Nearshore Americas

Recognizing Weaknesses, DR Pursues Vast Internet Upgrades

Digital infrastructure has been pushed into the limelight by the pandemic and is the undisputed priority of businesses and governments today. For the BPO industry, which has made a rapid transition to virtual work, broadband penetration and a digital savvy workforce have become the key differentiators when considering business service locations.

But as more companies rely on technology and mass telework to conduct everyday business processes, the gap in broadband penetration between the region’s markets has become more evident.

In the Dominican Republic, 95.3% of the territory does not have fixed broadband coverage or it offers little capacity while the mobile broadband reaches to just 61% of the country.

Fabrizio Opertti says broadband in the DR must become more affordable

“Closing the gap in digital infrastructure is important to increase the digitization of production and the insertion of local companies in regional and global value chains, which have the potential to increase the country’s productivity and generate more and better jobs,” said Fabrizio Opertti, Manager, Integration and Trade Sector, Inter-American Development Bank (IDB). 

The Dominican Republic’s shortcomings around digital infrastructure has motivated various initiatives to build higher levels of connectivity and access to broadband at affordable prices. With the intention of elevating the country’s competitiveness in foreign direct investment attraction and as a knowledge service exporter, the IDB is preparing a program with an expected $115 million loan focusing on increasing the digitization of citizens of the Dominican Republic. 

“The project aligns directly with two of the five areas that the Bank will focus on in the region within the IDB agenda, Vision 2025 – Reinvesting in the Americas: A Decade of Opportunities, the mission of which is to contribute to recovery and sustainable economic growth in Latin America and the Caribbean. These two areas are the promotion of the digital economy to foster innovation, as well as regional integration and the strengthening of value chains,” said Opertti. 

95.3% of the Dominican Republic does not have fixed broadband coverage or it offers little capacity 

For Antonio García Zaballos, IDB Connectivity, Markets and Finance Specialist, the low level of access of the citizens of the Dominican Republic to fixed and mobile broadband constitutes the general problem that this project has identified and that it will contribute to solve. “In the case of the Dominican Republic, according to data from the International Telecommunications Union (ITU), the proportion of individuals who use the internet is 74%, below the 83% in the OECD,” he said. 

Access to Education 

Antonio García Zaballos points out that internet use in the DR is below average levels of the OECD

The COVID-19 pandemic and restrictions on movement fuelled the need for high-speed, reliable broadband across all daily activities. The impact on education has been particularly dramatic and school closings due to concerns of contagion have turned a spotlight on the possible long-term effects of educational and income inequalities. In the DR, 80% of students who attend public schools did not have the necessary tools to convert to virtual classes at the beginning of the pandemic. 

In spite of certain government actions, such as promoting televised classes and distributing laptops and notebooks among students and teachers to facilitate distance learning, the financial and resource disparities continue. This is a trend in Latin America and the Caribbean, where at one point last year, an estimated 95% of students enrolled in schools are no longer attending classes at any educational level. 

“The government had an initial intention to move all educational activities to a ‘distance-learning mode’, but we weren’t able to accomplish that. As a result of the pandemic we’ve found deeper needs of our population in terms of digital services. Major cities have the best connectivity while rural zones face a very different situation. That’s the reason behind this project and the main focus of the Dominican Telecommunications Institute (INDOTEL)”, said Julissa Cruz Abreu, Executive Director INDOTEL, the IDB’s DR counterpart with a mandate to implement this project. 

When looking at digital services challenges, the Dominican Republic’s urban-rural divide in access and usage is apparent. Most municipalities have fewer than 500 connected homes; just two have more than 100,000 connections. According to García Zaballos this problem is a consequence of limited spectrum allocation and digital connectivity infrastructure.  

Boosting Business Diversification 

INDOTEL data indicates that businesses with Internet accounts are largely concentrated in six of the 32 municipalities, and about half of the municipalities have fewer than 50 connected businesses. This infrastructure dichotomy heavily impacts the Dominican Republic’s socioeconomic development prospects.

“This connectivity project is of vital importance to make the Dominican Republic more attractive as a destination for foreign direct investment,” Opertti said.

Today, the Dominican Republic’s economy is still largely built upon tourism, Free Trade Zone export-oriented industry, traditional agricultural exports and extractive industries — all of which depend on an intensive, low-cost workforce. However, in recent years, the contribution of the ICT sector has increased significantly. 

The expected entrance of a new ISP will help drive down internet costs, says Julissa Cruz Abreu

This progress has been threatened as the pandemic-induced work from home trend found the Caribbean island in an unfavorable position in terms of digital readiness. Many companies and workers, which need reliable internet to participate in the digital economy cannot afford fixed line broadband internet access at home. This situation has elevated the urgency of broader broadband access as an enabler of cost structure transformation in the services industry by enabling remote working. 

Sign up for our Nearshore Americas newsletter:

“We’re expecting the entrance of a new broadband provider soon. That will help with prices and the competitiveness of the market,” said Julissa Cruz Abreu. Despite strong competition at the retail broadband level, there is little competition for wholesale broadband capacity in the DR. 

It’s All About Connectivity

The increase in broadband penetration has branching network effects that impact job growth in various ways. From the development of new technologies and applications to expedite innovation, enhanced productivity due to utilization of advanced, complex and structured processes, to outsourcing employment with remote service delivery and information processing.

“This connectivity project is of vital importance to make the Dominican Republic more attractive as a destination for foreign direct investment” — Fabrizio Opertti

“As a result of the impact of the COVID-19 pandemic on global supply chains, multinational companies have begun to locate parts of their production processes in different countries, in search of greater efficiencies. This represents an opportunity for countries like the Dominican Republic, which has competitive advantages to attract these investments, including the proximity of the time zone, cultural affinity and proximity to large North American markets, as well as preferential access conditions to the US through DR-CAFTA and a maritime transport infrastructure with access through the Atlantic and the Pacific,” said Opertti. 

Currently, the DR call centers and back office services employ 50,614 workers representing US$724 million in exports. Quality broadband connection could accelerate the incentives for outsourcing providers and customers alike.

An increased level of broadband infrastructure in the country should open spaces for the use of new technologies that allow more agile connectivity for the benefit of knowledge-based services such as contact centers and BPOs, and other digital services that could be developed, Cruz Abreu believes. “The post-pandemic ecosystem is already being developed. We’re constantly receiving calls from investors that want to initiate or expand their operations based on the excitement for these projects. We are making sure that as part of this investment we can elevate the digital capabilities of our population as well,” Cruz Abreu concluded. 

Bryan Campbell Romero

Bryan Ch. Campbell Romero is the Investment and Policy Editor at Nearshore Americas. He also contributes to other publications with analysis on political risk, society and the entrepreneurial ecosystems of Cuba and the Latin American region. Originally from Cuba, Bryan holds a Bachelor’s degree in Philosophy (Licenciatura en Filosofía) from the University of Havana.

Add comment