4G Could Open Up Rural Outsourcing Frontiers Within Latin America

Narayan AmmachchiWill outsourcers in Latin America ever be able to cut costs by moving their call centers and IT operations to the countryside – as their counterparts in India are doing? Outsourcers in the region have not been able to go rural, partly due to less broadband penetration. But analysts say such a dream may be realized once new 4G services are launched in many parts of the region. As many as six LatAm countries are slated to auction 4G spectrum later this year.

And fourth-generation (4G) mobile networks – also known as LTE (Long Term Evolution) – have long been regarded as a substitute for fixed broadband service. Several small countries, including Peru, Jamaica and Uruguay, have announced plans to auction the spectrum while bigger economies like Brazil, Argentina and Colombia seem to be months away from auctioning.

Interestingly, many businesses in the region are eagerly waiting for the 4G to be launched. A study, recently conducted by analyst firm Informa Telecoms and Media, estimated that 58.6 million people in Latin America would hook up to 4G networks by 2017.

Brazil’s telecommunications union, Sinditelebrasil, has predicted that 4G services would increase broadband access in Brazil by four times.

Why 4G/LTE?

“LTE will allow for the use of a wide range of cloud-based applications,” said Andres Maz, Executive Director of Advanced Technology Policy in Cisco’s Global Policy group and member of Cisco’s Brazil and Mexico boards. “Once 4G is launched, people will be able to watch TV, video call, shop online and access social media on the go more easily,” he said.

Maz said he expects LTE to transform the broadband services market in the region allowing rural residents to access high-speed Internet. He, however, said that 4G roll-outs are expensive, but will certainly improve the quality of Internet service, giving birth to a new breed of  technology start-ups.

Informa stated that over 60 per cent of telecom operators in the region are planning to launch LTE over the next two years.

Some operators have already launched the services (see the graph) but the frequency band they are using vary from operator to operator.

“Even the speeds vary,” said Georgia Jordan, Telecom Analyst with Frost and Sullivan in Brazil.  “Telcel in Mexico markets 20 Mbps speeds, while its Brazilian subsidiary Claro markets 5 Mbps. UNE offers 12 Mbps and Antel offers 20 Mbps.”

She said carriers favor the 700 MHz frequency band used in the US due to its efficiency, but it is still used by analog broadcast television in most LatAm countries and is therefore unavailable for LTE.

With televisions switching over to digital signals, countries like Brazil, Mexico and Colombia are allowing telecom carriers to use the 700 MHz frequency band.

Expensive But Economical

“What is certain is that 4G services will provide a greater opportunity for LatAm countries to bolster their technology sector and develop a knowledge economy,” Maz added.  He suggests that LatAm countries should look at the economic benefits of the 4G services rather than the expenses that the roll-outs incur.

Every business that requires connectivity – whether it is an IT service firm or a BPO provider – will benefit from faster and more reliable mobile data services, improving efficiency and productivity, Maz said.

A recent survey by Capital Economics estimated that 4G services would increase Britain’s GDP by 0.5 percent and generate thousands of jobs in the country.

Jordan said it is hard to say if the 4G services would bring down the broadband prices because it is costly for the carriers to implement. But she agreed that ‘government broadband programs and fierce competition among telcos’ would ultimately bring down the prices.

Broadband prices have been decreased dramatically in countries like Nicaragua where Chinese operators are rolling out 4G services. Given the experience of some of the customers in the country, broadband prices have come down by 90 percent in Nicaragua over the past eight years.

“I think 4G services would drive down the broadband price by nearly 50 percent in the years ahead,” said Shiv Putcha, Principal telecom analyst with Ovum. To date, more than 42 countries in the globe have rolled out 4G and are already reaping the benefits of faster broadband networks.

Emerging economies – like Brazil where access to fixed line broadband connections are limited – 4G will bring super-high-speed connectivity for the first time and help them compete on a global scale.

Jordan pointed that 4G will no doubt substitute fixed broadband.