Forecasting and Ev

1. INTERNET DIFFUSION IN LATIN AMERICA:
BROADBAND AND CYBER CAFES
by
Victor Molina
A paper presented in partial fulfillment
of the requirements for the course
Forecasting and the Evolution of Technology
ARIZONA STATE UNIVERSITY EAST
April 2003

2. INTRODUCTION
The present paper on ‘Internet diffusion in Latin America: Broadband and Cyber
Cafes’ is a partial fulfillment of the requirements for the course Forecasting and the
Evolution of Technology.
The objectives of this paper are:
• To understand challenges to Internet diffusion in Latin America
• To review recent Internet diffusion trends in Latin America, particularly (a)
broadband-enabled technologies and (b) shared technology models
• To forecast Internet penetration in Latin America through (a) broadband-enabled
technologies and (b) shared technology models from 2003 to 2008.
The relevance of this paper lies in the fact that forecasting Internet diffusion in Latin
America through (a) broadband-enabled technologies and (b) shared technology models
we will be able to understand how developing countries are adopting and adapting
Internet technologies to their particular context.
BROADBAND and CYBER CAFES 2

3. INTERNET DIFFUSION IN LATIN AMERICA:
BROADBAND AND CYBER CAFES
Latin America and the Caribbean (LAC) have only 4% of worldwide Internet
users, far behind Canada/USA (40%), Europe (28%) and Asia Pacific (26%). According
to Kikman (2001), The reason for why LAC stand in this position is not one but a
complex and interlinked group of factors such as “the lack of economic resources, low
level of technical education, poor infrastructure, political instability, stagnant business
community and poorly formulated policies.” (p. 193) Additionally, geographic
fragmentation (people belong to different regions) and ethno-linguistic fragmentation
(people speak different languages), both reported by La Porta et al. (1996), do also show
a significant negative impact on Internet diffusion in the region.
Structural reforms such as the privatization of telecommunication public
companies in LAC during the 1990s (UN-ECLAC, 2001), and the availability of
information and communication technologies more appropriate and affordable to the
geographic, demographic, and economic characteristics of the region (Kirkman, 2001) is
now changing the LAC informational landscape.
Regional Digital Divide
Latin America was claimed to be fastest growing Internet community in the world
by 2000. (UN-ECLAC, 2001) Holding a 136% growth in Internet host, standing over
North America (74%), Asia (61%), Europe (30%), and Africa (18%). However, a closer
look to the LAC informational landscape will make evident some Internet diffusion
anomalies in the region such as digital divide among countries and digital divide within
countries.
Considering Internet users as percentage of total country population it has been
reported by UN-ECLAC (2001) a 20% in Chile, 11.9% in Uruguay, 11.5% in Peru,
10.9% in Guyana, 8% in Argentina, 5.2% in Venezuela, and 4.6% in Brazil. They are
clearly the Internet diffusion leading countries in South America. On the other hand, the
BROADBAND and CYBER CAFES 3

4. lower Internet diffusion countries are Suriname with 3.3%, Colombia with 2.7%, Ecuador
with 2.5%, Bolivia with 1.4%, French Guyana with 1,1%, and Paraguay with 1%.
Local (Geographic and Social) Digital Divide
Not only patterns of digital divide affect every country in LAC and the region as a
whole but also LAC countries show local (geographic and social) digital divide. High
concentration of Internet penetration is found in higher income population as well as in
the two major country gateways while the urban poor, medium size cities, and rural areas
are still excluded from the benefits of the digital world. This fact leads to a range in
between 80% to 99% percent of excluded population in LAC.
Castells (2001) reports that, in average, 90% of Internet users in LAC belong to
the higher income population. In both, Brazil and Mexico, is shown significant
percentages of Internet penetration divide between top 15% higher income population
(Brazil 81.6%, Mexico 57.1%) when compared to the Internet penetration in the overall
country population (Brazil 12.3%, Mexico 8.6%). This pattern of digital divide due to
income is repeated – according to UN-CEPAL (2001) - in the rest of LAC countries.
Therefore, the digital divide observed among world regions and among LAC
countries is again observed within LAC countries.
This situation does not only take place in LAC but in the rest of the developing
world. According to Kirkman (2001), “the global map of Internet connectivity shows that
while there may be Internet points of presence in every nation of the world, when the
sub-national patterns of Internet diffusion are examined, a very different picture emerges.
Particularly in the developing world, the Internet has no penetrated most rural areas, and
indeed, within urban areas, can be found primarily among the wealthy and privileged” (p.
192). For instance, to find how to re-shape informational divided landscapes in
developing countries for the benefit of the poor is a critical question in today’s world.
BROADBAND and CYBER CAFES 4

5. Re-shaping Latin American Informational Landscapes
Persistent patterns of digital divide in LAC countries have been provoked not only
by a lack of national policies, economic resources, and digital infrastructure but also by
wrong assumptions.
Some assumptions for what the poor have been excluded from the benefits of the
digital world up today in developing countries are (a) basic needs (water, shelter, and
food) is the priority of the poor, information is not; (b) it is neither technologically
possible nor economically affordable to bring Internet to rural areas, and impoverished
urban neighborhoods where the poor are settled because the size of the market is too
small and/or the income level is too low; and finally (c) nobody is interested in offering,
to the poor and the digitally excluded, Internet access opportunities.
Several scholars argue the validity of these assumptions. According to Tilak
(2001) and Henstchel (2001) local awareness about the potential benefits of Internet
access as a tool to face challenges of geography and poverty worldwide is increasing. The
poor and the digitally excluded are understanding that digital access to information,
education, and training could faster bring to the poor alternative strategies to meet their
basic needs. Also, recent advances in ICT, renewable energy systems, and the integration
of both are offering affordable alternatives to the problem (Kirkman, 2001). Finally,
recent reforms in international organizations, especially in the World Bank and the Inter-
American Development Bank (IADB) are making possible access to funds from
international co-operation oriented to small-scale projects implementation (Chapman,
2002).
Indeed, the three critical factors: local awareness, technology availability and co-
operation opportunities are now available for most of the developing world.
Forecasting Internet Development in South America: 2003-2008
Whether Internet diffusion is lead by the public or the private sector some South
American countries are performing better than others their entrée into the digital world.
BROADBAND and CYBER CAFES 5

6. In addition, within countries, business districts and affluent neighborhood are the most
advantaged, regarding Internet service, while the majority of the middle and low income
population remain with poor or none service. The major metropoles are, obviously, the
hot spots in the South American’s Internet map while vast rural areas remain un-served.
In the next five years, however, new technologies such as broadband and new
managerial innovations such as shared technology models are going to have a positive
significant impact on the Internet diffusion in South America.
Broadband-Enabled Infrastructure @ Top of Pyramid Market
According to Flores-Roux et alt. (2001), while LAC “has almost as many houses
and small enterprises as the United States has,” (p. 16) only few of them can afford
broadband access. By 2001 LAC has 300,000 broadband subscribers, which is equivalent
to only one-tenth of the US market. However, looking more closely to the LAC market it
is found that the percentage of higher-income households (top of pyramid) reached by
broadband infrastructure is not only high but also likely to increase in the short term. A
market research conducted in Brazil, Mexico, Colombia, Argentina, Peru, Venezuela, and
Chile shows that by 2004 “there will be anything from 3.3 million to 4.3 million
broadband subscribers in LAC. That would make for a growth rate of from 88 to 102
percent in the years since 2000” (p.17).
If the trend is sustained and no major economic catastrophe shakes the region it
could be expected that by the year 2008 broadband services will be commonplace in
business districts as well as affluent neighborhoods in Chile, Argentina, Uruguay, Brazil,
Mexico, Venezuela, and Colombia while initial stages of broadband-enabled
infrastructure will be placed in the rest of the region.
Shared Technology Models @ Base of Pyramid Market
Prahalad (2002) claims: “fully 65% of the world’s population earns less than
$2000 each per year – that’s 4 billion people. But despite the vastness of this market, it
remains largely untapped by multinational companies.” Internet service in LAC does also
BROADBAND and CYBER CAFES 6

7. fall in Prahalad’s assumption. However, local solutions – Kirkman (2001) claims - such
as cyber cafes, café Internet, Internet kiosks, Internet cabinas, community learning
centers and other similar endeavors “are making the Internet, telephones and computers
more accessible, and more affordable to communities of users (p 200). These shared
technology solutions, driven by small and medium enterprises, are now profitably serving
the South American base of pyramid market (lower-income households). One of the most
outstanding examples of shared technology solutions in South America is Lima.
According to Intel (2002a) “Lima, the capital of Peru, has a population of 6 million, so
some 1.9 million are considered “active” Internet users. Most important, nearly 83
percent of those users access the Internet in cabinas” (p. 1). Now, the government of Peru
– Intel (2002b) continues - is interested in providing eGov services, such as tax collection
and elections (2008), through Internet cabinas. If reached by Peruvian, this goal will
strength the presence of Internet shared technology model in the South American
informational landscape.
If the trend is sustained and no major technologic disruption shakes the region it
could be expected that by the year 2008 shared technology models will be commonplace
in most impoverished urban neighborhoods as well as rural areas in all South American
countries but especially in Peru, Ecuador, Bolivia, Paraguay, Suriname, and French
Guyana.
BROADBAND and CYBER CAFES 7

8. CONCLUSIONS
The conclusions from the present paper on ‘Internet diffusion in Latin America:
Broadband and Cyber Cafes’ are:
• Patterns of digital divide are persistently repeated at universal, regional, and local
level.
• Uneven Internet diffusion within countries seems to be caused by geographic,
linguistic, and social fragmentation.
• Two approaches have been developed to foster Internet diffusion in Latin
America. One is technology-driven (broadband) and the other is a business model
(cyber cafes).
• Broadband-enabled infrastructure @ top of pyramid is perceived to have a major
development in the South American market, especially in business districts as
well as affluent neighborhoods.
• Shared technology models @ bottom of pyramid is perceived to have a major
development in the South American market as well, specially impoverished urban
neighborhoods as well as rural areas.
The relevance of this paper lies in the fact that forecasting Internet diffusion in Latin
America and particularly in South America through (a) broadband-enabled technologies
and (b) shared technology models have made us understand how developing countries are
cautiously adopting and creatively adapting Internet technologies to their particular
context.
BROADBAND and CYBER CAFES 8

9. REFERENCES
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Publishers Ltd.
Chapman, R. and Hamel, G. (2001, November). The World’s Bank Innovation Market.
Harvard Business Review. 104-113.
Christensen, C. (1997). The Innovator’s Dilemma. Boston, Harvard Business Scholl
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Hentschel, J. and Waters, W. (2002). Rural Poverty in Ecuador: Assessing Local realities
for the Development of Anti-poverty Programs. Word Development, 30 (1), 34-
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Intel. (2002a). Cabinal Publicas Bring the Internet to Peru. Intel Intranet: The People and
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Intel. (2002b). Cabinas publicas: The Second Generation: Peru’s Internet Cafes Must
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Kirkman, G. (2001). Out of the Labs and Into the Developing World: using appropriate
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Prahalad, C.K. & Hammond, A. (2002, September). Serving the World’s Poor,
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Tilak, J. (2002). Education and Poverty: alternative approaches to development.
Journal of Human Development, 3 (2), 191-207.
United Nations-Economic Commission for Latin America and the Caribbean (UN-
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