Peru cancels fiber backbone concession contract

Peru's transport and communications ministry (MTC) has announced the termination of the concession contract for the design, financing, deployment, operation and maintenance of the national fiber optic backbone network project, for which the firm Azteca Comunicaciones is responsible.

The end of the concession will take effect on January 13, six months after publication of the decision in the official gazette El Peruano.

The announcement comes after a series of unsuccessful attempts between the MTC and Azteca Communicaciones to optimize the backbone network.

National telecommunications program Pronatel will assume the operation of the project on a provisional basis as of the expiration of the contract. This operation may be carried out directly or through third parties and for a period not exceeding three years.

The network controller for this transition period should be a company with sufficient expertise in network management and reputation, Carlos Huaman Tomenich, an analyst at consultancy DN Consultores, told BNamericas.

Pronatel must also carry out supervision, verification and reception of the concession assets before and during the termination of the concession.

The communications department will have to advance with the formation of a working group to prepare the technical, economic and legal criteria to guarantee the continuity of the network and its regional networks.

The new model for the backbone network will have to correct the design problems that caused the infrastructure to be underused and fail to generate the expected returns.

In a public hearing, Azteca stated that in nine years of operating the network, Rednace, a state network that would use the infrastructure of the backbone network, was never created.

The fiber optic backbone infrastructure is currently only being used by private operators, with a utilization rate of 3.2%.

The demand of users of the carrier service of the backbone network was 16.1Gbps in 2020, well below the 241Gbps/month projected for 2020 when the network was designed. It has just 23 clients.

Revenues from the network only covered 7.7% of its costs. The state had to make payments totaling US$290mn for investments, maintenance and operation, US$192mn more than estimated when the project was structured, the MTC said in a statement.

Most of the territory where the network is deployed is covered by other fiber optic infrastructure providers.

DN Consultores proposes that in the areas where there is competition, the state should hand over the infrastructure to private companies. The state, meanwhile, should focus only on offering services in non-competitive areas, said Huamán Tomecich.

According to Azteca's estimates, a new concession would cost US$200mn. The company is willing to file a claim with the International Centre for Settlement of Investment Disputes (ICSID) for US$175mn.

The fiber optic backbone network, which began operating in 2015, currently extends for 13,636km.