What Is the Future of Mobile Communications in Central America?

Almost every industry depends on strong telecommunications infrastructure and services, but it is typical for developing nations to struggle to keep up with necessary technological advances. In Central American countries, the telecom industry is lagging behind as demand increases for faster connections that can handle higher volumes of data and deliver better quality.

Over the past two decades, the Central American telecom industry has evolved as telecom has largely transitioned from a public utility to a privatized industry. This change has increased competition, and telecom companies have concentrated their efforts where the most profit can be made.

Even with privatization, Central American countries trail the rest of the world when it comes to telecom advancements. According to a report by GSMA that looked at telecom in Guatemala, El Salvador, Honduras, Nicaragua, Panama, and Costa Rica, nearly 35 percent of the Central American population has access to 4G mobile networks, but this technology only accounts for 5% of all mobile connections. Greater innovation and investments are needed to remedy this situation.

Fortunately, the telecom industry in Central America continues to grow. Here, we’ll take a look at some of the changes anticipated in Mexico and Central America, as well as some of the problems that may thwart progress.

How Can the Gap Be Closed?

How can Central America keep pace with the rest of world when it comes to mobile technology infrastructure? According to GSMA, policy reform in these nations is needed. Regulations in many Central and Latin American countries have created many of the roadblocks that are halting the expansion of high-speed mobile networks.

In its report, GSMA found that regions that have fewer operators tend to see higher levels of investment in mobile networks, and quality of service was significantly better when compared to regions that are inundated with providers. This may be because operators in less crowded markets have more incentive and ability to invest in mobile infrastructure, because there are higher ROIs in such markets and operators are more able to distribute fixed costs. Highly fragmented markets can lead to inefficient allocation of the spectrum as well. However, complicating matters is the fact that some Central American governments have taken a hard stance against mergers, making it difficult for operators to consolidate even when it might result in efficiencies.

The GSMA report suggests a number of policies to promote the expansion of 4G technology in Central America. For one, countries must allocate a greater share of the spectrum for 4G use; currently, Central America has allocated just one-fifth of the amount the International Telecommunication Union recommends for efficient mobile services. GSMA also suggests that countries review legacy regulations that may be impeding progress and investment, such as price caps, limitations on price discrimination, and barriers to mergers.

The Role of Competing Mobile Providers

Fierce competition among mobile operators is another defining feature of the Central and Latin American telecom landscape. Local providers are more prominent across the region, and with limited resources and often-strict government control, they can become stagnant in terms of innovation and investment in new technologies. When global operators seek to enter these markets, acquisitions become a real threat to consumer choice, but increase the probability of much-needed investments.

Analysts predict that some local mobile telecom providers will be edged out in favor of global multinationals. Additionally, established global providers in these countries will continue to look for opportunities to expand. Some experts foresee that smaller providers will be completely eliminated by larger players. These takeovers are expected to occur despite populist regulations enacted in many countries.

What Does the Future Hold?

Central America is currently in the midst of a broadband explosion that has been in progress for nearly a decade. This trend is mirrored globally; the U.S. has also prioritized the expansion of broadband networks. Mexico even instituted telecom industry reform initiatives in 2013 that made Internet access a constitutional right.

Other Central American countries have lagged behind Mexico, but have still seen some progress. For example, Colombia instituted a National IT Plan with the goal of providing 70 percent of the population with Internet access, while also seeking to ensure that all education and healthcare institutions have access, even those in rural areas.

Despite the progress being made, reform is still needed if Central American countries are to keep up with the world’s developed nations. An expansion of both fixed-line and mobile broadband networks in Central America is directly tied to economic prosperity in these counties, which should be a top concern for governments. A stronger economic base will help Central American countries compete in a global economy and will serve to improve quality of life for everyone. Government policies that focus on economic sustainability, reduced barriers to entry for operators, and infrastructure improvement will be critical to improving telecom across the region.