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Costa Rica - Telecoms, IP Networks and Digital Media

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Costa Rica’s mobile market gaining effective competition

Costa Rica’s telecom industry is on the brink of a sea change as it struggles to implement liberalisation of its internet, VoIP, and mobile telephony markets. The transformation is not an easy one. Of all Latin American countries, Costa Rica has possibly been the most resistant to either the privatisation or liberalisation of its telecom sector. The new regulator, Sutel, faces a challenging task.

State-owned ICE and its subsidiary Racsa have been the monopoly providers of virtually all telecom services in Costa Rica except for pay TV. ICE provides fixed and mobile telephony, ADSL access, and corporate solutions. Racsa offers broadband via cable modem and WiMAX, internet dial-up, WiFi, prepaid internet cards, and corporate services including internet via satellite. Though ICE has achieved better fixed-line coverage than any other operator in Latin America, it has proved itself inefficient in the mobile telephony business, with month-long waiting lists for mobile services.

ICE has displayed the typical reluctance of private incumbents towards competition, submitting objections against the issuing of authorisations, stalling interconnection negotiations, and criticising most of Sutel’s policies. In this, it has had the support of political forces averse to foreign enterprise. As a result, the liberalisation process in Costa Rica has been marked by a conspicuous lack of cooperation and dialogue among parties.

Sutel began to issue authorisations in 2009 to new companies interested in providing internet, VoIP, and corporate telecom service. It took a whole year, however, for ICE to sign interconnection contracts, and then only after Sutel’s intervention. The first alternative operators were finally interfaced in mid-2010. By then, Sutel had awarded 86 telecom authorisations.

Mobile telephony is expected to keep grow strongly given the market entrance of two competitors, Claro and Movistar, in late 2011, and the existing low cellular penetration compared with other Latin American countries. However, poor regulatory mechanisms have made it difficult for these new players to build their mobile infrastructure, creating delays in roll-out schedule as set out by the regulator.

Costa Rica’s broadband market is the most developed in Central America, with the highest broadband penetration for this sub-region. Geographical distribution however is unequal, with a much higher digital gap than in the case of telephone services. Compared with the whole of Latin America, Costa Rica’s broadband penetration lags behind Chile, Argentina, Uruguay, and some Caribbean islands.

The DTT market was underway in mid-2012, with the first digital broadcast. The switch to DTTV is expected to be completed by the end of 2017.

Key telecom parameters – 2010; 2012
Sector | 2010 | 2012 (e)

Subscribers to telecoms services (thousand):

Fixed-line telephony | 1,520 | 1,590
Fixed broadband | 350 | 420
Mobile | 2,340 | 2,320

Penetration of telecoms services:

Fixed-line telephony | 33.3% | 34.2%
Fixed broadband | 7.7% | 9.2%
Mobile SIM (population) | 79.0% | 87.0%
(Source: BuddeComm)

Market highlights:

In early 2010, Sutel implemented a price cap system for all services, including mobile and fixed-line telephony, text messaging, internet, and IP telephony. ICE’s existing rates were adopted as price caps. At the time, some of these tariffs were very low by Latin American standards.

In March 2010, Sutel adopted the Long Run Incremental Costs (LRIC) model to calculate access and interconnection rates between operators. All network operators in Costa Rica must grant interconnection to other network operators on a non-discriminatory and transparent basis.

The first companies to reach access/interconnection agreements with ICE, in July 2010, were cable TV company Tigo, public telephone operator BBG Global AG, and three VoIP providers: Ticom, CallMyWay, and Intertel Worldwide. Tigo was finally able to launch its own cable modem service, becoming the operator to offer internet access in competition with the incumbent.

After a seven-year wait, ICE launched prepaid services in 2010. With a long pre-launch waiting list, the lines were snapped up in no time. ICE recycled the accounts of GSM customers that migrated to 3G, but even so, GSM lines dried up and customers were again left waiting.

The government plans to move the management of the telecoms sector from the Ministry of Environment, Energy and Telecommunication (Minaet) to the Ministry of Science and Technology (Micit) by the beginning of 2013. The move was first proposed in 2010.

Henry Lancaster August 2012

Data in this report is the latest available at the time of preparation and may not be for the current year.

This report provides a comprehensive overview of trends and developments in Costa Rica’s telecommunications market. With its long-awaited liberalisation, Costa Rica is an attractive market for telecom investors. The report analyses the mobile, internet, broadband, digital TV and converging media sectors.

Subjects include:

Market and industry analyses, trends and developments;
Facts, figures and statistics;
Industry and regulatory issues;
Major players, revenues, subscribers, ARPU;
Internet, IPTV;
Mobile voice and data markets;
Broadband (FttH, DSL, cable TV, wireless);
Convergence and Digital Media;
Broadband market forecasts for selective years to 2020.

Key developments:

Claro Costa Rica and Movistar Costa Rica granted extension to network rollout deadline; telcos’ financial and operating data to Q1 2012; market developments to mid-2012.

Companies covered in this report include:

Instituto Costarricense de Electricidad (ICE), RASCA, Tigo, Cable Tica.This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Costa Rica.

It provides further information on:

Market liberalisation and regulatory issues;
The impact of the global economic crisis;
Telecoms operators – privatisation, acquisitions, new licences;
Mobile data market developments in coming years in light of spectrum auctions and new license awards;
3G developments, regulatory issues and technologies including HSPA and LTE;
Broadband migration to an FttH architecture;
Historical and current subscriber statistics and forecasts;
ARPU statistics and forecasts.

1. Executive summary
2. Key statistics
3. Telecommunications market
3.1 Country overview
3.1.1 General outlook
3.2 Overview of Costa Rica’s telecom market
3.3 Market analysis – 2012
4. Regulatory environment
4.1 Background
4.1.1 General Telecommunications Law
4.2 Regulatory authority
4.2.1 Sutel
4.3 Telecom sector liberalisation
4.4 Universalisation fund (Fonatel)
4.5 Interconnect
4.6 Access
4.7 Number portability
4.8 Tariffs
5. Fixed network operator in Costa Rica
5.1 ICE
6. Telecommunications infrastructure
6.1 National telecom network
6.1.1 Fixed-line statistics
6.2 International infrastructure
6.2.1 Interconnection with other Central American countries
6.2.2 Submarine cable networks
6.2.3 Satellite networks
6.3 Infrastructure developments
6.3.1 IP and Voice over Internet Protocol (VoIP)
7. Wholesale
8. Broadband market
8.1 Overview
8.1.1 Broadband statistics
8.2 Cable modems
8.2.1 Racsa
8.3 Asymmetrical Digital Subscriber Line (ADSL)
8.4 Wireless broadband
8.4.1 WiMAX
8.4.2 Internet via satellite
8.4.3 Mobile broadband
8.5 Digital Media
8.5.1 Overview
8.5.2 IPTV (Broadband TV)
9. Broadcasting
9.1 Cable TV
9.1.1 Tigo
9.1.2 Cable Tica
9.2 Satellite-based digital pay TV developments
9.3 Digital Terrestrial TV (DTTV)
10. Mobile communications
10.1 Overview of Costa Rica’s mobile market
10.1.1 Mobile statistics
10.2 Regulatory issues
10.2.1 Spectrum auction
10.2.2 Mobile Number Portability (MNP)
10.3 Mobile technologies and data services
10.3.1 Overview
10.3.2 Third Generation (3G) mobile networks (UMTS)
10.4 Major mobile operator
10.4.1 ICE
10.5 Mobile voice services
10.5.1 Prepaid
10.6 Mobile broadband
11. Related reports
List of Tables and Exhibits
Table 1 – Country statistics Costa Rica – 2012 (e)
Table 2 – Telephone network statistics – 2012 (e)
Table 3 – Internet user statistics – 2012 (e)
Table 4 – Broadband statistics – 2011 (e)
Table 5 – Mobile statistics – 2012 (e)
Table 6 – National telecommunications authority
Table 7 – Evolution of GDP in Costa Rica – 2000 - 2012
Table 8 – ICE financial data – 2010 - 2012
Table 9 – Fixed lines in service and teledensity – 1997 - 2012
Table 10 – Internet users and user penetration – 1997 - 2011
Table 11 – Broadband subscribers and penetration – 2000 - 2011
Table 12 – Broadband market share by technology – 2000 - 2009
Table 13 – Cable modem subscribers and household penetration – 2000 - 2010
Table 14 – ADSL subscribers and household penetration – 2002 - 2010
Table 15 – Mobile subscribers by technology – 2009 - 2010
Table 16 – Mobile subscribers and penetration - 1998 - 2012
Exhibit 1 – ICE at a glance
Exhibit 2 – Major submarine cable networks connecting Costa Rica

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