Telecommunications Infrastructure
Computing & Internet Diffusion
Analysis: Strengths & Weaknesses
Analysis: Impacts on non-IT business
Analysis Impacts on IT business
Liberalization and Deregulation
Argentina divides the responsibility for infrastructure services between the national and provincial governments. In 1989, when the national government began a privatization initiative, that would involve multiple sectors, such as gas and power, water works, and telecommunications, they created a fairly open deregulation process with regulatory commissions spearheading each agency. The agencies consisted of four main utilities: telecommunications, water and sanitation, electricity, and gas. (1)
Out of the agencies created, telecommunications was outperformed. This agency, named Comision Nacional de Telecommunications (CNT) shared regulatory responsibilities with the Secretariat of Telecommunications. This division was created by an executive decree that ensured that the agency would be accountable to the executive branch, rather than to legislative. (2) From inception, the executive branch modified the decree several times, ensuring that greater power be bestowed to itself, diminishing the agency’s ability to regulate effectively.
Examples of the inability for CNT to regulate are numerous. First, CNT’s operation was to be financed through payments by radio spectrum buyers and a 0.5% sales tax on telecommunications firms. However, due to CNT’s inability to obtain self-sufficiency in its decision making activities, organizing itself to address issues by providing the appropriate levels of expertise had not been easy. One main concern involved the distortion between local and long distance end user rates. (3) However, responsibility for regulating this issue had been divided between CNT and the Secretariat of Telecommunications. Therefore, it is a difficult chore to organize, fund, and direct an agency whose power is consistently diminished so as to allow the executive branch to manipulate regulatory decisions.
Clearly, it is difficult to judge the effectiveness of an agency when it does not have full control of its regulatory functions or agenda in general. Although Argentina has managed to fully deregulate its telecommunications and information technology markets, the policymaking process for doing so has been less transparent than most industry experts believed it could have been. The confusion of dividing regulatory operations created separate agendas for reaching one end goal and this design flaw directly promoted a slow, bureaucratic process from which CNT’s poor agency performance, compared to the other agencies previously mentioned, can be attributed. It is clear that providing sufficient autonomy in the design of agencies empowered to chart a deregulatory course for a government is a key attribute leading to an open, efficient, and commercially sound and effective policy reform.
As previously mentioned in the telecommunications section, the 1991 sale of the state-owned Empresa Nacional de Telecommunicaciones (ENTel) created a duopoly. EnTel was split between Telecom Argentina, which controlled central to northern Argentina and Telefónica de Argentina, which controlled the central to southern region of the country. To provide long-distance services throughout the country, Telintar, an entity co-owned by Telecom Argentina and Telefónica de Argentina was formed. This duopoly would last until 1999, when competition would begin to emerge, leading to November 9, 2000, which marked the date that competition was fully opened in Argentina. However, before this period of time, this duopoly would provide significant infrastructure improvements. In short, part of their agreement to run Argentina’s telephone services for almost a decade meant that they would need to invest heavily, meeting various quality of service standards as well as infrastructure expansion targets. During this period of time, both companies would invest approximately US $17 billion in such improvements and targets. (4) This investment was a milestone to the deregulatory process because it created a solid base from which the country could profit once other entrants emerged. This was so because entrants would arrive with an impressive national infrastructure already functional and competitive. Therefore, they could invest more on expanding networks, improving services, and increasing market share - rather than on building a country's infrastructure from the ground up.
On June 9, 2000, President Fernando de la Rua signed a deregulation decree, which established the regulatory framework for fully opening Argentina's telecommunications market. The new regulations, which covered licensing, interconnection and universal service, are expected to create a level playing field for new entrants and allow for an effective competitive environment. The deregulation impacted every segment of the market including local telephony, national and international long distance, cable, wireless, satellite, IP telephony, and the Internet. Telephone and interconnection rates were reduced significantly. Internet costs also dropped substantially, in a country that produced more new Internet start-ups than all other Latin American countries combined. Analysts predict that this $12 billion market will need $3-5 billion of equipment and services in 2000 alone. The package was expected to attract an additional $4 billion in investment to the sector. (5)
To better illustrate the impact of deregulation on the Argentine economy, it must be noted that Argentina's telecommunications and information technology sectors grew a combined 6% in 2000, while other industry sectors experienced almost no growth. Yet, it is clear that this sector's ability to jumpstart others was not in full gear at this point since the markets had just been fully opened to competition.(6)
The Argentine Government has forecast approximately US$4 - US$5 billion in technology and telecommunications investments by 2001. These figures reflect increased availability of services to consumers, with basic telephone services growing to 41%. Other contributors to this phenomenal investment are market increases in mobile phone services (25%) and equipment (22%). Lastly, hardware (38%) and services (36%) made up over two thirds of information technology sales. (7) Much of these sales, however, were products manufactured by other countries, especially that which are made in the United States. Therefore, money being spent is leaving the country rapidly - although other sections in this report clearly demonstrate that Argentina has the right mix of attributes needed to build ICT products ready for both domestic sale and exportation.
