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A primary challenge for wireless operators in Latin America and the Caribbean during the past three years has been relatively flat earnings measured on a per-user basis. Average revenue per user (ARPU) has remained in the $12 to $14 range. Meanwhile, users – especially young people – are substituting voice communication with texting, instantaneous messaging systems, and social networks. Plus, the market is being flooded by sophisticated and expensive devices (such as smartphones and tablets) and a large selection of applications that increase users’ appetites for data consumption.
Stagnant voice revenue growth pushes operators in the region to consider mobile data as a major opportunity to improve ARPU. However, the increasing data traffic needs to be supported by the deployment of advanced mobile broadband technologies in order to make efficient use of available spectrums. HSPA provides the foundation for mobile broadband services with more than 434 commercial networks worldwide and approximately 1 billion connections.
Since 2008, the bulk of HSPA networks were launched in Latin America by using in-band spectrum from cellular and PCS services. Taking advantage of the economies of scale from the U.S. market, Latin operators started to offer HSPA services in the 850 and 1900 MHz bands. Initial customer offers were aimed at postpaid and laptop users who represent only 20% of the market. It was necessary to broaden the offer to include the the larger prepaid market, which subsequently created a positive impact to revenues. Data contribution to service revenues is increasing steadily, from an average of 10% in 2008 to a healthier 23% at the end of 2011. Argentina, Mexico, Venezuela, and a few other countries in the region have reached a data contribution rate above 30% since.
Technology needs to advance as data demand, driven by heavy use of more sophisticated devices, exceeds the supply of available network capacity. With little to no new spectrum available, operators need to be creative in the use of the limited spectrum they do have and begin to deploy HSPA+, thereby tripling the average speed experienced by the end user and improving spectral capacity. This would result in an improved user experience with faster downloads of popular applications and services. In an effort to provide more advanced services with HSPA+, operators face a challenge to improve the transmission backhaul networks by replacing cable or coax-based transmission systems with more advanced fiber optics, microwave, or Ethernet solutions.
Latin operators responded to the market challenges of network capacity constraints, limited spectrum supply, backhaul upgrades, and data hungry customers by building a large HSPA+ footprint of 34 networks in 21 countries in Latin America and the Caribbean. HSPA+ Dual-Carrier, with a peak theoretical download speeds of 42 Mbps, is being offered in countries like Chile.
Characterized by a high prepaid customer base (80%) and a relatively low ARPU, there is a need to carefully manage CAPEX and OPEX in Latin America while always looking for more spectrally efficient technologies to bring down the cost per byte. LTE has given operators the opportunity to plan for more cost efficient networks. Latin operators started to test LTE at end of 2009 and waited patiently for governments to assign and release the new spectrum. At the end of 2011, the first LTE networks began to appear in different parts of the region, with two in the Caribbean (Puerto Rico), one in the Andean region (Colombia), and two at the South Cone (Brazil and Uruguay).
Many additional operators have expressed plans to provide LTE service to their customers once the spectrum is provided. Operators are doing everything in their power to improve and advance mobile communications and Internet services. Now is the time for governments to step up and provide this valued spectrum in a timely manner.
To cope with consumer demand and to provide new sources of revenue, 4G Americas believes that the road ahead over the next three years calls for a continuous and aggressive deployment of HSPA+ and the strategic deployment of LTE networks.
Erasmo Rojas is the director of Latin America and the Caribbean for 4G Americas and is responsible for providing information to mobile operators, vendors, regulators, telecommunications organizations and the media and analysts regarding the 3GPP family of technologies in Latin America and the Caribbean and its evolution to 3G and 4G including LTE.