels and
between rural and urban areas will eventually be reduced. Although a detailed analysis of these gaps is beyond
the scope of our study, since its focus is investment, we believe that achieving the set targets will imply, in most
cases that in certain geographic areas and socioeconomic segments, operations will reach market limits.

b. Accesses projection assumptions
Europe-25: FBB accesses are calculated using decreasing inter-annual capture rates in the 12.8% range
(decreasing marginal returns of the net new-services historic curve). The Europe-25 projection for 2020 would
reach 75% of households.
MBB accesses are projected using data on net new-services and growth rates of the available series (3 years)
and uses mobile lines as the maximum limit.
Latin America: In order to set the fixed broadband penetration target in households in Latin America, the
accesses until 2020 are first projected based on the trend of the last 9 years (we will call thi s calculation trend
based projection or trend)
5
.
Then we calculate what should be the current number of accesses and the projected number that correspond to
the European penetration. Once compared, the differences are analyzed and the AHCIET 2020 Challenge is
set, which is the closest value to Europe-25 deemed possible according to each countrys characteristics. The
same criterion is applied to mobile broadband, but based on information gathered over 4 years.
b.1. Maximum hypothesis
It is common practice in the industry to believe that the limit (maximum hypothesis) of possible broadband
accesses depends on the coverage of the fixed telephony network. While the criterion is valid and represents
the first limit that the expansion of connectivity must confront (as the telephone network is the largest
communications network and xDSL the most widely used technology - 67% of connections in Latin America -),
we preferred to use as a limit the number of households with access to the electricity network, since it is
currently the minimum required factor.
Broadband coverage can be achieved through other fixed networks, such as cable modem, fiber networks that
complement the mobile operators networks (as is happening in some cases in Latin America, for example,
Total Play in Mexico, Claro Argentina and Claro Chile, in all cases operators that had no household capillarity).
Eventually, mobile technologies (LTE) or fixed wireless (in a licensed and unlicensed spectrum) may also be
considered.
In the case of mobile broadband, because the study focuses on individuals, the boundary is set by the
population and, within this the first limit would be the population below the poverty line. Mobile lines are not
considered as limits, since they exceed 100% of the population, due to phenomena already explained, and they
will continue to grow in the future as a product of machine-to-machine communications (M2M or Internet of
things). Moreover, mobile broadband will probably replicate the phenomenon of individuals with more than one

5
See methodological Appendix







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data connection for multiple devices. It is clear that reaching 100% of the population will imply that some
individuals have more than one device connected to data while others have none.

Although not analyzed in this study, it is important to mention two other restricting factors to the development of
broadband: Access to international connectivity and terrestrial fiber backbones.
In the first case, the expansion of the capacity of existing submarine cable systems and the l aying of new cables
are sufficient, according to studies made by Convergencia Research, to meet the demand over the period of the
analysis. Mediterranean countries such as Bolivia and Paraguay present additional complexities and they are
both seeking solutions.
Terrestrial backbones are an aspect that is being guided using different models based on national broadband
plans or digital agendas.

b.2. Coverage
Coverage targets are not established in the calculation of the projection; it is assumed they will continue growing
at historical rates (for the trend) and that the series of data used includes the additional coverage efforts needed
to continue advancing in complex or extensive geographies. For this reason, as shall be seen in the results, the
amount of investment grows to the extent that attempts are made to accelerate the increase of accesses.
In the case of mobile broadband, 2G networks reach more than 90% of the coverage in nearly all the countries
and it is estimated that, although currently 3G networks (mobile broadband) cover nearly 70% of the population,
SURVEY
ANALYSIS Stage 1
Sources of information
IPublic information from State and
multilateral organizations.
Operators, industry experts
Databases and studies
Convergencia Research
Broadband in Europe
Evolution Fixed Broadband accesses
Evolution Mobile Broadband accesses
Household and individual penetration
Network infrastructure penetration
Analysis and systematization of gathered information
Trends per country
Evolution Fixed Broadband accesses
Evolution Mobile Broadband accesses
Household and individual penetration
Broadband
plans 11
countries
LatinAm
Broadband
plans Europe
Background
information
Set range for Target per Country
Preliminary range
MAX Broadband Europe
MIN Trend Broadband
Target Range
Fixed and Mobile
Broadband







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in the period of analysis they will eventually cover the same proportion as 2G, as a logical consequence of
technological development.
Technological migration will be faster in those countries that open the spectrum both for 3G and 4G (LTE).
Meanwhile national broadband plans and even spectrum auctions consider coverage targets that include rural
areas or even those that run at a loss for the private sector.
In the case of the fixed networks, if we took as a limiting factor the coverage of the telephony network, this also
covers today a great percentage of homes in urban and suburban areas that do not contract broadband. An
important aspect for the purposes of this study is (to know) how much should be invested so that in those areas
where there already is coverage new clients can be connected and the networks maintained. Meanwhile, in
rural areas where coverage is lower, nearly all the countries are considering improvements and in this case, the
model also implies that as accesses increase the coverage is extended.

c. Calculation of the investment
The investment needed to achieve the AHCIET 2020 Challenge of connected homes and individuals is the
focus of this study.
In order to create the calculation model, information was gathered on the investments of the last 10 years and
those of the last 5 years, in particular, were analyzed. This information was used to construct the indicator that
assigns a value to the investment made to expand the network (new customers) and another for the investment
in network maintenance based on the number of customers (fleet).
6

Operators provide other services over the network, mainly voice, whether fixed or mobile
7
. Therefore, values
were also assigned for its maintenance and update, as can be observed in the diagram on the next page.
The total investment projected for new connections/subscribers is a function of existing telephone lines, new
connections/subscribers for fixed and mobile telephone lines, FBB and MBB accesses based on which speed is
upgraded. This calculation is made for three scenarios: one that projects accesses according to the market
trend, one that would enable achieving European levels of penetration and a third established as the AHCIET
2020 Challenge.


6
For more detailed information see methodological Appendix In the case of fixed networks since xDSL is the main fixed broadband access
technology voice is considered. For CATV operators the main service is television.
7
An analysis of TV on cable modem networks has not been done in order to simplify the model of investment calculation.







15
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The following assumptions are considered:
a) One years investment determines the number of accesses the following year.
b) The value of the investment for network expansion is independent of the degree of market penetration of
FBB service.
c) The efficiency in the use of infrastructure (vacancy) is maintained over time.
d) The investment in the expansion of broadband services is absorbed by the demand
8
over the projection
period.
e) The projection of the annual value of the investment in existing coverage is accompanied by the increase in
bandwidth required for new applications, maintaining historical patterns.
f) The case of MBB accesses implies that spectrum allocations accompany an increase in customers and it is
for them that the best possible combination of high and low bands for a given state of technological
development is made viable.
g) Investments are projected for three scenarios:
a. Trend: This is what would be invested following historical patterns, depending on the increase of subscribers
so as not to slow up the current pace.

8
The aspects that could limit this assumption are explained qualitatively in the analysis of each country.
SURVEY
PROCESSING
AND ANALYSIS
STAGE 2
Sources of information
Historical series BAM and BAF
accesses
Historical investment fixed and mobile
networks
Estimation model of historical investment values
Preliminary range
MAX Broadband Europe
TargetRange
Fixed & Mobile
Broadband
AHCIET
TARGET 2020
Fixed & Mobile
Broadband
MIN Trend Broadband
Fixed services Telephony Fixed Broadband
Investment in existent coverage
Investment in coverage expansion
Mobile services Telephony Mobile Broadband
Investment in existent coverage
Estimation of investment with current technology.
Analysis of necessary investment values vs. GDP
Investment in coverage expansion
Access
Requested
investment







16
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challenge
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LATIN AMERICA
b. Equivalent to Europe-25: It is the investment required to achieve the services penetration of Europe-25.
c. AHCIET 2020 Challenge: The values of scenarios a. and b. are compared and, depending on the
differences and characteristics of each country, the AHCIET 2020 Challenge is established.
h) Both in fixed and mobile networks investments are extrapolated to a possible maximum.
However, although the model does not consider its effects, it is important to bear in mind that the market forces
themselves are driving the convergence between fixed and mobile networks that could eventually reduce costs,
such as for example small cell solutions, combinations with Wi-Fi, among others.
In the case of fixed networks there are also new technological solutions that enable getting more speed from the
copper lines increasing their productive life to get more speed from the copper pair, for example.
Infrastructure sharing alternatives could also reduce the necessary investments.
Meanwhile, telecom operators have integrated their fixed and mobile operations to a greater degree than in
previous periods, which can also result in investment optimization.


d. Speeds. Getting connected is only the beginning
Thinking about targets conveys the idea of speeds, which is why this report is complemented by the projection
of a possible scenario of connection distribution according to the speed of fixed and mobile broadband for 2020,
although no speed targets are set.
Moreover, as the model has been created using the European Union as control group, it is important to bear in
mind that the targets of the European Digital Agenda in terms of speed are very demanding, such as achieving
speeds greater than 30Mbps based on 100% coverage and getting 50% of subscribers to contract speeds of
over 100Mb.
Latin America is far from being able to bridge this proposed gap. The priority for now is connecting a higher
number of individuals and households, although one should not lose sight of speed (interpreted as a quality
estimator).
Speed projection is done by replicating the increase pattern based on data from Ooklas Net Index in the case of
fixed broadband and Akamai for mobile broadband.
As speed per se provides no substantive information about broadband, the applications that can be used with
each type of speed are analyzed according to a ranking system established by ECLAC (see table on next
page).
Two scenarios for the different types of broadband are set: one for current applications (2011) and another in
terms of future applications (2020). The applications included are those that are known so far. We cannot rule
out the possibility that innovative applications that transform demands and require higher bandwidths may
appear over the next seven years.







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LATIN AMERICA


Speeds download : > 2 Mbps
upload: > 768 kbps
download : > 10 Mbps
upload: > 3 Mpbs
> 50 Mbps
> 15 Mpbs
Activities and applications
Interactivity Medi um
Technol ogi es
Typical devices
Total Advanced Basic
Fixed
Broadband
2020
email, Messenger, social networks. Web
browsing, basic videoconference (web),
sharing large-size files.
IP Telephony, e-commerce, e-banking,
ERP and CRM.
Basic Games. IP Audio conference.
Teleworking. Video streaming and high
Definition Music.
e-Government, e-Health and e-Education
including video and large size image
transference
Video streaming and High Definition IP
TV (HD). Advanced games. Telepres -
ence Video Sale, Video Service, Video
Support, Video Advice and other
activities using video. Voluminous files
Exchange. HD Videoconference.
Teleworking exchanging large volumes
of information. e-Government, e-Health
and e-Education, including high
definition video.
3D Video Streaming. 3D Games. Virtual
Meetings. Virtual Teleworking. Remote control.
e-Government, e-Health and e-Education
including 3D video.
Telerobotics Enhanced Reality
High Real time
ADSL, fixed wireless Cable modem
xDSL, Cable modem, docsis 2.0 xDSL, Cable modem, docsis 2.0
PCs, Laptops, Netbooks
Game consoles
All in one printers
PCs, Laptops, Netbooks
Game consoles, all in one printers
Video Cameras
Smart TV Systems, tablets
PCs, Laptops, Netbooks
Game consoles, all in one printers
Video Cameras
Smart TV Systems, tablets
Speeds Download: >256 Kbps < 128 Kbps
Upload: 128 Kbps
Download: >2 Mbps < 10 Mbps
Upload: 512 Kbps
Download: > 10 Mbps
Upload: > 768 Mpbs
Activities and Applications
Interactivity Low Medi um/Hi gh High/Real time
Technol ogi es 2G (GPRS/EDGE) and beyond 3G (HSPA) and beyond 4G and beyond
Typical devices
Advanced Feature Phones, Smartphones Smartphones, tablets, Laptops, Netbooks
Total Advanced Basic
Mobile
Broadband
2013
email, messenger, social networks,
limited web browsing
all the basics + m-commerce, m-banking,
IP telephony, file-sharing, corporate
management applications, audio-o-
streaming, video-streaming, basic games
all basics and advanced + HD TV, IP TV,
telepresence, advanced games, low-latency
applications
Tablets, new generation of laptop comput -
ers, Phoneblets, intelligent systems







18
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LATIN AMERICA

e. Devices. The users CAPEX
Throughout the history of the industry, the price of terminals has been one of the main obstacles for the mass
use of services. In Latin America the tax burden is added to this.
In this study we are interested in determining the annual amount that society should invest in devices for the
AHCIET Challenge, and compare it to the investment in fixed and mobile infrastructure.
Reducing the connectivity gap that separates the region from the rest of European countries involves replacing
devices so that, along with speeds, they may enable the use of those applications that technology makes
available at a given time in its evolution. For this we generated a model with the target of the complete
replacement of the computer fleet every 3 years and the complete replacement of mobile phones every two
years.
Since the targets objectives do not necessarily coincide with current replacement patterns, in order to assign a
value to the fleet, instead of taking the current volume of sales by country and projecting it, we decided to
incorporate a quality factor.
We defined this quality factor based on the price of iPhone 5 for the high-end mobile phones and an average
value for the low-end phones based on a selection of BlackBerry, Samsung and Motorola models. In the latter
case, we assumed that 80% of the equipment is low-end terminals and 20% high-end phones.
For computers we worked on the basis of the value of DELL Inspiron laptops with an Intel i5 processor, 4-16 GB
RAM, 500 Gb disk, 4 to 16 GB memory and 15.6'' screen.
As we want to include the impact of the tax burden in the investment, we used the retail value in the United
States (in the case of mobile phones we used the price of unlocked terminals) and on that basis we calculated
the tax burden for each country according to the values that appear in the study Taxation and
telecommunications in Latin America prepared by Delloite for AHCIET in 2012.
The values were projected based on accesses, assuming that each household has a computer and that for
each mobile subscription there is a phone
9
. The result of the calculation is the investment effort of society to
acquire the terms that meet the AHCIET Targets regarding number of accesses, level of fleet replacement and
compliance with the quality factor defined in the model.


9
Tablets or netbooks were not taken into account because they account for a small portion of the market and although tablets are expected
to develop greatly, they are still a secondary device.







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Calculation Method
A model is used considering a typical device depending on whether it is a household connection (FBB) or an
individual one (MBB).
For FBB a state of the art laptop is considered and for MBB a Smartphone. New devices such as tablets,
connected TVs and video game consoles are not taken into account.
Computers. The device fleet is equivalent to at least one for each FBB access defined in the AHCIET 2020
Challenge for each country.
a) The value is based on the price of DELL Inspiron Notebooks and Netbooks with an Intel i5 processor, 4-16
GB RAM, 500 Gb disk, 4 to 16 GB memory and 15.6'' screen.
b) Prices do not include VAT, but they do all other taxes
c) Prices remain constant over the projection period and it is assumed that the model will vary according to
technological evolution.
d) The rate of equipment replacement is 3 years.
Smartphones: The terminal fleet is equivalent to at least one for each MBB access defined in the 2020 target
for each country.
SURVEY
Device Valuation
Sources of Information
Fixed Broadband
Devices rates based on web data
DELL Market price
Tax burden by AHCIET country
Analysis and systematization of the information
Valuation of devices, application of tax burdens
Mobile Broadband
Devices rates based on web data
e-Bay market prices
Tax Burden by AHCIET country
Currently
existing devices
that comply
requisites for
using FBB or
MBB
Context
referential
information
Fixed & Mobile Broadband accesses to 2020
For AHCIET target
Investment in devices according
to Fixed & Mobile Broadband
Target
IBAF and BAM
accesses
information 11
LatinAmerican
countries







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Investments
to bridge
the digital divide
LATIN AMERICA
a) The value is based on 2 types of terminals: high-end and mid-range. For the high-end the prices were those
of iPhone 4 and 5 (unlocked). For mid-range the prices are those of Motorola, BlackBerry and Samsung
(unlocked) phones.
b) 20% of high-end and 80% of mid-range equipment is established as a mix for MBB.
c) Prices are wholesale and were estimated based on the retail value of the U.S. market. They do not include
VAT, but they do all other taxes
d) Prices remain constant over the projection period and it is assumed that the model will vary according to
technological evolution.

e) The rate of equipment replacement is 2 years.











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4. 2020 Challenge: Regional conclusions
Fixed and mobile broadband: Current situation



The five-year period 2007-2011 recorded strong
growth in the total number of individuals connected to
telecommunications services in Latin America.
The period began with the launch of 3G networks and
ended when Latin America exceeded 100% mobile
teledensity. The access gap with regard to European
countries, chosen as control group in this report, tends
to close. A debate is generated due to the
requirement of additional spectrum.
In fixed services, voice lines maintained their natural
growth during the years of the analysis (with some
exceptions), fixed broadband started to slow its
growth rates compared to the previous five years and
applications began to require more bandwidth.
The gap of fixed broadband access between Latin America and Europe-25 tends to expand, which generates an
in-depth discussion in the industry about the public policies needed to reduce the gap, which are mostly
expresses in each countrys broadband plans or digital agendas.
By the end of 2012, the eleven countries analyzed in this report could be classified into the following groups
according to their levels of fixed and mobile broadband penetration.
a) High connectivity:
a. Uruguay, Chile, Argentina: With fixed broadband penetration per household of over 35% and mobile
broadband reaching about 20% of the population or more.
b) Medium connectivity:
a. Venezuela and Colombia: Fixed broadband penetration reaching between 25% and 35% of households and
mobile broadband penetration of between 15% and 20% and growing fast. Mexico can be added to these
countries, although its levels of fixed broadband per household correspond to the high connectivity group.
c) Incipient connectivity:
a. Peru and Ecuador: Fixed broadband penetration reaching between 15% and 20% of households and mobile
broadband penetration of between 5% and 10%
b. Bolivia and Paraguay, with fixed broadband penetration per household below 10% and about 10% of mobile
broadband penetration.







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With some national plans/digital agendas in execution and several countries having planned their spectrum
allocations, the situation of the communications infrastructure by the end of 2012 can be summarized as follows:
a) International connectivity: Most countries have improved their access to international capacity. Capacity
expansions and new lines (public and private) ensure that future demands for international bandwidth can be
met. Mediterranean countries such as Bolivia and Paraguay are also executing improvement plans.
b) National backbones: The national backbones are necessary infrastructure so that fixed and mobile
broadband access networks can increase their speeds without bottlenecks. Most countries are deploying these
backbones as part of their national plans or digital agendas. Private alternatives are added to these increasing
the competition.
c) Internet Regional Exchange Points (IPx) are seen as alternatives to decrease the cost of bandwidth and
facilitate an increased adoption of services.
d) Fixed access networks in large urban centers where there is competition are geared towards bringing fiber
closer to the home.
e) Mobile networks, in countries where definite plans on spectrum allocations exist, move towards the evolution
to LTE, with a focus on speed but also on the IP world.
f) Alternatives to make sharing infrastructure easier are being analyzed by the public and private sector to
reduce coverage gaps in urban, suburban and rural areas.
As part of the national plans or digital agendas, almost all the countries are analyzing measures to stimulate the
demand to reduce the external (with the developed world) and internal (rural and urban areas, social classes
within a same country) digital divide.









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challenge
Investments
to bridge
the digital divide
LATIN AMERICA
Historical investment in telecommunications
Between 2004 and 2011 the accumulated investment for the 11 countries studied was USD 152,004 and
the average annual investment in fixed and mobile services grew at compound annual rates of 13%,
except in 2009 when the global financial crisis hit.
The historical series shows that the industry invested increasingly every year, which was a result both of
coverage expansion and new services, and maintenance and upgrades for a greater number of those
connected.
As an illustration, the sums invested between 2004 and 2011 were similar to the value of Argentinas GDP in
2004. Argentina was then the third largest economy in the region. This information viewed in hindsight gives a
clear idea of the magnitude of the investments made. It would have been difficult to predict in 2004 that the
region could invest in the next 7 years values that would approximate the GDP of the third largest economy in
the region.
The annual average gross investment between 2007 and 2011 (historical period of greatest growth in
connectivity) was USD 22,437,000 and the accumulated investment (fixed and mobile services) was USD
112,186,000.


U
S
D

1
0
,
7
1
5
U
S
D

1
3
,
4
7
9
U
S
D

1
5
,
6
2
1
U
S
D

1
7
,
5
2
9
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S
D

2
3
,
2
1
2
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1
9
,
1
5
8
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2
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,
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2
2
.
,
4
3
8
USD 0
USD 5.000
USD 10.000
USD 15.000
USD 20.000
USD 25.000
USD 30.000
2004 2005 2006 2007 2008 2009 2010 2011
Annual historical investment in telecommunications (fixed + mobile)
2004-2011 (11 countries)
USD Million
Source:: Convergencia Research
Accumulated 2004 2011:
USD 152,004 Million
CAGR 13







24
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challenge
Investments
to bridge
the digital divide
LATIN AMERICA
a. Investment as a percentage of the GDP
To achieve the current levels of penetration of fixed and mobile services, the eleven countries analyzed have
invested in fixed and mobile telecommunications infrastructure average annual values of 0.60% of the GDP at
current prices.

Chile, Bolivia and Paraguay are the countries with the highest proportion of investment as a percentage of the
GDP, around 1% for the five years analyzed. There are different reasons for this.
If longer series (last decade) are analyzed, Chile has always invested a higher proportion of its GDP on
telecommunications infrastructure than the other countries.
In the case of Bolivia also, its effort to get connected amounted to about 1% of the GDP throughout the decade.
Once Entel was nationalized, it began a new cycle of expansion of its mobile networks.
In the case of Paraguay, in the five years analyzed, the State operator - Copaco - has focused on improving its
networks and the State mobile operator Vox has focused on 3G and 4G (from early 2013), while private mobile
operators have invested in the expansion of 3G (and 4G from early 2013) and some providers have laid fiber
networks to compete in broadband, such as Cablevision (now Tigo) and Claro.
The GDP ratio is indicative of the investment effort in relation to the economy. Ratio variations, however, can be
affected by circumstantial aspects of either of the two variables that constitute it.


0,00%
0,20%
0,40%
0,60%
0,80%
1,00%
1,20%
1,40%
i
n
v
e
s
t
m
e
n
t

a
s

%

o
f

G
D
P
Investment in Telecommunications 2007-2011 (% GDP)
2007 2008 2009 2010 2011







25
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challenge
Investments
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LATIN AMERICA
b. Per capita investment
The values of average annual per capita investment figures range between figures close to USD 100 for Chile to
USD 20 for the economies of Bolivia, Paraguay and Ecuador.
The average investment per capita for the region in the period 2007-2011 was around USD 40.
Brazil, Chile, Argentina, Bolivia, Ecuador and Uruguay show a trend towards the increase of per capita
investment over the whole historical period analyzed. Colombia, Mexico and Paraguay show a more random
behavior. Venezuela is a special case, since the investment is measured in dollars to enable comparisons and
this country has suffered major devaluations in recent years. In local currency investments in Venezuela are
increasing.
The variations seen in the chart below show some growth peaks that can be generally explained by the fact
that some investments in the industry are not recurrent but specific, for example the acquisition of spectrum and
the subsequent deployment of mobile networks of a newer generation, the laying of fiber optic national
backbone, the admission of new entrants, among others.
Some decreases can also be seen, primarily between 2008 and 2009, due to the international financial crisis,
which then return to their upward trend.

An important fact is that from 2000 onwards in half of the countries analyzed, per capita investment in
telecommunications has always followed an upward trend and decreases are only responses to
circumstantial events. In the other half of the analyzed countries no specific pattern for the decade can
be observed. Although from 2007 onwards the investment per capita has been increasing in all cases.

0
20
40
60
80
100
120
140
160
U
S
D

p
e
r

c
a
p
i
t
a
Investment in Telecommunications 2007-2011 (USD per capita)
2007 2008 2009 2010 2011







26
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challenge
Investments
to bridge
the digital divide
LATIN AMERICA

Broadband access: AHCIET 2020 Challenge: MBB and FBB
The studys objective is to estimate the investments needed to bridge the digital divide in eleven countries of
Latin America. As the digital divide can be looked at from different angles, to calculate the investment we
decided to work with the adoption gap (access) for fixed and mobile broadband, comparing it with a selection of
25 European countries. To do this we used the model explained in the previous chapter, which sets a maximum
possible reduction target in terms of subscribers and calculates the necessary investment extrapolated to a
maximum. In both cases the historical series is used as a standard for modeling period 2013-2020.
The targets are defined in terms of fixed broadband to connect homes and mobile broadband to connect
individuals. This restriction is made on the assumption that the number of connected devices in the home will
require bandwidth provided by fiber networks (as close to home as possible) and that individuals will require
mobile broadband for ubiquitous connectivity. It also responds to the need for simplifying the calculation model.
There are exceptions in some countries where the coverage gap, geographical difficulties and gaps in
purchasing power make the connection of households through wired networks quite unlikely so that they will
depend on 4G and its evolutions to provide fixed solutions over mobile networks.
Meanwhile, the natural evolution of the mobile networks technological upgrades will drive the
replication in data communications of what occurred with mobile voice networks and bridging the
digital divide in Latin America will occur through mobile broadband.
In order to match Europe-25 in 2020, the countries should achieve a 75% penetration of fixed broadband
in households and a 95% penetration of mobile broadband among the population.
The following values for the AHCIET 2020 Challenge emerge as a result of the applied model:
a) Gap 0 compared to Europe-25: fixed and mobile broadband
a. Uruguay: 1 million connected households and 3.2 million mobile broadband subscriptions.
b. Argentina: 11 million connected households and 42 million mobile broadband subscriptions.
b) Gap 0 compared to Europe-25: mobile broadband
a. Chile: 4 million connected households with fixed broadband and 18 million mobile broadband subscriptions.
b. Brazil: 45 million connected households with fixed broadband and 202 million mobile broadband
subscriptions.
c) Half-way point
a. Mexico: 22 million connected households with fixed broadband and 90 million mobile broadband
subscriptions.
b. Colombia: 8 million connected households with fixed broadband and 35 million mobile broadband
subscriptions.
c. Venezuela: 4.5 million connected households with fixed broadband and 30 million mobile broadband
subscriptions.







27
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challenge
Investments
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LATIN AMERICA
d) Substantial improvement in fixed and mobile broadband
a. Peru: 3.5 million connected households with fixed broadband and 30 million mobile broadband
subscriptions.
b. Ecuador: 1 million connected households with fixed broadband and 12 million mobile broadband
subscriptions.
e) Inclusion via mobile broadband
a. Bolivia: 1 million connected households with fixed broadband and 9 million mobile broadband subscriptions.
b. Paraguay: 1 million connected households with fixed broadband and 6 million mobile broadband
subscriptions.









28
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challenge
Investments
to bridge
the digital divide
LATIN AMERICA
Investments needed to achieve the AHCIET 2020 Challenge
To achieve the AHCIET 2020 Challenge, in the period 2013-2020, the eleven analyzed countries would
have to average annual investments of USD 44,478,000 each.
The accumulated investment projected for 2013-2020 in investments on fixed and mobile infrastructure
for all 11 countries will be USD 355,825,000.
The average compound annual rate of growth of the investment in infrastructure (fixed+mobile) for the
11 countries in the period 2013-2020 will be 4.65%.
For investments of this magnitude to be made it will be necessary to work within a framework of predictability in
regard to business rules and to have open dialogue at governmental and corporate levels.
Initiatives that enable reducing the costs of investment in infrastructure are recommendable as they would have
a direct impact on the reduction of prices of services, generating a virtuous circle that would lead to a further
acceleration of the time needed to bridge the digital divide. As well as alternatives that speed up the deployment
of this infrastructure, such as reducing the number of permits, simplifying processes for the installation of
antennae, measures to avoid discretionary decisions by local governments regarding rates and taxes in the
case of mobile networks and facilities for the use public media and infrastructure.



As an indication, the projected investment amounts needed to achieve the AHCIET 2020 Challenge are similar
to the value in USD of the GDP of Colombia in 2012 in current prices. Colombia is today the fourth largest
economy in the region. If 7 years ago, the equivalent to the third largest economy was invested (See section on
Historic investment in telecommunications), one can expect that history will repeat itself if the necessary
conditions are generated.
U
S
D

3
6
.
5
0
4
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S
D

3
8
.
5
8
1
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4
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.
8
9
5
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4
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USD 0
USD 10.000
USD 20.000
USD 30.000
USD 40.000
USD 50.000
USD 60.000
2013 2014 2015 2016 2017 2018 2019 2020
I
n

m
i
l
l
i
o
n
AHCIET 2020 Challenge
Annual investment in telecommunications (fixed + mobile)
Comparative: Challenge vs. Trend
USD Million 2013-2020 (11 countries)
Challenge Trend
Source: Convergencia Research Analysis
Annual Average
2013-2020







29
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challenge
Investments
to bridge
the digital divide
LATIN AMERICA
The countries that will need to make the greater effort to achieve the AHCIET 2020 Challenge are Bolivia and
Paraguay. The former would have to invest for the cycle 2013-2020, on average, 1.4% of its annual GDP and
the latter 0.86%. Third is Chile, which as explained above, in all the analyzed series is always the country with
the highest percentage of the GDP allocated to telecommunications and also with more dollars per capi ta
destined to be invested in the sector.
The country that would allocate the most dollars per capita to achieve the AHCIET 2020 Challenge is Chile
with USD 171. Brazil would be in second place (USD 93) and Argentina in third (USD 85).
On average, the 11 countries would have to invest 71% more in dollars per capita in the 5-year period 2007-
2011, product of expanded coverage, the increasing demand for bandwidth per user and network maintenance
for a larger number of connected individuals.


USD 32
USD 36
USD 37
USD 42
USD 54
USD 58
USD 67
USD 66
USD 70
USD 85
USD 93
USD 171
USD 0 USD 100 USD 200
Paraguay
Bolivia
Peru
Ecuador
Venezuela
Colombia
Uruguay
Average (11
Countries)
Mexico
Argentina
Brazil
Chile
AHCIET 2020 Challenge Annual
Investment Average
USD per capita 2013-2020
Source: Convergencia Research
0,38%
0,49%
0,51%
0,55%
0,64%
0,65%
0,70%
0,71%
0,80%
0,86%
0,86%
1,40%
0,00% 0,50% 1,00% 1,50%
Uruguay
Venezuela
Peru
Mxico
Argentina
Brasil
Colombia
Proemedio 11
pases
Ecuador
Chile
Paraguay
Bolivia
AHCIET 2020 Challenge Annual
Investment Average
%GDP per capita 2013-2020
Source: Convergencia Research







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In 2020, if the values proposed by the AHCIET Challenge of connected households and individuals were
reached, the industry would have to invest USD 52.508 million in fixed and mobile networks for all the 11
countries, compared to USD 28.466 million invested in 2011. This means that not only is it necessary to
debate the actions needed to achieve the investment figures to bridge the divide, but once this is
achieved large volumes of capital will still be needed to maintain and upgrade these networks.
In order to realize investments of this magnitude, a public and private shared agenda to debate public
policies that facilitate investment and promote innovation in business models that enable economic
sustainability in the long term will be necessary.


If the penetration levels of the AHCIET 2020 Challenge are achieved, the necessary capital for fixed and
mobile networks would increase its share of the Gross Domestic Product from the average 0.59% in 2011 to
0.67% in 2020.
U
S
D

1
3
.
8
9
0
U
S
D

4
.
9
8
5
U
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2
.
4
8
7
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2
.
3
0
0
U
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D

2
.
0
9
6
U
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D

1
.
0
6
9
U
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D

7
7
4
U
S
D

3
2
7
U
S
D

2
4
7
U
S
D

1
6
4
U
S
D

1
2
8
U
S
D

2
4
.
4
5
6
U
S
D

9
.
8
5
3
U
S
D

3
.
4
9
4
U
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4
.
3
1
5
U
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D

4
.
0
6
5
U
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2
.
1
7
5
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1
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6
7
7
U
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9
9
0
U
S
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7
3
0
U
S
D

3
9
6
U
S
D

3
0
2
USD 0
USD 5.000
USD 10.000
USD 15.000
USD 20.000
USD 25.000
Bolivia Brazil Chile Argentina Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela
U
S
D

m
i
l
l
i
o
n
Ahciet 2020 Challenge
Annual Investment in Telecommunications (fixed + mobile)
Annual investment / 2011 vs. 2020
2011
2020







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Future investments would increase as a result of the larger subscriber base and the need for maintenance that
would enable maintaining upgrade levels in accordance with the technological model and the network
expansion required for incorporating new subscribers to the network.
Measured in dollars per capita, the investment for the average of the 11 countries will increase from USD 48 in
2011 to USD 79 annually in 2020.

U
S
D

5
6
U
S
D

7
1
U
S
D

4
4
U
S
D

1
4
3
U
S
D

4
6
U
S
D

3
6
U
S
D

2
6
U
S
D

2
2
U
S
D

2
3
U
S
D

2
5
U
S
D

3
8
U
S
D

4
8
U
S
D

9
4
U
S
D

1
1
6
U
S
D

7
7
U
S
D

1
8
4
U
S
D

6
4
U
S
D

6
1
U
S
D

4
8
U
S
D

5
5
U
S
D

5
7
U
S
D

4
9
U
S
D

8
5
U
S
D

8
1
USD 0
USD 20
USD 40
USD 60
USD 80
USD 100
USD 120
USD 140
USD 160
USD 180
USD 200
Argentina Brazil Mexico Chile Colombia Venezuela Peru Ecuador Bolivia Paraguay Uruguay Average
11
Countries
USD per capita
Ahciet 2020 Challenge
Annual Investment in Telecommunications (fixed + mobile)
USD per capita / 2011 vs. 2020
2011
2020







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The application of the model developed in the case of Chile, Mexico, Argentina, Uruguay and Brazil, while
involving substantial increases in investment could be achievable given current levels of development,
coverage, and historical patterns of attracting demand and investment, provided public policies that facilitate
investment are generated. In these countries the greatest effort required by investment will be to upgrade
existing customers to higher bandwidth. Since they have a large user base, migrating to new technologies will
require a significant financial effort for existing customers.
In the case of Argentina, it will be essential to see the country make decisions regarding spectrum allocations.
The model, which assumes that the spectrum is made viable according to needs, shows there is a high potential
demand. Without spectrum the gap in mobile broadband will not be bridged unless it is at a very high cost to the
industry and society.
Both in Argentina, as in the other countries, spectrum availability is a necessary condition to achieve broadband
penetration targets. The exponential growth in demand for mobile data requires looking ahead at and planning
new allocations taking into consideration costs and reasonable terms.
In Colombia, Venezuela and Peru, the gap will probably be bridged using mobile broadband. In the case of
Colombia, the country has higher broadband speeds than Venezuela and Peru.

Venezuela would have (to make) an additional effort to increase the bandwidth of its subscriber base and in
Peru the need to increase coverage and to address rural areas in a complicated geography has more impact.
In Peru, Ecuador and Venezuela achieving the AHCIET 2020 Challenge will probably imply exceeding the
involved companies efficiency limits and, as a result, greater efforts will have to be made to produce public
policies that stimulate demand.
Paraguay and Bolivia have a level of delay in basic infrastructure such as electricity, drinking water and
transport that adds additional complexity to the low coverage of fixed networks and the restrictions on access to
international bandwidth, which are the typical barriers of telecommunications. For example, since 2006 Bolivia
has been working on developing basic electrical infrastructure through a plan whose objective is to reach the
whole population only in 2025. Moreover, the poverty levels and large percentage of rural population will require
additional efforts on actions to stimulate demand. Consequently, the mobile platform will fulfill the double
function of connecting homes and individuals. In terms of affordability, innovative solutions will be needed to
bridge the price barrier.
In every country analyzed there is intense activity on the public policy agenda to bridge the digital divide. On the
basis of national plans or digital agendas, at least one of the strategic lines of action recommended by different
international organizations is being worked on.
Qualitative objectives are generally shared by all national plans, although from different political -economic
perspectives: Digital inclusion, planning of spectrum allocations, execution of universal service funds that
include Internet access, promotion of domestic production and employment in the industry, training and
research in information technologies, connectivity and infrastructure, analysis of the role played by the
competition, lowering barriers to access devices, improving affordability. Less common is setting targets for
connection speeds.
The implementation of the plans or agendas, however, shows differences in the priorities and steps to be taken
to achieve penetration and network coverage that respond to the realities of each country.
The way of measuring the level of progress of the master plans for bridging the divide is heterogeneous. Some
countries set indicators of total access penetration without distinguishing whether these apply to households or
individuals, gap reduction targets in terms of the coverage of municipalities or simply broadband access targets
in the short or medium term.







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The AHCIET 2020 Challenge adds a homogeneous look that enables comparing the 11 countries and focuses
on applying a model to obtain a general framework for the necessary investments, an aspect that has been less
studied so far.
For all 11 countries, achieving the AHCIET 2020 Challenge will result in the incorporation of segments or
areas where the efficiency barrier for private companies or the affordability barrier for users is reached. For this
reason, now the investment has been estimated, its profitability must be assessed.
We hope that the information provided in this study will be used by the industry to debate models of
public and private actions that ensure sustainability through market structures that promote
economically and financially sound companies in the short and long term.









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2020 Speeds: MBB vs. FBB

This study does not intend to set speed targets (which, in a simplified way, can be understood as quality).
However, it is important to keep in mind the objectives of the European Digital Agenda for future comparisons or
objectives that may arise in the region.
The European Digital Agenda establishes, for example, that coverage of at least 30 Mbps must be provided by
all networks and that 50% of households will have to hire speeds higher than 100 Mbps. These values are
proving to be difficult in the complex European macroeconomic scenario and compared to Latin America, are
too high for the divide to be bridged by 2020.
Average speeds in 2011 are in the range of 0.56 Mbps and 7.07 Mbps for fixed broadband.
Most connections cluster at speeds that enable the use of basic applications, except in some countries where
the number of those connected at speeds that allow advanced uses increases. Total Broadband is almost
nonexistent.



If the trend of the past three years continues, the average speed projections for 2020 would lie between 19.06
Mbps and 55.22 Mbps and will show an improvement that would enable, in most cases, expected uses
identified as advanced. This improvement will be the result of migration to fiber platforms closer to home (FTTx).
Chile and Brazil stand out.
4,11
0,56
6,10
7,07
3,33
2,67
4,75
2,63
1,71
3,13
1,09
3,38
38,77
19,06
49,81
55,22
34,44
30,75
42,31
30,54
25,43
33,30
21,97
34,69
0,00
10,00
20,00
30,00
40,00
50,00
60,00
Mbps
Fixed Broadband Average speeds
2011
2020







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Average speeds for mobile broadband in 2011 are in the range of 0.5 Mbps and 1.71 Mbps.
Average speed projections for 2020 would lie between 9.91 Mbps and 25.08 Mbps. Uruguay and Chile stand
out.

Devices

Throughout the history of the industry, the price of terminals has been one of the main obstacles for the mass
use of services. In Latin America the tax burden is added to this.
The affordability of the devices is strongly conditioned by the tax levels on them, especially customs duties,
special taxes that consider a mobile phone a luxury product, among others.
The tax burden should be reviewed in order to align it to the achievement of targets, because as the results
explained in the following paragraphs will show, under the current structure in most countries society as a whole
must invest more on devices than in network infrastructure.
In this study we are interested in determining the annual amount that society should invest in devices for the
AHCIET Challenge, and compare it to the investment in networks.
To do this we generated a model (explained in the previous chapter) whose objective is the complete
replacement of the computer fleet every 3 years and the complete replacement of the mobile phone fleet every
two years. In the latter case, we assumed that 80% of the equipment is low-end terminals and 20% high-end
0,83
0,38
0,75
1,35
0,95 0,96 0,90
0,50 0,62
1,71
0,94 0,90
15,06
9,91
14,14
20,96
16,34 16,50
15,82
11,28
12,58
25,08
16,25
15,81
0,00
5,00
10,00
15,00
20,00
25,00
30,00
Mbps
Mobile Broadband Average speeds
2011
2020







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ones. The replacement targets do not necessarily match the pattern of sales by country, as they would include a
quality factor forced by the model that also includes the effect of specific taxes.
10



The result of the calculation is the investment effort made by society to acquire the devices that meet the
AHCIET Targets regarding number of accesses, level of fleet replacement and compliance with the quality
factor defined in the model.
As a result, the model predicts that to keep the terminal fleet updated, society should invest, except in the case
of Chile, a greater amount than what is invested (real and projected) in fixed and mobile network infrastructure.
In 2011, an updated device fleet would have cost society an amount equal to 58% of the total investment (fixed
and mobile infrastructure + fixed and mobile terminals). In 2020, the relevance of devices will increase to
represent 68% of the total. Therefore, to achieve the penetration target it is important that measures to lower the
barriers that prevent access to terminals, especially the tax burden, should be debated.





10
Specific taxes that are different from the value added tax







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5. About AHCIET
AHCIET is the Ibero-American Association of Research Centers and Telecommunication Enterprises, a private
non-profit organization created in 1982 and constituted by over 50 telecommunications operators in Latin
America, which include public, private, multinational and local and companies, diversity that provides a
significant representation of the entire industry.
Our Mission is to significantly contribute to the development of telecommunications in Latin America through
public-private dialogue, promoting the industrys common interest and the exchange of knowledge and good
practice between companies, to further the development of digital connectivity and telecommunications
services.

AHCIET Team
Pablo Bello Arellano Secretary General
Fernando Gonzlez Muoz Manager
Gastn Soublette Operations Coordinator
Eduardo Chomali Strategy and Institutional Affairs Coordinator
Vctor Rodrguez Accounting
Pablo Cereceda Pinto Communications Advisor
Lorenzo Sastre Technical Regulation Advisor
Juan Jung Studies and Regulation Coordinator
Andrs Sastre Portela Studies Advisor


Experts who contributed their views to this study
IADB: Antonio Garca Zaballos
ECLAC: Edwin Fernando Rojas
Cisco: Andres Maz
Intel: Luis Marn







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6. About Convergencia Research
Convergencia Research is the area of research and market intelligence of the Convergencia Group, an
independent company specializing in providing business information about telecommunications and information
technologies in Latin America and the Caribbean.
Since 1998, Convergencia Research has been conducting multi-client studies and ad-hoc reports for companies
and organizations in the telecommunications sector in Latin America and the Caribbean.
Its work team is constituted by specialists in telecommunications, professionals from different fields such as
analysts, journalists, regulatory experts, experts in marketing and market research, economists, sociologists and
experts in finance.
Convergencia Group has two other business units. The publishing business unit that produces the content of
the site www.convergencialatina.com, Convergencia Maps, Convergencia Telematics, Convergencia
Documents, Telehealth, among other publications. Convergencia Events organizes business conferences and
training in the ICT sector.
Contact information: Grupo Convergencia Convergencialatina Convergencia Research: Ave. Belgrano 680 -
Piso 9 - C1092AAT Buenos Aires Argentina - Telefax: +54 11 4345 3036
Work team
Director
Mariana Rodrguez Zani

Research
Germn Alonso
Jorge Cougnet
Gabriela Ressi Garay
Pablo Castro