THE CONTROL TOWER

Ecuador 2012 | ICT | REVIEW: ICT

Mobile and fixed-telephony penetration rates are increasing, thanks to government support and modern technology. The number of internet users has also surged in the past six years, as service providers focus on rural areas.

Ecuador's ICT sector is a thriving and rapidly maturing component of the national economy, contributing to an increase in the flow of both national and foreign investment. By naming the ICT sector as a strategic industry for the development of Ecuador, President Correa and his administration brought much-needed political stability and long-term vision to take advantage of the sector's future potential.

The country's telecoms market is expanding; services revenue grew by an estimated 10% in 2010 and projections for 2011 showed an increase of 8% or 9%. This trend has partly contributed to boost internet usage and the penetration rate of new technology among Ecuador's tech-thirsty population, especially in rural areas of the country, which for many years were deemed “technologically disconnected."

The penetration of the fixed and mobile telecommunications sectors continued to increase in 2011, yet it is the mobile market spearheading growth; the mobile penetration rate reached 114% in 2011, up from 106% in 2010. Meanwhile, fixed-line penetration reached 38.5% of the country's households, up from the 35.6% registered in 2010. For that reason, the fixed-line sector is responsible for about 20% of telecoms revenues, whereas the mobile sector accounts for the remaining 80%.

Although ICT products accounted for only 0.2% of Ecuador's total exports as compared to 0.16% in 2009, according to a World Bank report released in 2010, the government is highly committed to the development of the sector. The authorities see the ICT sector as a key component for future economic and social development.

In 2011, the Ministry launched “Ecuador 2.0," a multidisciplinary project based on four areas: equipment, connectivity, training, and applications. The main goal of Ecuador 2.0 is to see the country evolve in terms of these four points, which are supported by an institutional, legal, and regulatory framework applicable in three existing areas: universal access and digital enrollment, broadband digital enhancement, and the government.

In this regard, the state plans to invest a further $400 million by 2013 in infrastructure. State-owned National Telecommunications Corporation (CNT), a leading company within the ICT sector, has future plans to expand fiber-optic networks, deploy wireless systems using CDMA-450 technology, and upgrade broadband services. The country has long-term growth potential, especially within mobile and broadband services.

FIXED TELEPHONY

Fixed-line density in Ecuador lags considerably behind other Latin American countries such as Uruguay, Venezuela, and Argentina; 14.5 people for every 100 inhabitants have a fixed line in the country. However, both fixed telephony and the overall number of lines in the country are increasing every year. According to the Ministry of Telecommunications, there were 2.16 million lines in 2011, as compared to 2.06 million in 2010, which represented a 4.89% annual increase. In addition, 38.5% of Ecuadorean households owned a fixed line in 2011, as compared to 35.6% in 2010.

Despite strong competition from the mobile telephony market, these figures have positively contributed to the market's maturity. Currently, state-owned CNT dominates Ecuador's fixed telecoms sector with a market share of about 90% of the country's main lines. However, competition is on the rise, with fixed-line operators such as CNT, ETAPA, TVCable (Suratel), Claro (Ecuadortelecom), Linkotel, Etapatelecom, Global Crossing, Grupo Corpiar, and Starsat, which are investing in new infrastructure.

Most of these operators offer both internet and TV services and will benefit from the government's plans to improve usage density while universalizing fixed-telephony services throughout the country. Several operators, including CNT, are increasing efforts to expand the country's fixed-line infrastructure.

MOBILE TELEPHONY

Today, Ecuador has three main mobile telephony operators. Conecel is a unit of Mexican giant América Móvil that is trading as Claro, and is the market leader with about 10.4 million subscribers. In second place is Movistar Ecuador, controlled by Spain's Telefónica, with 4.2 million subscribers. State-owned Alegro operates under CNT's umbrella, with over 301,000 subscribers.

Ecuador enjoys a higher mobile penetration rate than the regional average; it has increased from 63.3% in 2006 to 114% in 2011, as multi-SIM usage becomes a prevalent method to take advantage of special offers. According to the regulator Supertel, there were 16.4 million subscribers by the end of 2011 (15.12 million in 2010 and 14.9 million in 2009) with the largest number of subscribers in the pre-paid segment, 12.9 million over the 2.03 million post-paid users at the end of 2010.

Mobile Number Portability (MNP) for mobile telephony in Ecuador, a new law that came into effect in October 2010, has played a significant role in boosting both mobile penetration and the number of subscribers in the country. Supertel determined that subscribers may port their lines up to twice a year at no charge, and according to the national regulator, mobile telephony operators received over 66,700 MNP requests within the first month of the new law's enforcement.

The government is also determined to improve competition in the market, and could launch new regulations in the near future. In addition, operators have market plans to introduce new technology as well as improve mobile services for their customers; Alegro launched 3G UMTS services, branded as “Niu 3.5G", while Claro plans to conduct tests regarding 4G long-term evolution (LTE) technology.

Moreover, the smartphone market is one of the mobile telephony segments that is rapidly growing, especially among the under 25 age up. At the beginning of 2012, there were around 522,000 smartphone users in Ecuador, according to the Ecuadorean National Institute for Statistics and Census (INEC). According to a survey, smartphone owners in Ecuador use their handset mainly to access social networking sites (70%), search for information on the web (69.8%), check their email (65.9%), play mobile games and listen to music (62.1%), and access GPS applications (42.8%).

For these reasons, and considering the country's low-density and fixed-broadband penetration, mobile operators in Ecuador have been promoting mobile broadband as a qualitative and reliable alternative to fixed internet access.

INTERNET

Currently, Ecuador has an internet penetration rate of 36.77%, according to the Ministry of Telecommunications. There are 5.4 million internet users, and 4.14 million have access to at least 128/256 kbps speeds. The approximate growth in the number of people who had internet access in Ecuador between 2006 and 2011 was 570%.

This trend has been fuelled by Ecuador's young population and the increasing purchasing power of the country's households. Currently, 24.7% of Ecuador's households own a desktop computer, while only 9.8% have a laptop. According to data released by the Ministry in 2011, 33.1% of Ecuadorean internet users had telephone access, whereas 57.4% enjoyed broadband internet. Although wireless internet access rates are slowly growing, they are still low: 7.6% in 2011 from 6.3% in 2010. The broadband market began to take off in 2009 in Ecuador, and still has significant unsatisfied demand. For that reason, the government is encouraging broadband activity across the country as part of the Ecuador 2.0 plan, which ambitiously targets to provide 75% of the population with broadband internet access by 2017.

One of the main lines of the project is the broadband national plan, through which the government plans to significantly increase broadband activity by 2014, especially among SMEs in major rural areas, which still need to be connected to broadband infrastructure. In addition, the plan also envisages the construction of new infrastructure, the improvement of existing networks, and the expansion of the fiber-optic network throughout the country.

The Minister of Coordination of the Strategic Sectors, Jorge Glas Espinel, explained these and other government plans to boost broadband activity in Ecuador in an interview with TBY. Among some of the strategies, Glas Espinel explained “the state-owned company will invest around $900 million in the next five years to improve services."

As a result of the Ministry's efforts, Glas Espinel reported that “before we had 1,400 kilometers of fiber-optic cable under the public company, and now we have almost 7,500 kilometers, while broadband prices have decreased."

CNT, which controls about 54% of the fixed broadband market, provided broadband internet access to around 300,000 new households in 2011, but there are many smaller broadband providers present in Ecuador. TVCable, which offers cable modem access or packages that include pre=paid TV, broadband, and fixed telephony, is CNT's main competitor and boasts a 23% market share; Claro, Transtelco, Easynet, PuntoNet, Interactive/Zenix, Panchonet, Empresa Eléctrica Azogues, Empresa Eléctrica Regional Centrosur, Transelectric, and Telconet are among the other companies competing in the market.

IT

Ecuador's vibrant software sector in the 1980s and 1990s made the country a leading exporter of information services in Latin America, focusing primarily on software for financial institutions both domestically and abroad. However, in the last decade, this sector has been overtaken due to increasing regional competition, as well as economic and political instability in the past. Alongside the prioritization of broadband internet, the Ministry of Telecommunications is also concentrating on the development of the Ecuadorean software industry.

Today, the sector produces around $250 million worth of software products, of which it exports around $40 million, according to the Ecuadorean Software Association (Aesoft). As part of the national strategy for the sector, the government aims to reach the success levels of earlier years by boosting production and exports, investing in human capital, and attracting FDI.

In addition, the authorities rely on the potential of SMEs within the software sector, which is currently undergoing a process to certify processes using both European and US operational efficiency and quality services standards, as part of the national strategy to gain international recognition.

Ecuador registered 500 companies specializing in IT services in 2011, up from the 430 in 2010, most being medium-sized enterprises, helping to boost specialization within the sector. Such trends demonstrate that the software industry in Ecuador is on the way back, representing a valuable investment opportunity for entrepreneurs.