COLOMBIA: FOREIGN BROADBAND DEPLOYMENT INITIATIVES

UNCLAS BOGOTA 001377

SIPDIS

EB/CIP/BA FOR TFINTON; FCC FOR RTANNER;
DOC/ITA/OTEC FOR ABENNETT

E.O. 12958: N/A
TAGS: ECPS ECON CO EINT EINV ETTC
SUBJECT: COLOMBIA: FOREIGN BROADBAND DEPLOYMENT INITIATIVES

REF: SECSTATE 27310


1. SUMMARY. Internet usage has grown to 40 percent of the
Colombian population in the last ten years, with internet
subscriptions rising at an annual rate of 75 percent. Over
73 percent of internet subscribers use broadband. Despite
the growth, Colombia's subscription penetration average
remains sixth in Latin America, with a majority of internet
subscriptions concentrated in Colombia's three largest
cities. To promote Information and Telecommunications (IT)
services in rural areas, Colombia's Ministry of
Communications developed a comprehensive ten-year National IT
plan. A USD 750 million public-private Communications Fund
administers plan implementation, with 60 percent of funds
targeted to the Compartel rural and community development
program. USAID also supports the development of
telecommunications networks in rural areas, as well as
provides technical assistance to GOC telecommunications
authorities. END SUMMARY.

Internet Access Growing, but Penetration Still Low
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2. The percentage of internet users has grown from 1 to 40
percent of the population -- or approximately 17 million
people -- within the last decade. Permanent internet
subscribers have also grown at an annual rate of 75 percent
in the last five years, although the actual number of
subscriptions remains low at 2 million. Colombia's
penetration average (the internet subscription to population
ratio) is 4.3, ranking it sixth in Latin America behind
Chile, Argentina, Uruguay, Mexico and Brazil. Likewise, 55
percent of subscriptions remain concentrated in the cities of
Bogota, Medellin and Cali.

Broadband Coverage
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3. Colombia has 1.45 million internet subscribers with
broadband access -- approximately 73 percent of total
subscriptions. (NOTE: Colombia's Telecommunications
Regulations Commission (CRT) defines broadband as an internet
service with a minimum download speed of 512 kbps, which is
faster than the 128 kbps download speed defined as broadband
by the International Telecommunications Union (ITU). END
NOTE.) DSL (63 percent) and cable (32 percent) dominate the
broadband market share, with Wimax (5 percent) a distant
third. The main providers according to market share are:
Empresa de Telefonos de Bogota (25 percent); EPM
Telecommunications (24 percent); Colombia Telecommunications
(20 percent); Telmex Hogar (19 percent); and independent
providers (12 percent). These providers focus on triple-play
packages combining internet, television and telephone
services, which has contributed to the rapid expansion of
internet usage. Carlos Forero, the Vice-President of the
CRT, told us that broadband and associated value-added
services are now seen as the market differentiator between
telecommunications providers.

GOC Policies To Promote Telecommunications
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4. Last year the Ministry of Communications (MOC) announced
a National IT Plan, establishing three main goals to be
achieved before 2019: 70 percent of Colombians with internet
subscriptions, 100 percent of health and education
establishments with internet access, and 100 percent of rural
areas with internet access. The MOC plans to achieve these
objectives through its flagship community and rural
development program Compartel, which is funded by a USD 750
million public-private National Communications Fund. (Note:
All telecommunications providers are required to assist the
MOC in financing the Compartel program, with private sector
contributions equaling 15 percent of Compartel's total budget
in 2008. END NOTE.) Compartel provides subsidies or
investment incentives to establish internet networks and
telephony services in Colombia's most rural and impoverished
areas. Since 2008, the program has invested USD 421 million
in rural networks, benefiting 16,000 rural educational,
health and government institutions.


5. In addition to Compartel, the GOC also supports

additional programs in the educational, health,
entrepreneurial, competitiveness, online-government and
research sectors. Activities in 2008 included the
distribution of refurbished computers to educational
institutions (USD 86 million),connectivity financing for
small and medium enterprises (USD 15 million),conversion of
all public institutions to online institutions (USD 70
million),and e-medicine (USD 5 million).

USAID: Providing Connectivity and Regulatory Guidance
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6. USAID also promotes telecommunications connectivity for
underserved and rural populations, as well as education and
content to support economic and social development, through
its Last Mile Initiative. Major contributors to this
public-private alliance are Avantel, Intel, Cisco, Microsoft,
Google, Polyvision, regional and local governments, and the
MOC. Through the program, USG-provided equipment and
training will connect 50 municipalities in the departments of
Meta, Huila and Magdalena, including 21,000 small businesses
and 325,000 institutions such as schools, hospitals, justice
houses and local government offices. On the technical side,
USAID assisted the MOC with the development of its National
Plan and presently advises the CRT on "unbundling the local
loop" to increase competition in broadband provision.


COMMENT: Not Yet A Leader, But Ripe For Growth
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7. Colombia remains behind Latin American neighbors such as
Mexico, Brazil and Argentina in most IT indicators, but since
the GOC privatized its state-owned National
Telecommunications Company in 2003, the IT sector has
expanded rapidly. The sector contributed a record 3 percent
of total GDP in 2008. Local experts agree the IT sector will
continue to experience accelerated growth as Colombia's
domestic security situation improves and the legal economy
strengthens. However, they also emphasize that continued
private investment is key to the GOC achieving its lofty
goals by 2019.
BROWNFIELD