In this interview with El Comercio, Gallitto analyzed the challenges and opportunities that Peru faces in the deployment of mobile networks, especially with regard to the development of 5G. Although the country shows significant progress in coverage, barriers still persist such as the lack of digital skills, the affordability of devices and regulation that, according to the specialist, needs to be better aligned with market dynamics. Their vision offers a key perspective on how Peru can boost its connectivity and close access gaps.
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– In the report “The mobile economy in Latin America in 2024″, which they released in June, draws attention to the mobile Internet usage gap in Peru, which is 40%, even though the coverage figure is not low. What is the reason for this usage gap if the problem is not lack of coverage?
It is important to differentiate concepts, because when we talk about connecting the disconnected, the first thing that usually comes to mind is bringing coverage to where there is none. To be connected you need two things: first, mobile broadband coverage, because without coverage it is not possible to connect; and second, the user’s willingness to connect, which brings us to the concept of the demand gap.
In Peru, this demand gap is particularly significant. Today, 55% of Peruvians are connected, which is 10 percentage points less than the average for the region. However, the positive part is that the coverage gap in Peru, that is, the number of people without access to mobile broadband, is lower than the Latin American average. Even so, 40% of Peruvians do not connect, and there are three reasons behind this.
– What are they?
First, many people don’t connect because they don’t know how to use the service. Here comes the factor of digital skills or technological knowledge. Secondly, they do not connect because they do not find content relevant to them, either because it is not available in their language or because it is not interesting to them. The third reason has to do with the affordability of the devices. These devices continue to be a significant barrier, especially in low- and middle-income countries, as are most of the region. This is due, in part, to an outdated view that sees mobile devices as luxury goods, with internal taxes that have not evolved in recent decades. This makes the devices more expensive and less accessible to a large part of the population.
On the other hand, regarding mobile service, we have seen that it is relatively affordable. For one dollar, in practically all Latin American countries you can access decent plans, at least with one gig of data. However, the cost of the devices remains a significant barrier.
– What measures should be taken to reduce the gap?
In our gap report we identified two or three key points. The first is to work on citizens’ digital skills through cooperation between different lines of Government, such as the Ministry of Education and the Ministry of Social Development. This would allow various groups of the population to be trained to use digital services. Another important point is related to the fiscal and regulatory barriers faced by the industry in Peru. For example, taxes, fees and contributions represent almost 14% of operators’ sales, well above the regional average, which is around 8%. In addition, an increase in the contribution to the Universal Service Fund (FSU) is currently being discussed, going from 1% to 3%.
This seems like a bad idea to us for several reasons. First, studies show that these funds are inefficient and not used effectively. Increasing its budget would be, in essence, rewarding a poorly functional mechanism. Second, tripling this contribution is equivalent to creating an additional tax, which reduces the resources available to invest in networks, training programs and service improvements. The operators’ budget is limited; If more goes to taxes or regulatory fees, there will be less to expand connectivity and improve services.
– How does the GSMA evaluate mobile network coverage in Peru compared to other Latin American countries?
In terms of coverage gap, Peru is 50% below the Latin American average, which is a good sign. This shows that, despite the challenges, the industry has risen to the occasion in terms of investment and service provision. In the end, connecting people and things is in the industry’s DNA. I think the numbers support this performance.
– So, in terms of infrastructure we are not so bad?
It is difficult to evaluate in absolute terms like ‘good or bad’, because there are many nuances. What we are seeing in Latin America is that, although the region is not a leader in mobile technologies like China, the United States or Asia, the time it takes to adopt new generations of technology has been reduced. For example, the time between the launch of 3G in leading countries and its adoption in the region was much longer than in the case of 4G, and the same has been true for 5G. The good news is that technological evolution is arriving in shorter periods. If we consider this metric, along with the coverage gap, where Peru is below the regional average, we can say that the country is not behind in infrastructure.
– What is the current status of the deployment of 5G networks in Peru? I understand that until last year it was very low, almost 1%.
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In Peru, at the end of 2023, 5G adoption reached 2%, compared to a regional average of 5%. This is a topic that often comes up, but I think we need to understand that this is not a race. Each country has its own pace of technological adoption. The good news is that 5G is being deployed in Latin America. Now, the development of 5G also depends on the incentives that governments establish.
For example, Chile has adopted a non-collective policy for spectrum management, while Brazil held the largest spectrum auction in its history prioritizing coverage. In the latter case, the government worked for two years with the operators to identify the best deployment strategies and consolidated the market into only four to three operators, so that it has fewer, but stronger and more investment capacity. In Brazil’s 5G auction, 93% or 94% of the spectrum value translated into coverage commitments, not revenue for the Government. His approach was clear: ‘We are not interested in fundraising; ‘We are interested in deploying 5G as quickly and efficiently as possible because we see it as a key tool for the digital transformation of our industries.’ I believe that in Peru there is still an opportunity to adopt public policies more aligned with this type of vision.
– What regulatory measures and public policies do you consider essential to accelerate the deployment of 5G in Peru?
I’m going to focus on practical aspects. First of all, Peru has a very high competitive intensity. This means that there is strong competition between operators, which is positive because it allows users to choose the company that best suits their needs. However, excessive regulation can harm this development. An example is the setting of caps on reconnection rates by Osiptel. Today, due to competition, there are operators that do not even charge for this concept. In these cases, it is best to let the market force do its work.
Another important point is the increase in the contribution to the Universal Service Fund, which I already mentioned previously. This measure would be unwise because it would reduce the ability of operators to invest in infrastructure. Furthermore, in Peru there is still a sanctioning view regarding market dynamics. High fines and overly specific quality regulations do not always reflect competitive reality. For example, quality is an attribute of competition. If a user is not satisfied with the service, they have the option of porting to another operator, and porting in Peru works well. This industry has the particularity of offering different services and plans according to the needs of users, and that should be respected.
The important thing is that there is diversity in the services offered, and overly strict regulations tend to turn connectivity into a commodity, which reduces flexibility in the market.