Telecom Informer


by The Prophet

Hello, and greetings from the Central Office!

I write to you from the desert Southwest, where I am spending some time in an Arizona central office before starting my new management career.  It is sunny outside, but I am busily applying skills learned in my management training toward "maximizing deferred maintenance asset value," otherwise known as "don't actually fix anything, but try to keep customers paying their bills for as long as possible anyway."  It's almost exactly the kind of work I was doing years ago, except I was the person implementing the plans instead of making them.  It feels good to be back in the saddle again.  In the next few months, I will travel around the world clockwise, from the U.S. to Amsterdam to Croatia to China and then back to the U.S. again.  I'll be busy "maximizing" a lot of "value" and my new career is going to be great.  I expect to double my previous salary!

Having spent the last several months in Central America, I became interested in seeing more of South America.  This is a part of the world where I haven't spent much time, and the opportunity to visit arose when I found a "mistake fare" from Phoenix to Quito, Ecuador.  It was under $400 for the trip (usually fares to Ecuador are triple that) and, best of all, I could stay overnight in Mexico City on the way back.  The opportunity to explore the telecommunications landscape in two countries was too exciting to pass up, and I immediately booked the ticket.

Ecuador isn't a place where many Americans visit, even though they use the U.S. dollar.  It is a friendly, clean, politically stable, and rapidly modernizing country.  A few years ago, it was difficult to get Internet access, but today, access is available throughout the country via ADSL and 3G.  In some larger cities, broadband is also available via cable modem.  Speeds are fairly slow; 1.5 Mbps seems to be the norm.  However, pricing is reasonable, with the typical household paying around $25 for a basic Internet package.  Service is available throughout the country, even in very remote areas.  The Ecuadorian government considers the availability of Internet access to be a national priority, and this has been one of the heaviest infrastructure investments bringing good quality connectivity to nearly all areas of the country.  Free Wi-Fi Internet access is widely available in public areas, such as libraries, city halls, and even museums.

Mobile phone adoption runs below other countries in the region, largely owing to the exceptionally high tariffs on handsets which adds over 100 percent to the cost versus the United States.  Ecuadorians have also largely failed to join the smartphone revolution because they are priced out of the market.  Even the most basic of Nokia handsets costs around $50, a large sum in a country where a mid-level manager makes only $1200 per month, and a worker makes half that.  Given the high price of buying a handset, carriers keep the cost of a SIM card very low to encourage adoption.  A new SIM card costs $3 and typically includes $5 in calling, although the rates are expensive (about 28 cents per minute for calls and five cents each for texts).  As in many countries, you can subscribe to service packages which include text and data service, and also international calling.  Internet service is fairly expensive, costing $10 for 500 MB of data.

There are technically three mobile phone providers in Ecuador (all running GSM networks), but effectively only two.  One of the licenses is held by the former government telecommunications monopoly, who has failed to invest in their network.  Coverage is limited and 2G only, and subscriptions can only be done on a contract, so this company now has less than one percent of the market.  The two largest providers are Movistar and Claro, both multinational providers who operate throughout Latin America.  In Ecuador, Claro has the largest network with the best coverage and fastest data service.  However, the service is considerably more expensive than Movistar, so I chose Movistar as my mobile provider.  The coverage proved adequate in the areas where I traveled, although I definitely noticed gaps, and 3G coverage dropped to 2G outside of cities.  The speed of data service was generally poor, and it was not fast enough for Skype - not even in the business district of Quito.

What I found especially interesting - and so incredibly different from most other places in the world - was the prevalence of payphones and other public calling services.  Owing to the slower adoption of mobile phones, these are not being removed in Ecuador; in fact, many are newly installed.  Some are operated by the former government telecommunications monopoly (this company operates under different names depending on the region of Ecuador - and their payphones use land lines), but Claro and Movistar also have wireless payphones.  If you use a Claro payphone, the rates are really cheap to call a Claro mobile phone, and Movistar payphones are cheap to call Movistar mobile phones.  If you want to call a land line, you get the best rates on a payphone from the land line provider.  You very often find three payphones all in a row, one from each company.  All payphones in Ecuador charge by the minute, most take only prepaid smart cards, and the rates are around 10 cents per minute.  While it is possible to make international calls from payphones, you really wouldn't want to; the prices are just as high as making international calls from a mobile phone without a service plan (around 60 cents per minute to the U.S.).

International calls are where "cabinas" come in.  These are shops throughout Ecuadorian cities where you can make phone calls.  They are outfitted with a half dozen or so small rooms equipped with a bench and a telephone.  There is a door that closes for privacy, and you can make calls anywhere in the world.  In Ecuador, these aren't scary and dirty places like they can be in other parts of the world; Ecuadorian people are very clean and the "cabinas" are generally maintained in a spotless condition.  Most of these shops use a VoIP service on the back end (typically a SIP provider).  I made test calls to the U.S., Canada, and China from different shops and the quality was - to my surprise - uniformly excellent to all of these countries.  You leave your ID card or passport with someone at the front desk, make your call (billed at low international rates - for example, six cents per minute to the U.S.), and then pay for the call after you finish, whereupon your ID is returned.  These shops are all over the place and most Ecuadorians use them when they want to make an international call because it's the cheapest way for most people to make a call.  To illustrate just how common this is, one of the largest banks in Ecuador (called Banco Pichincha) operates a chain of these shops throughout various Ecuadorian cities and they can directly debit your bank account for the price of the call.  Many of these shops also offer Internet service, printing and copying, bill payments, and "recargas" prepayments for mobile phone service.

After a thoroughly enjoyable two weeks in Ecuador, it was time to head back to the U.S.  On the way back, I had the chance to stop in Mexico City to get a taste of telecom in one of the world's largest cities.  Mexico City is a lot like Beijing - smoggy, heavy traffic, and both the political and cultural capital of its country.  Fashionably dressed people carry the world's most modern smartphones, with a particular affinity for sleek models from Samsung.  Mobile phone service is offered in both prepaid and contract form.  As you ride the subway, you'd be hard-pressed to distinguish that you're in Mexico and not New York or Paris.

There is a difference in Mexico, though: payphones are flourishing there as well.  None look new, but the ones in place aren't going away and compete vigorously for business.  Not only are there TelMex fortress phones everywhere, but COCOTs do a brisk business too.  Many COCOTs even offer innovative services like web browsing, email, and SMS messaging!  "Fifty percent cheaper than calling from your mobile," beckons one ad pasted to a public phone.  "Unlimited duration, flat rate!" beckons another.  Payphones cannot compete on convenience, but they apparently can compete on price.  I was surprised to see young, cost-conscious consumers making use of them.

And with that, it's time to head out into the Arizona sunshine and hit the golf course with the execs.  If you notice an "enhancement" in your billing statement introducing a new requirement that you buy a land line along with your ADSL service, don't forget to thank me.  If you don't thank me, I might introduce some "new rates" in your next statement as well.  I'll be at HOPE this summer in New York City, and I'll look forward to meeting you.  And don't forget... Internet service is an unregulated "Information Service!"