When asked how I would classify the arrival of 5G in the markets of Latin America and the Caribbean, my answer is “a break with the traditional model of doing business, 5G implies a paradigm shift.” Rarely do I receive an additional question that seeks to clarify what exactly I am referring to, what is the change that will make this new wireless technology viable.
However, since nothing happens suddenly, it is always important to think about the current context, the near past and the future that you want to achieve. 5G is, on the one hand, that technology that will serve as a launch platform for the famous world of the Internet of Things (IoT, for its acronym in English). Thanks to this new technology that will allow up to a million devices per square kilometer to be connected, the costs of using sensors to digitize processes will be greatly reduced. Business models that until now were not profitable, become extremely interesting not only at the end user level (which can be a company) but also as an opportunity to expand the portfolio of products and services of non-traditional players in the world of telecommunications. We are inching closer to a world where devices will start to be produced by companies that may not currently have a dedicated business unit. The same could be said for apps, cloud services, and analytics.
The new world that has been promised for decades and finally made possible by 5G is that of the digitization of our environment. The so-called digital transformation as longed for as it is distant due to the high costs of its implementation. Sensors that for decades were used in a limited way, in the coming years will achieve economies of scale that will accelerate their use. 5G places us at the gates of a technological ubiquity until now only seen in movies or narrated in works of fiction.
For this reason, I call 5G as a technology that represents a break in the traditional business models of mobile operators. The increase in the use of sensors to increase the efficiency of the productive sectors of the economy is an element that has a direct impact on the export of products and services. Costa Rica has already warned us that the globalized world that we hear so much about is already here, especially for those sectors of the economy focused on exports and that cannot satisfy their supply with local demand. For them, their digitization and technological demands are defined more by what their international clients demand and by what their direct competitors are doing in other markets than by what happens in their own. You have to innovate at the same pace or risk losing relevance in this increasingly digitized world.
The solution of the Costa Rican companies that faced a demand for technologically advanced medical equipment with interoperability requirements with 5G networks was to open subsidiaries in other markets that already had these networks. The consequence is an increase in the costs of Costa Rican companies, lower profit margins for these contracts (less taxes paid to the government) and the loss of new direct and indirect jobs. The other side of this coin is that the markets where Costa Rican companies opened subsidiaries for testing received new investment, tax money and job creation.
Likewise, 5G will imply the dominance of all-IP wireless networks. That quality that arrived in the markets through 4G, that LTE that initially channeled services such as voice through switched 2G and 3G networks, will now be accompanied by a new technological generation that will improve the services offered. We are witnessing this increase in infrastructure and coverage of fully IP mobile wireless networks (which can also offer fixed services) through 4G in many markets in the region, from Mexico with the creation of a constitutional entity for this purpose to Colombia where a The second 4G auction has given new impetus to the expansion of LTE population coverage.
These efforts to expand LTE have given rise to new business models, which in Peru are materialized in areas historically unattractive for operators through a 4G Open RAN network, complemented by the still incipient emergence of 5G networks in the region. . At the moment a large number of announcements of commercial launches of this new wireless generation, in practice only Chile, Brazil and Puerto Rico seem to be the only markets that after their commercial launch announcement of 5G continue to expand to other locations in the country, increasing each month the number of cities that have this technology.
The expansion of 4G that is taking place at an accelerated rate at the moment and the irruption in the 5G markets are not isolated phenomena. They are accompanied by the blackout of 2G and 3G networks as allowed by the operator’s business model that depends on the technologies that its customer base is using. The problem that many operators in Latin America and the Caribbean face is that the vast majority of their subscribers do not have phones that can support mobile telephony offered by their service provider. The alternative is clear, use OTT applications for this purpose.
The solution to this dilemma is called Voice over LTE (VoLTE), which allows users to make phone calls over an IP network, but unlike those made through third-party applications, with better levels of service quality. To achieve this, you must have a phone enabled with this technology.
Unfortunately in Latin America and the Caribbean in recent years there have been misguided opinions about the relevance of VoLTE. Hearing in specialized industry forums that VoLTE was not necessary or important for regional mobile operators was normal. Perhaps in the beginning, when the cost of the devices was prohibitive and the blackout of switched mobile networks was something far away, those opinions could have been justified. Now the reality is different, due to the scarcity of VoLTE devices in the mass of mobile users in Latin America, together with the adaptation of the networks of many operators to support the service, blackouts of older mobile networks (2G and 3G) will have to procrastinate The mere fact that the concessions to offer mobile service mostly include the mobile telephony offer by the concessionaire makes this offer an obligation that in an IP environment, such as 4G and 5G, can only be fulfilled with VoLTE.
There is also the external factor. In a world where the local market is no longer the only determinant of the deployment strategy of new technologies by telecommunications operators, what happens in other geographies also has its impact. For example, in the United States, the three large national mobile operators announced the blackout of their 3G networks in 2022. The first of them, AT&T, has scheduled it for February 22, while T-Mobile announced that the 3G CDMA network of the defunct Sprint will shut down on March 31 and its 3G UMTS network on June 30. The last to turn off its 3G network will be Verizon on December 31.
The first impression is that they are different dynamics that do not affect us. It is precisely this type of myopia that led more than one to minimize the importance of VoLTE. Perhaps with the problems in roaming or roaming services that will begin to be seen at the end of February 2022 and that will be exacerbated at the end of June of the same year, more than one will realize that VoLTE is a necessity to at least attend to the high-income customers who travel abroad frequently or visitors who will arrive in Latin American territory with phones that may not be able to connect to networks that have already been dismantled in their home markets.
The biggest blow of this new reality will be suffered by the markets of the region that historically have a greater flow of tourists or that tourism represents a significant percentage of its economy, such as, for example, destinations such as the Bahamas, Belize, Brazil, Jamaica, Mexico , Peru or the Dominican Republic.
Fortunately, there is a little time left for all phones without the ability to connect to 2G and 3G networks to disappear in markets that have already switched off these networks. Replacement rates ranging from 12 to 24 months show us a panorama that Latin American and Caribbean operators have at least a couple of years to continue connecting visitors by roaming. The problem is to see how their high net worth users will be able to stay connected when they travel to those markets. Maybe then they will realize that VoLTE was and is important for operators in Latin America and the Caribbean.