As Peru's fibre-optic network progresses, access to high-speed internet services expands

Aiming to increase the number of Peruvians with access to high-speed broadband internet, in 2012 the government introduced the broadband adoption law, an ambitious plan to develop a National Fibre Optical Backbone Network (Red Dorsal Nacional de Fibra Optica, RDNFO). In light of often-weak economic incentives for operators to invest in extending their networks into areas of low population density or challenging terrain, the RDNFO was conceived as a public-private partnership.

In 2013 Mexico’s TV Azteca was awarded a 20-year concession to develop by July 2016, 13,500 km of fibre-optic network covering 180 provinces and 22 regional capitals, involving an investment of $323m. This initial stage is being supplemented by a further 21 regional broadband projects, entailing an additional investment of $1.8bn by 2021. These projects will extend the fibre-optic network by a further 30,000 km, covering 1516 district capitals. Contracts for these 21 projects were to be awarded in six blocks to private sector operators between the first quarter of 2015 and the second quarter of 2017. However, by mid-2017, only eight of these projects were under way, with most now due to be completed by end-2017, having been beset by delays relating to logistical and financing challenges. Inclement weather has played havoc with projects in the north of the country in particular. The eight ongoing projects were awarded to Telefonica (1), Gilat (4) and Redes Andinas de Telecomunicaciones (3), while of the remaining 13 projects five were reported to be in the promotion stage, four were undergoing viability assessment and the remaining four were under evaluation.

Getting Back On Track

While the eight ongoing projects have been subject to delays, Carlos Valdez, vice-minister for communications, told local media in May 2017 that the projected timeline was improving. While only three of the projects had been envisaged for completion during 2017 at the beginning of the year due to financing challenges, the authorities were now on course to bring on-stream seven of the networks by the end of the year. These will cover the regions of Lima, Ica, Amazonas, Junín, Puno, Tacna and Moquegua.

Expected Impact

Sustained improvements in the fibre-optic network will broaden access to high-speed internet services and bring down prices. “Sustained investment in Peru’s fibre-optic infrastructure can have a really positive impact on Peru’s economic and social development over the next five years,” Tao Duc Thang, group general manager of Vietnamese telecommunications operator Viettel, told OBG. “Improved coverage in isolated areas can increase connectivity within and between communities while also stimulating the development of online content tailored to local tastes.”

According to figures reported by telesemana. com, the prices charged by private operators already declined from $250 per Mbps per month in 2013 to $150 per Mbps per month in 2014 as the RDNFO was coming on-stream, to an average of only $50 per Mbps per month by 2017. In some cases, prices had reportedly dropped below $27 per Mbps per month, spurring the authorities to consider altering the terms of the concession granted to TV Azteca. Valdez flagged plans in May 2017 to change the rules governing the pricing of bulk transmission on the backbone network. His ministry has asked the Supervising Organisation for Private Investment in Telecommunications to explore changing the pricing, originally set at $23 per Mbps per month, to make it more competitive in light of changes in the market since the projects were initiated.

In exploring alternative financing sources, through multilateral organisations for example, and by being ready to adjust concession contracts in light of market developments, the authorities have demonstrated the flexibility that will be needed to see this bold infrastructure programme come to fruition. It is likely that such a flexible approach will remain necessary in order to ensure the success of the eight regional projects already nearing completion as well as to mobilise investors to engage in the remaining 13 projects.