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March - April 2000

Don’t call, just e-mail
Competition is reducing communication costs in Latin America, especially for Internet users



By Paul Constance

For years now, technology pundits have been heralding the age of ultralow cost communications, thanks to ever increasing competition and lower equipment costs. Does the prediction apply to Latin America?

The answer depends on what country you live in and what services you use, according to a new study by the Alexis de Tocqueville Institution, a research group in Arlington, Virginia. For the second time in two years, adti recorded the cost of telecommunication services in 24 countries in the region and the United States.

The new survey shows that Latin Americans who don’t make a lot of calls continue to enjoy low costs. In 14 of the region’s countries, the cost of 200 minutes of local calls is lower than in the U.S., which has very low prices by global standards. However, most Latin American countries do not offer a flat rate, unlimited-use package for local calls (a standard feature in the U.S.). Charges accumulate on a per-minute basis, leaving heavy users of local service with bills much larger than the U.S. average. The price of domestic long-distance calls is also relatively low in Latin America: 50 minutes’ worth costs well below $10 in every surveyed country except Venezuela ($12.50), Argentina ($16.50), Uruguay ($23.50) and Bolivia ($24).

The picture is not nearly as bright for Latin Americans who use the telephone a lot, make domestic and international long-distance calls, and like to surf the Internet. As the graph shows, the cost of a "high use" basket of services is almost half as low in the United States as in Jamaica, the next lowest-cost country in the survey. Everywhere else in Latin America and the Caribbean the "high use" basket of services costs several times more than in the U.S—a serious competitive disadvantage for companies that are attempting to enter the burgeoning world of electronic commerce. These higher costs are partly due to the practice of cross-subsidizing local and domestic long-distance fees with high international long-distance and Internet access fees. They may also be due to a lack of competition: according to atdi, the six most expensive countries in the "high use" category allow monopolies in domestic and long-distance voice telephony. (Honduras is described as having "partial competition.")

The lack of competition in fixed-line voice communications may also affect a cost factor that is not measured in the adti survey: the price and waiting period for a new telephone line. In many Latin American countries, connection fees are still high and waiting periods long. As a result, "teleden-sity" (or the number of fixed phone lines per 100 people) is still very low. The difficulty of getting a new line has fed the spectacular growth of cellular telephony in the region. From virtual nonexistence a decade ago, cell phones have multiplied to the point where they now equal at least 30 percent of all fixed telephone lines in 11 Latin American countries. And prices for 200 minutes cell service are, on average, only 70 percent higher in Latin America than in the United States.

The most rapidly evolving aspect of telecommunications in Latin America today is Internet access. Two years ago companies in only a few countries offered unlimited-use, flat rate pricing for this service. Now, only two countries in the survey—Costa Rica and Trinidad and Tobago—do not offer unlimited access over telephone lines. Moreover, the price of unlimited access has been dropping steadily in most countries, thanks to ferocious competition among Internet service providers. If Costa Rica and Trinidad are excluded from the survey, the average cost of unlimited access in Latin America is now just over $22—only slightly more than the typical U.S. rate. In Brazil and the U.S., several companies have begun offering unlimited Internet access for free. There’s a catch, though. Since Brazil and almost all other Latin countries still charge between $.02 and $.05 per minute for the local calls that users must make to go online, even "free" Internet service will cost between $1.20 and $3.00 per hour.



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