Costa Rican ICT Market Finally Breathing Life of Liberalization

By Dan BerthiaumeThe Costa Rican telecom market is undergoing a period of intense growth that should last at least through 2016, according to a new report from Pyramid Research.

“Costa Rica: Surging Market Gives Operators More Devices, Access and Content to Sell” identifies two key factors in what is expected to be a robust increase in adoption of Costa Rican mobile services: The emergence of competition from pan-regional operators to dominant local telecom player ICE (Costa Rica Institute of Electricity), and exceptionally strong growth in use of mobile data.

ICE Monopoly Ends

In addition to enjoying a monopoly on providing electricity in Costa Rica, ICE is also the country’s premier telecommunications provider. The report indicates that ICE has invested significant resources into its fixed broadband service Acelera and has successfully penetrated the residential mobile service market in the past three years.

However, this month, Mexican telecom provider Claro and Spanish company Movistar, which already have a presence in other Latin American countries, are entering the Coast Rican market by launching airtime promotions and subsidizing handsets in an attempt to steal some of ICE’s marketshare.

Mobile Data Leads Mobile Services Growth

Mobile voice services are currently expanding in Costa Rica, but Pyramid Research predicts its growth will soon slow as users switch to mobile data services. This is expected to produce 27.2% mobile data services growth between 2011 and 2016, with mobile data and mobile voice services both generating close to $500 million USD in revenue at the end of the forecast period.

In addition, fixed broadband services are expected to grow about 12% in the next five years and generate more revenue than fixed voice services by 2015. Other sources of increased communications market revenue in Costa Rica during the next five years include VoIP (which will complement service bundles by cable operators), and pay TV services, where IPTV will account for around 10% of total communications market revenue by the end of 2016. Pay TV revenues are expected to grow at a rate of almost 3% in the next five years, as penetration reaches lower-income segments of the Costa Rican population.

Regulation Favors Competition

Another contributor to the anticipated growth of the Costa Rican telecom market is a regulatory market which Pyramid Research calls “one of the most competition-friendly in Latin America.” Costa Rican telecommunications laws include provisions for customer rights and number portability. In addition, the Superintendence of Telecommunications (SUTEL), the Costa Rican telecommunications regulatory body founded in 2009 as a result of the privatization of mobile telephone and internet services, promotes competition through mandates such as local loop unbundling and infrastructure sharing.