A GREATER INVESTMENT

Peru 2015 | TELECOMS, IT & MEDIA | REVIEW: TELECOMS & IT

In cooperation with government entities, Peru's ICT sector is fostering mobile and internet coverage expansion, narrowing the economic urban versus rural divide.

As Peru's telecommunications industry grows slowly but steadily, the economic divide between urban and rural areas has become all the more apparent when considering phone and internet access. In the early 1990s the Peruvian government started reforms in the sector, establishing Peru's decentralized state telecoms regulator OSIPTEL (the Supervisory Agency for Private Investment in Telecommunications) in 1992, to oversee private telecoms companies and duly protect the rights of users. In 1993 OSIPTEL created the Fund for Investments in Telecommunications (FITEL), which began collecting a 1% levy on telecom companies' gross operating revenues in order to fund telecom service expansion in rural areas. According to the OECD, between 2001 and 2004, FITEL provided at least one public payphone to 6,509 villages in rural Peru that had no phone services (fixed line or cellular) previously.

URBAN Vs RURAL ACCESS

Peru uses a nationwide microwave radio relay system and domestic satellite systems supported by 12 earth stations to power its telephone system. Domestic fixed-line teledensity is at 12 per 100 persons, while mobile-cellular teledensity exceeded 100 telephones per 100 persons. Peru's National Institute for Statistics and Information (INEI) reports that the total percentage of households with access to fixed line telephone service was 28.6% in 2013, and 37.2% of residents in urban residential areas had access, compared with only 2.3% in rural areas.

Households with at least one member who accesses a mobile phone was at 82% in 2013. According to the World Fact Book, 83.8% of households had access to mobile phone service by end of June 2014, a 2.8% increase from 2013's second quarter reports. As of June 2014, 90% of Lima's population had one mobile phone, compared to 66.1% in rural areas, up 4 percentage points from last year's figures.

In 2014, the GSMA intelligence report stated that there were 15.8 million unique mobile subscribers in Peru and 32.1 million connections (92% active and 70% prepaid), though growth in unique mobile subscribers averages around 7% per year--—a rate below the level of most other Latin American countries. Voice is the largest part of mobile revenue, at 79% for mobile operator Movistar as of 2013, though mobile data usage is starting to climb. Telefónica, trading as Movistar, holds half the Peruvian market, and the greatest market share in rural areas and big cities, with América Móvil, operating as Claro, following close behind. The third largest operator is Entel Perú, the brand that replaced Nextel Perú in 2014. Vietnamese military-run telecom operator Viettel became Peru's fourth mobile operator in late 2014, which provides 3G-only services under the brand Bitel.

The mobile industry represents 3-4% of Peru's GDP, a figure estimated to increase over the period to 2020, according to GSMA figures. According to La Republica reports, Peru's Transport and Communications Ministry (MTC) plans to invest $77.1 million in 2015 in telecommunications projects in the Arequipa region, which will benefit a total of 901,000 people.

In addition to over 2,000 radio stations, a large number of which operate in indigenous languages, there are at least 10 major television networks in Peru, including the state-owned Television Nacional de Peru. Eric Jurgensen, CEO of América Televisión—Peru's oldest channel and sole private network—says that despite setbacks in the early 2000s, Peruvian television is gaining ground. As Jurgensen told TBY, “From 2002 to the present, television has recovered notably. The advertising market has grown from $76 million to almost $400 million in 2014. The cost per rating has also increased, as have advertising costs and local production. Many networks have been posting solid financial results."

Peru's National Institute of Statistics and Information's (INEI) 2013 data shows that 32% of Peruvian households had at least one computer, and 22.1% of households had access to internet service. In urban areas, internet access is notably more attainable; 41.4% of households in Lima had access in 2013, compared to 13.2% in the rest of country, and only 0.9% in areas considered rural. According to the INEI, as reported by Peruthisweek, the number of Peruvians using the internet daily increased 2.5% in 2014, totaling 50.9%, though this percentage is dramatically higher for people living in urban areas with higher levels of education.

MOBILE DATA PENETRATION

One significant opportunity for operators and mobile-led services lies in mobile data penetration. Mobile broadband connections are increasing exponentially; at the end of 2013 they accounted for 25% of total connections, an increase of over 20% over less than five years. Smart phone penetration doubled in 2013 from the previous year, hitting 10%, though it remains lower than the regional average of 20%.

To meet the traffic demand, Peruvian mobile networks are evolving. In 2013 3G service was accessed by 26% of customers. Movistar launched the country's first 4G LTE service in January 2014. Entel launched 4G LTE services in late 2014, followed by Claro. Mobile messaging application use is increasing, as is social network usage. According to GSMA Intelligence reports, Peru ranks among the top 10 countries for time spent on such networking sites as Twitter, LinkedIn, and Facebook.

Peru has one of the most neutral and unrestricted web spaces globally. In an interview with TBY, Chairman of the Board of OSIPTEL Gonzalo Martín Ruiz Diaz explains that, “In 2012, Peru's broadband law was approved, establishing net neutrality and delegating the regulation of this matter to the Ministry of Transport and Communications [MTC] and OSIPTEL. Net neutrality is part of our future agenda. Last year, we approved a rule that established the principle of net neutrality and forbade the restriction of access to specific applications on the mobile or fixed device for consumers." One of the MTC's key targets is to expand telecom infrastructure to be able to offer universal internet access throughout Peru. In order to do so, OSIPTEL, acting as regulator, has established standards on coverage and quality of service; as such, operators are expanding their networks' infrastructure to meet requirements. Peru, however, has a relatively low density of base stations compared to the region. Revenues for mobile operators have been negatively impacted due to Mobile Termination Rate (MTR) cuts, the fees mobile operators can charge carriers using their networks to terminate calls, which has made network expansion difficult.

FILLING SOCIOECONOMIC GAPS

Peru's ICT sector has the potential to fill numerous socioeconomic gaps in the country, most notably through the expansion of mobile-enabled services. Taking into account the percentage of mobile phone owners in Peru (approximately 70%) alongside the percentage of the un- or under-banked (approximately 80% compared to the regional average of 39%), mobile banking offers an opportunity to connect people to their finances. The government has taken steps to support the financial inclusion of unbanked rural inhabitants, as Peru became the first in Latin America to have e-money legislation passed through parliament in 2013.

In 2011, Lima-based PROMUC (Advancement of Women and the Community), in partnership with the Dutch consortium Connect4Change and Text to Change (TTC), launched a digital skills building program for rural business women. The program, which reached 21,000 women in 2013, includes trainings on business management and insurance, as well as offers a banking program that uses mobile phones to send information on credit and interest rates and advertises new financial products.

Education is another area in which the utilization of ICT can continue to contribute to advancement. Though Peru's national literacy rate is high, at 90%, in the 2012 OECD PISA tests the country placed last out of 65 countries in all three subjects; mathematics, science, and reading. The controversial One Laptop per Child (OLPC) program provided 800,000 laptops to schoolchildren in 2012, although most laptops remained unused due to internet connectivity problems and a lack of teacher training.

Another key factor to note is the language divide. Peru's national curriculum is taught mainly in Spanish, though nearly 5 million Peruvians, namely in the rural Andean region, speak Chechua. The International Institute for Communication and Development (IICD), a Dutch non-profit providing ICT solutions in Latin American and Africa, initiated a program to turn OLPC's unused laptops in rural schools into offline digital libraries in the Chechua language. Through the use of the Raspberry Pi, a computer the size of a credit card that can function as a local server, educational content can be downloaded off of Wi-Fi and accessed through the XO laptops. As reported by IICD in 2014, the program is currently serving 20 schools in partnership with local charity organization CESIP (Center for Social Studies and Publications). IICD plans to implement the program in over 200 schools in the Cusco, Huancavelica, and Junin regions.

In March 2015, Movistar provided 100 internet connections to 54 public schools across seven regions. In addition to its commitment to invest over $1 billion in rural coverage expansion upon securing its mobile license renewal with the government in 2013, the telco agreed to “halve rates for pensioners and state workers in rural areas, provide coverage in 1,842 villages and give free internet service for rural state schools," according to Transport and Communications Minister Carlos Paredes.