LatAm's broadband boom - ISPs taming challenges and tapping opportunities

The segment of broadband internet service providers (ISPs) continues to expand in Latin America, but it has seen a slowdown in some of the more saturated markets, as well as regulatory challenges hindering these firms’ ability to muscle up and compete with the big telcos.

“There are some challenges ahead, such as saturation in some markets, but in general Latin America still offers great opportunities for the growth of fixed connections and for internet service providers in particular,” Basílio Perez, president of ISP federation LAC-ISP, told BNamericas.

LAC-ISP is the biggest group of ISP associations and internet chambers in the region, with around 40,000 ISPs under its wing.

The biggest challenges for the segment are still regulatory barriers and markets that remain closed to ISPs.

Uruguay, for example, is a country that has only now partially broken the monopoly of state-owned telco Antel in the provision of fixed broadband. Around 80 local companies, which offered cable TV, can now also offer internet services.

The Uruguayan market is small and already highly connected, but Perez said that these companies are already seeing users migrate from Antel to their customer bases.

By the end of 2023, Uruguay had 1.09mn fixed broadband accesses, down from 1.14mn at end-June. Around 99% of the total were provided by Antel and 93% were via fiber optics.

In Mexico, another country that still experiences market concentration in provision of internet service, growth has been occurring in the interior of the nation, particularly in more remote and underserved areas.

Unlike Brazil, for example, Mexico does not have a large base of small ISPs spread across the country. 

At the end of March, Mexico reported 27.3mn fixed broadband accesses. Around 64% of the total were via fiber. The broadband segment is led by América Móvil’s Telmex, with roughly 10.3mn accesses, followed by Grupo Salinas’ Totalplay with 5mn and Megacable with 4.5mn.

Next comes Grupo Televisa’s Izzi companies: Cablemas (2mn), Cablevisión (1.3mn), Televisión Internacional (957,000), TV Cable de Oriente (738,000), and Cablevisión Red (634,000).

América Móvil’s Telnor had 523,000 while Sky, recently acquired by Televisa from AT&T, had 455,000 accesses.

Colombia, on the other hand, is a country that has seen the emergence of several new players in recent years, many of which have come from Brazil and even Argentina, said Perez. These are ISPs that have expanded to take advantage of growth opportunities and fiber connections after testing their model in their home countries or facing domestic competition.

According to Perez, there are cases of providers that have sold operations in Brazil and Argentina to try their hand at doing business in Colombia.

Colombia had 8.91mn fixed internet subscribers as of end-2023, inching down by 2,300 from 2022. There, unlike Brazil or Chile, cable modem technology continues to lead the market with 4.8mn connections. Fiber, in turn, accounted for 3.3mn accesses and xDSL covered 396,000. 

Fiber optics was the only technology that grew between the of 3Q23 and the end of 4Q23, rising 2.8%.

“Colombia is perhaps the most promising market in Latin America right now in terms of growth. There are many regions that are underserved and there’s good room for growth," said the executive.

SATURATION

In Brazil, a market with over 10,000 registered ISPs and with fiber already accounting for 75% of all broadband accesses, growth opportunities with first-time internet customers are increasingly limited.

At the end of May, Brazil had 49.7mn fixed broadband accesses, with 38.1% of the total provided by small ISPs, or 42.4% considering only fiber broadband.

“The main markets and large cities are already pretty well served. As a result, we see more and more customers switching between operators. It’s increasingly difficult to find new customers – those who have never had the service,” said Perez.

The consequence of this phenomenon is, in addition to the fierce competition bringing prices down, an intense effort by ISPs to offer services that can provide some kind of edge, such as streaming, digital services and, eventually, mobile plans under the MVNO model.

However, outside the main cities there is still a large contingent of people who are not served by fiber services. 

Perez said he sees many households, especially low-income ones, struggling to afford internet bills. He says that this is the result of macroeconomic issues, but it also affects the growth of FTTH.

The executive advocates for incentives to enable low-income families to contract internet services, such as with public funds.

AGENDA

In addition to subsidies for poorer families, LAC-ISP calls for the entire 6GHz band to be reserved for unlicensed services such as Wi-Fi, instead of being licensed to operators for services such as 5G. 

The high-frequency spectrum band is hotly disputed by both sets of companies. It is crucial for ISPs to be able to offer higher quality home internet, since all fixed services are used via Wi-Fi. 

In September, LAC-ISP will participate in a meeting organized by the Organization of American States' (OAS) Inter-American Telecommunication Commission (Citel) in Mexico to advocate for this spectrum being used entirely for Wi-Fi. Mexico has classified only 500MHz in the lower part of the band (5,925-6,425 MHz) for unlicensed use.

In Argentina, according to Perez, the difficulty lies in importing equipment and routers for more powerful Wi-Fi services. The country has granted the whole 6GHz band to Wi-Fi.

Another important topic on the ISPs' agenda is the opposition to the so-called fair share – a call by large telecom operators for traffic generators, such as streaming and content services, to contribute to investments in network expansion.

In the providers' view, such an imposition would make the service more expensive for end-users and for the industry chain in general.

LAC-ISP has been defending this position in forums in Brazil, Panama and Argentina, among other places, according to Perez.

Finally, ISPs in markets such as Brazil are still waiting for a definition by electricity and telecom regulators regarding new rules and the pricing model for the use of power poles to deploy telecom cables.

This week, telecoms regulator Anatel strongly criticized power sector watchdog Aneel for unilaterally dropping a regulation on mutual pole-sharing. 

Anatel says that progress was being made on pole-sharing, with a joint resolution approved in October 2023 that aimed to establish a cost-based pricing methodology for usage. 

It said that the proposal was in line with government policies promoting pole-sharing and that its disagreement with Aneel is driven by concerns over the impact on millions of Brazilians and the disregard for previous negotiations between the two agencies.

Aneel said in a statement that it had decided to end the process and send the issue back to its technical teams for consideration. 

That decision was due to feedback from market consultations and a recent government decree, which the regulator said requires electricity companies to transfer their distribution infrastructure to a separate legal entity.