Enabling Investment and New Opportunities in Telecommunications

Latin America has enjoyed strong economic growth over the last five years, which is expected to continue, even if at a slower pace. With increasing prosperity, the expanding middle class is strengthening internal demand for goods and services. The telecommunications industry has also benefited from this economic expansion and has achieved significant growth in the mobile sector, but wireline connections and broadband penetration lag those of the Asia-Pacific region. Technology is the basic engine of economic development and it is well established that investment in broadband spurs growth in employment, productivity, and GDP. Therefore, it is critical that Latin American governments ask whether they need to update their public policies so as to take advantage of new technologies and ensure that their regulatory frameworks encourage investors - both domestic and foreign - to accelerate the deployment of broadband networks and offer converged services.

Attracting Foreign Investment in Telecommunications Infrastructure

Foreign direct investment (FDI) has typically been the driver of telecom sector growth in liberalizing economies. Countries that have eliminated barriers to FDI have benefited from greater commitment and longer-term engagement by foreign investors as well as new management approaches, technology, and skills. The elimination of ceilings on FDI and other restrictions that disadvantage foreign providers of telecommunications services can help attract investment that will accelerate the deployment of broadband networks. As the region moves forward in this process, it will be essential for governments to have policies and practices that create a business environment that attracts investment and fosters competition. Telecommunications is a capital intensive industry and access to capital is key to ensuring the deployment of robust networks. Swift further liberalization of the telecom sector has the potential to reinforce economic growth in key sectors throughout the region’s markets.

In addition, having an overall pro-business and pro-competitive environment will help attract the necessary investment in broadband networks. A clear and stable legal system is a key element in creating a favorable business environment. For example, countries that have well-established and predictable tax laws will be favored by investors over those that do not. Other important factors associated with a pro-business environment relate to policies that encourage innovation and maintain technological neutrality. Investors place high value on having flexibility to choose the technologies that will enable them to offer innovative services efficiently.

Regulatory Processes that Provide Confidence

Regulatory processes that allow for consultations with the industry on rulemakings, are transparent, and contain effective enforcement mechanisms provide confidence to investors. Industry members should be encouraged to comment on proposed rules and their comments should be made available to all interested parties. Such regulatory transparency enables regulatory agencies to monitor the business environment and ensure that the rules of engagement are followed. Effective mechanisms to resolve disputes and a history of enforcing safeguards against anti-competitive conduct track record both provide confidence to investors and strengthen the role of the regulator.

Encouraging Innovative Telecommunications Services

Licensing provides the basic certainty and legal security investors need to make significant investments in telecommunications infrastructure. Licensing criteria and conditions should be developed in a transparent and open manner. In order to foster converged IP-based services, service licenses should have a broad scope to facilitate the offering of innovative services. In addition, the possibility of not requiring licenses for the offering of non-basic services, such as value-added services, should be considered. Other important aspects that need to be considered include prompt means to resolve disputes on the scope of permitted services, and reasonable and streamlined licensing regulatory fees. Finally, ensuring that licensees obtain access to necessary network inputs such as international gateways and other network facilities on reasonable terms will foster competition and speed up the offering of innovative services.

In summary, technology is the fundamental engine of economic development, and investment in broadband networks and services spurs economic expansion. Most countries in Latin America are in a strong position to revise/review their public policies and take advantage of new technologies. The adoption of policies that encourage FDI, streamline the licensing process, broaden the scope of licenses, and create regulatory processes that provide confidence will be key in determining the future of broadband services in the region. The time to act is now.

Jacquelynn Ruff
Vice President of Regulatory Affairs
Verizon