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The Information Revolution in Latin America:
The Case of PeruResearch Report: December 6, 1999
Views: [ Overview | Presentations | Index | Charts ]
Welcome to the The Information Revolution in Latin America:
TheCase of Peru. This Web site presents the result of Team
Peru'sresearch on the obstacles and opportunities presented by
thedevelopment of the Internet in Peru. Our research is organized
bytopic, but it is also possible to view it as three presentations:
(1)Education, Labor Markets and Technical Capacity, (2)
CreatingInternet Opportunities, and (3) The Main Event -- RCP
vs.Telefonica.
We began our research by assessing the context of Peru in
termsof geography, labor, and education. We attempted to
understandthe present technical capacity of the country as relevant
toInternet development, and to estimate the ability of the
populationto realize that capacity.
Next, we assess Peru's telecommunications policy,
intellectualproperty protection, and sources of financing for
potential Internetventures. We briefly cover the history of
telecommunicationspolicy in Peru, as well as more recent reform
legislation.Throughout our analysis, one of the most interesting
actors is thenon-profit Red Cientifica Peruana (RCP). In the latter
part of ouranalysis, we contrast the progressive vision of RCP with
thefinancial and organizational might of the
dominanttelecommunications carrier, Telefonica del Peru, a
formerstate-owned monopoly. Finally, we present overall conclusions
onthis topic.
Views: [ Overview | Presentations | Index | Charts ]
The Case of Peru: Overview
http://www.stanford.edu/~csandvig/cs377c/ [12/13/1999 4:25:12
PM]
http://www.stanford.edu/class/las194/
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Project Home
PresentationsViews: [ Overview | Presentations | Index | Charts
]
This page lists the results of our research, ordered by the
in-class oralpresentations we have given.
Presentation 1Education, Labor Markets and TechnicalCapacity
Given Monday, 25 Oct 1999 [ View Slides for this Presentation
]SummaryGeography and DemographyLabor MarketEducation: Long-term
outlookEducation: Short-term outlookTechnical CapacityAccess to
Internet OpportunityIntroducing Red Cientifica Peruana
Presentation 2Creating Internet Opportunities
Given Wednesday, 10 Nov 1999 [ View Slides for thisPresentation
]
SummaryTelecommunications Policy OverviewIntellectual Property
OverviewSources of Financing OverviewFinancing: Venture
CapitalFinancing: BanksFinancing: Government AssistanceFinancing:
Going PublicFinancing: Multinational Ventures and
AcquisitionsFinancing: Multinational AidFinancing: Other
Sources
The Case of Peru:
http://www.stanford.edu/~csandvig/cs377c/pres.shtml (1 of 2)
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Presentation 3The Main Event--RCP vs. Telefonica
Given Wednesday, 1 Dec 1999 [ View Slides for this
Presentation]
SummaryOrigin of Telecommunications
(1920-1990)Telecommunications Reform Act (1991)Telecommunications
Privatization (1994)RCP's Beginnings (1991-1994)RCP: Creating an
Internet CultureRCP: Cabinas PublicasTelefonica: Infrastructure
Investment (1995-1999)Telefonica: Ending the Monopoly
(1997-1999)Telefonica: Future outlookA History of ConflictOverall
Conclusions
Overview Handout (318K)(Requires Adobe Acrobat Reader)
The Case of Peru:
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[12/13/1999 4:25:24 PM]
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Project References
List of ReferencesThis page lists the sources used for our
research. Print and online sourcesare listed first, while
interviews are listed at the bottom of the page.
Print and Online sourcesBourrie, Sally Ruth, "Peru awaits PCS
Entrants," WirelessWeek, June 28, 1998.
Bowen, Sally. (August 9, 1991). "Peru Telecoms MarketConnection"
Financial Times (London), p. 3.
Central Intelligence Agency, "Peru," CIA World
Factbook(1998).
Consejo Nacional de Ciencia y Tecnologa Per (CONCYTEC)"Estudio
de la realidad nacional en ciencia y tecnologia"[Study of the
National Reality en Science andTechnology]," December
1998."Indicators of Science and Technology -- Peru", table.
Congress of Peru, Digital Law Archive (for text of
laws),http://www.leyes.congreso.gob.pe/leyesperu.htm
Congressional Commission of Science and Technology,Proceedings
from a Conference on Science, Technology, andDevelopment, held on
February 25-26, 1998 at the PacificUniversity in Lima, Peru.
Creatividad Empresarial web
site:http://www.upc.edu.pe/home/creatividad/1999/ The Economist,EIU
Country Profile: Peru 1998
ELITE Occupational Education Center Endeavor Initiative web site
Facts on File, Inc., "Facts on File World News Digest,
1975":Lexis-NexisFederal Research Division, Library of
Congress,Peru: a country study, 1993
Holligan, Jane, "PERU: PUTTING THE NET IN THE CORNERSTORE",
Business Week, October 25, 1999.
Instituto Cuanto, Peru en Numeros, 1997 Instituto Nacional de
Defensa de la Competencia y de laProteccion de la Propiedad
Intelectual (INDECOPI)
Interamerican Development Bank, Internet for the People Janet
Matthews Information Services, Quest EconomicsDatabase, Countrywise
Publishing Limited Country Market
The Case of Peru:
http://www.stanford.edu/~csandvig/cs377c/refs.shtml (1 of 3)
[12/13/1999 4:25:28 PM]
http://www.cia.gov/cia/publications/factbook/pe.htmlhttp://www.concytec.gob.pe/http://www.concytec.gob.pe/resumen/index.htmhttp://www.leyes.congreso.gob.pe/leyesperu.htmhttp://www.upc.edu.pe/home/creatividad/1999/http://www.elite.edu.pe/http://www.endeavor.org/http://www.indecopi.gob.pe/http://www.iadb.org/exr/IDB/stories/1997/eng/e11f2.htm
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Report, 1998: Lexis-NexisKPMG, Handbook on Investment in Peru.
KPMG (1997). Krochmal, Lisa, "Can the Venture Capital Model Work
for LatinAmerica?", LatPro's web site.
Mayo, John K.; Heald, Gary R.; Klees, Steven J.
"CommercialSatellite Telecommunications and National
Development:Lessons From Peru." Telecommunications Policy, 16(1).
pp.67-80. (1992).
Montealegre, Ramiro, A temporal model of
institutionalinterventions for information technology adoption
inless-developed countries: Journal of Management
InformationSystems; Armonk; Summer 1999 (Peru is one of the
casestudies)
OECD, Development Indicators -- Economic Well-being (1999). OIT
Regional Office for Latin America & The Caribbean, ILOLabor
Statistics (1999).
OIT Regional Office for Latin America & The
Caribbean,Estructura del Empleo no Agropecuario 1990-1997
(1999).
O'Neill, Judith. "Dynamics of Telecommunications
SectorRestructuring." Telecommunications Int'l Edition, pp.
70-75.(January 1991).
"Peru" Encyclopdia Britannica Online..
Pontificia Universidad Catolica del Peru Web Site:Informatics
Engineering DepartmentInformatics Services Unit
Red Cientifica Peruana web site:Articles from El Comercio
(Peruvian Newspaper) See:RCP Press Information. (February 25, 1999
and others).Directorio Nacional de Cabinas Pblicas (surveyed as
of10 Oct 1999)Education Page
Telefonica del Peru web
site:http://www.telefonica.com.pe/acerca/memoria/m5.htmregarding
opening of the
market:http://www.telefonica.com.pe/acerca/memoria/m17.htmhistory:http://www.telefonica.com.pe/acerca/memoria/m21.htmtariffs:
The Case of Peru:
http://www.stanford.edu/~csandvig/cs377c/refs.shtml (2 of 3)
[12/13/1999 4:25:28 PM]
http://www.latpro.com/articles/venture-capital.htmhttp://www.latpro.com/articles/venture-capital.htmhttp://www.latpro.com/articles/venture-capital.htmhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.oecd.org/dac/Indicators/htm/data_eco.htmhttp://www.oit.org.pe/spanish/260ameri/info/estadis/estadis.shtmlhttp://www.oit.org.pe/spanish/260ameri/info/estadis/estadis.shtmlhttp://www.oit.org.pe/spanish/260ameri/info/estadis/graficos/cdro5a.shtmlhttp://www.eb.com:180/bol/topic?eu=115067&sctn=1http://nibble.inform.pucp.edu.pe/faci/inform/index.htmhttp://andromeda.pucp.edu.pe/http://www.rcp.net.pe/http://rcp.net.pe/rcp/PRENSA/http://ekeko.rcp.net.pe/rcp/servicios/cabina/donde.shtmlhttp://ekeko.rcp.net.pe/educacion/http://www.telefonica.com.pe/acerca/memoria/m5.htmhttp://www.telefonica.com.pe/acerca/memoria/m17.htmhttp://www.telefonica.com.pe/acerca/memoria/m21.htm
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http://www.telefonica.com.pe/emphogar/tarifas/tarbas.htmThomson,
Adam, and Sally Bowen, "Telecom Boom," LatinTrade, October
1997.United Nations, UN Statistical Yearbook1995
TradePort International Trade report United Nations, UNESCO
Statistical Yearbook 1998, 1999 United States Copyright Office La
Universidad de Lima Web Site:
Systems Engineering DepartmentStudent Services: Infomatics and
Systems
Universidad Nacional Mayor de San Marcos Universidad Nacional de
Piura:
Informatics Engineering DepartmentInformatics Institute
Courses
Urrelo Guerra, Dr. Rafael, Presentation to the PeruvianCongress
on the "Bill for a law to promote investment intechnological
development, "
World Bank, World Development Report, 1998/99
InterviewsPersonal interviews with Peruvians, October 1999 Email
correspondence with Latin American Venture Capitalistand
Entrepreneur from Sandro Trosso
Conversation with Peruvian Congressman Oswaldo
SandovalAguirre.
Conversation with Latin American Venture Capitalist
OswaldoSandoval Zavala.
The Case of Peru:
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[12/13/1999 4:25:28 PM]
http://www.telefonica.com.pe/emphogar/tarifas/tarbas.htmhttp://tradeport.org/ts/countries/peru/isa/isar0008.htmlhttp://lcweb.loc.gov/copyrighthttp://ulima.edu.pe/asp_acad/facultades/fac_ingsist.htmlhttp://ulima.edu.pe/servicios/informatica.htmlhttp://www.unmsm.edu.pe/http://www.unp.edu.pe/ingindustrial/daiinfo/daiinfo.htmlhttp://www.unp.edu.pe/ingindustrial/Inst_Infor/ii_cursos.htmmailto:[email protected]:[email protected]:[email protected]:[email protected]://www.stanford.edu/class/las194/
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Project Credits
CreditsThis research project is the work of the Peru Team from
the course"The Information Revolution in Latin America" offered at
StanfordUniversity, Fall Quarter 1999.
The Peru team consists of John Bilderbeck, Debbie Jaffe, Karen
Libby,and Christian Sandvig.
A group moment after presentation 3:
From left to right:Presenter (John)Red Cientifica Peruana
(Karen)Referee / "The State" (Christian)Telefonica del Peru
(Debbie)
The Case of Peru: Credits
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Project Feedback
Send FeedbackPlease send us your comments on this site. You can
also view thecomments history.
Send us your thoughts and comments.
Organization:
Email:
Name:
Enter comments below:
The Case of Peru: Feedback
http://www.stanford.edu/~csandvig/cs377c/feedback.shtml
[12/13/1999 4:25:41 PM]
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Project Feedback
Feedback HistoryThis page shows the comments that we have
received. Please take amoment to send us your comments.
Name: Karen LibbyOrganization: Stanford University student, Peru
group memberDate: 26 October
1999-----------------------------------------------------------The
feedback option is now operational!
Name: Isaac Kos-ReadOrganization: Stanford University,
Department of EconomicsDate: 1 November
1999-----------------------------------------------------------Your
presentation had a coherent arc to it from introducation using
basicstatistics to the concluding slide. Your focus on the success
of the redcientifica was useful as it allowed listeners to take
away some detailed exampleuseful for considering in their own
cases. I found the slides aestheticallywell-designed and the
speakers of high quality. If I remember correctly, one ofyour
speakers sounded a little too much like an advertisement. In fact,
Irecieved a rather rosy picture of the case for Internet in Peru of
which I am veryskeptical. I think there could possibly be less
emphasis on convincing andselling Peru, and rather on a critical
look at what is happening versus whatcould happen given various
different policy rubrics.
Web-page:Given that this medium can be very artistic, I think
you could do more of that foryour page but at the same time I feel
it has a very clean, academic quality to it. Of course, given the
prior research of some of your memebers, it looks asthough you were
able to focus rather efficiently on other aspects of thePeruvian
case. The information is very complete and supplemented by lots
ofstatistics and links to the sites of origin of all the
information - a great resourcehas been created!
The Case of Peru: Feedback
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Project Home
Index by TopicOther views: [ Overview | Presentations | Index |
Charts ]
This page lists the results of our research, ordered
alphabetically bytopic, then by subtopic. The presentation number
where the topic wascovered is indicated in brackets after each
entry.
Access...to Internet Opportunity [1]
Conclusion
Handout (318K) (Requires Adobe AcrobatReader) [3]Overall
Conclusions [3]
ConflictBetween RCP and Telefonica [3]
EducationLong-term outlook [1]Short-term outlook [1]
FinancingBanks [2]Going Public [2]Government Assistance
[2]Multinational Aid [2]Multinational Ventures and Acquisitions
[2]Other Sources [2]Overview of [2]Venture Capital [2]
GeographyGeography and Demography [1]
Intellectual PropertyOverview of [2]
LaborMarket for [1]
The Case of Peru: Index
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Red Cientifica PeruanaBeginnings of (1991-1994) [3]Cabinas
Publicas Program [3]Creating an Internet Culture [3]Introduction to
[1]
Summary...of Presentation 1 [1]...of Presentation 2 [2]...of
Presentation 3 [3]
Technical CapacityTechnical Capacity [1]
Telecommunications PolicyHistory of (1920-1990) [3]Overview of
[2]Privatization (1994) [3]Reform Act (1991) [3]
Telefonica del PeruEnding Monopoly of (1997-1999) [3]Future of
[3]Infrastructure Investment by (1995-1999) [3]
The Case of Peru: Index
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Project Home
ChartsViews: [ Overview | Presentations | Index | Charts ]
This page lists the charts and tables on this Web site and in
our slideshows, alphabetically by title. The presentation number
where the topicwas covered is indicated in brackets after each
entry.
Expansion and Modernization Program of Telefonica,1994-1998
[2]
Internet Connection Fees Advertised by RCP, 1999 [1] Labor
Market Breakdown (from Power Point slides) [1] Peru Snapshot in
Statistics (from Power Point slides) [1] Peruvian Users of
Teleservices by Type of Service, 1996 [1] Public Cabin in Rural
Area (photograph) (from Power Pointslides) [3]
Software Piracy, 1995-1997 (from Power Point slides) [2] Sources
of Financing, Conceptual Overview (from PowerPoint slides) [2]
Survey of Banks Providing Lines of Credit and Loans, 1999[2]
Telecom Infrastructure Indicators, 1993-1996 [1] Telephone
Penetration, 1993-1996 (from Power Pointslides) [1]
Telephone Service Tariffs (Telefonica), 1999 [2] Wait For
Telephone Line In Months, 1993-1996 (from PowerPoint slides)
[1]
The Case of Peru: Charts
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Research and Analysis by Topic
Banks(This topic was originally discussed in Presentation 2)
Bank loans and lines of credit are available in Peru, but like
in theUnited States, they are a costly source of financing. For
smallbusinesses, loans are only given with personal collateral of
one ofthe borrowers. Even for large businesses, the interest
rates(taken from the Banco de Comercio) can be prohibitive,
rangingfrom 20-60% depending on the type of loan and whether it is
innuevo soles or US dollars. At the extreme end, an
overdraftinterest in soles carried an interest rate of 166.17%
compared to28% if denominated in dollars. This shows the inherent
riskperceived of a currency devaluation in Peru. For
smallbusinesses without access to a foreign currency, these high
ratesmake bank loans very unattractive.
Other major banks surveyed provided services for
businessesincluding lines of credit and loans, but at similar
rates. Thesebanks included:
Banco de Credito: financing options fit most short termcapital
needs, with special products for the agriculturesector. The also
offered some medium and long term longs,and loans for
construction.
Banco Latino: Banco Republica Banco Santander: a Spanish bank
Banco Wiese: offers a variety of options for small and
largebusinesses. Wiese interest rates were lower than Banco
deComercio.
See AlsoThe next topic in this presentation: Financing:
GovernmentAssistance
SourcesEmail correspondence with Latin American Venture
Capitalist andEntrepreneur from Sandro Trosso
The Case of Peru: Banks
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Conversation with Peruvian Congressman Oswaldo
SandovalAguirre.
Conversation with Latin American Venture Capitalist
OswaldoSandoval Zavala.
Proyecto De Ley Promocion de la Inversion en
DesarrolloTechnologico (Law Project for the Promotion of Investment
inTechnical Development)
IADB story on Internet for the People Endeavor Initiative
LatPro's "Can the Venture Capital Model Work for Latin America?"
World Bank Inter-American Development Bank Red Cientifica Peruana
Banco de Comercio interest rate table The Industry Standard company
description of FirstComCorporation
Quicken.com/Excite page on FirstCom Montealegre, Ramiro, "A
temporal model of institutionalinterventions for information
technology adoption inless-developed countries", Journal of
Management InformationSystems.
The Case of Peru: Banks
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Research and Analysis by Topic
Government Assistance(This topic was originally discussed in
Presentation 2)
There are several possible mechanisms for the state to
provide(or assist in providing) financing for Internet
ventures.
Direct financing from the state transfers resources from
theState through specialized institutions or a
technologicaldevelopment fund to those companies interested in
employing anew technology, or which claim to generate or adapt
technology intheir own labs or contract their development with
special R&Dentities. The resources can be transferred as
nonrefundablefunds through contests or as loans with or without
elements ofsubsidy. In general, subsidies on part of the cost of a
project arejustified when there are externalities, large risks, and
long termmaturation of the R&D.
Tax Benefits and Subsidies would allow the reduction of incomeby
investments that businesses have in R&D, for the purpose oftax
payment. Tax incentives and benefits and subsidies forcertain
industries are very controversial in the PeruvianCongress. Prior to
the free market reforms of the Fujimorigovernment, tax breaks and
subsidies were used to favor certainindustries over others. Often
these tools were used to give favorsto particular interest groups.
Under the new Constitution of 1993,Congressmen are reluctant to
support any law that would provide"market distorting" incentives to
particular sectors of the economy,such as tax incentives and
subsidies. According to oneCongressman, the current government is
unlikely to pass any lawthat provides such tax incentives.
Such distaste for tax benefits is evident from the failure of
the LawProject to Promote Technological Development to pass into
law inSeptember of 1999. This bill (Law Project 5054 discussed
below)proposed tax benefits for projects related to technology
R&D andthe use of new technologies. This bill and other similar
laws arediscussed below.
Law Project 5054 - text of law (Spanish) - partial
Englishtranslation
In 1999 a new law was proposed under the Law Project for
thePromotion of Investment in Technical Development by the
The Case of Peru: Government Financing
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Congressional Commission on Science and Technology. Whilethe law
passed the approval of the Science and TechnologyCommission, it was
rejected outright by the EconomicCommission in September 1999 as
mentioned above.
The proposed law contained items relevant to financing
oftechnology projects, and would most likely apply
toInternet-related projects. The proposed law included tax
benefitsand credits relevant R&D investments or adoption of
newtechnologies (up to 20% of net income).
Law Project 3261 - text of the law (Spanish) - Despite the
failureof Law Project 5054, a previous project begun in April 1997
for alaw proposing a framework for the promotion of science
andtechnology was realized on 8/4/99.
Details related to financing include Article 7, which states
that theState promotes and guarantees private, national, or
foreigninvestment that contributes to the development of science
andtechnology and the innovation and transfer of technology.
Thiswould likely apply to Internet-related technologies, and
couldpossibly relate to the government guarantee on the RCP
loanmentioned in Venture Capital and Multinational
Organizationssections.
Details related to intellectual property: Article 29 states that
theState protects innovation in all fields of technology through
theauthorization of industrial property titles in concordance with
thelegal devices in force and with international treaties signed
byPeru.
See AlsoThe next topic in this presentation: Financing: Going
Public
SourcesEmail correspondence with Latin American Venture
Capitalist andEntrepreneur from Sandro Trosso
Conversation with Peruvian Congressman Oswaldo
SandovalAguirre.
Conversation with Latin American Venture Capitalist
OswaldoSandoval Zavala.
Proyecto De Ley Promocion de la Inversion en Desarrollo
The Case of Peru: Government Financing
http://www.stanford.edu/~csandvig/cs377c/2-06.shtml (2 of 3)
[12/13/1999 4:26:05 PM]
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Technologico (Law Project for the Promotion of Investment
inTechnical Development)IADB story on Internet for the People
Endeavor Initiative LatPro's "Can the Venture Capital Model Work
for Latin America?" World Bank Inter-American Development Bank Red
Cientifica Peruana Banco de Comercio interest rate table The
Industry Standard company description of FirstComCorporation
Quicken.com/Excite page on FirstCom Montealegre, Ramiro, "A
temporal model of institutionalinterventions for information
technology adoption inless-developed countries", Journal of
Management InformationSystems.
The Case of Peru: Government Financing
http://www.stanford.edu/~csandvig/cs377c/2-06.shtml (3 of 3)
[12/13/1999 4:26:05 PM]
http://www.congreso.gob.pe/ccd/proyectos/pr9908/00505495.htmhttp://www.iadb.org/exr/IDB/stories/1997/eng/e11f2.htmhttp://www.endeavor.org/http://www.latpro.com/articles/venture-capital.htmhttp://www.worldbank.org/http://www.iadb.org/http://www.rcp.net.pe/http://www.bancomercio.com/tasas/opera.htmhttp://www.industrystandard.net/companies/company_display/0,1591,52694,00.htmlhttp://www.industrystandard.net/companies/company_display/0,1591,52694,00.htmlhttp://quicken.excite.com/investments/quotes/?symbol=FCLXhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/class/las194/
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Research and Analysis by Topic
Technical Capacity(This topic was originally discussed in
Presentation 1)
Since the early 1990s, the technological capacity of Peru
(especially thatspecific to telecommunications) has risen
dramatically. Peru's Physicaltelephone network has been
invigorated, with a dramatic increase intelephone penetration from
2.9% in 1993 to 5.9% in 1996 and a dramaticdecrease in the wait for
a telephone line (see graph).
Such vitalization in the telephone system is largely due to
governmentalpolicy such as the privatization of the formerly
state-run ENTEL. Nowfunctioning as Telefonica del Peru (TDP), the
company has investedheavily in infrastructure, resulting in high
growth of the sector.
In terms of Internet-specific capacity, Peru was identified as
one of LatinAmerica's (and the world's) fastest growing markets.
The rate ofownership of Personal computers has seen an approximate
377%growth rate. The number of Internet hosts has grown over 204%
in thelast 12 months. Such advancements have given Peru the status
of anInternet Growth Leader.
The top Internet Service Provider in Peru is Red Cientfica
Peruana, orRCP (see: http://ekeko.rcp.net.pe/rcp/rcp_net.htm). It
is a user-ownedcooperative that pioneered the concept of cabinas
pblicas -- franchisedcomputer centers typically run by individual
investors, chambers ofcommerce, or banks that provide Internet
access through RCP for aboutUS$1 per hour.
It is interesting to note that according to our statistics,
actual telephonesystem modernization is rapidly outpacing
predictions. The followingtables summarize the state of the
technical capacity of Peru.
Peruvian Users by Type of Service
Peruvian Users of Teleservices Nationally, 1996
Type of Service # users
Telephone 1,260,000
Cellular 152,000
Cable TV 100,000
Internet Access 40,000
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Source: Peru en Numeros, 1997
Telecommunications Infrastructure
Indicators from Telefonica Del Peru,1993-1996
1993 1994 1995 1996
Installed capacity of fixed lines 753,987 870,669 1,309,908
1,764,809
Total lines in service 673,021 772,390 1,109,231 1,435,147
Lines in service per 100 people 2.9 3.4 4.7 5.9
Avg # of months of waiting list for a line 70 33 5 2
Source: Peru en Numeros, 1997
Personal Computer Penetration
Personal Computer Penetration in Peru, 1996-19991996 1999
PCs per 1000 inhabitants 5.9 27.9
1996 Data Source: World Bank World Development Report
1998/991999 Data Source: The Global Competitiveness Report 1999
Internet Connection Fees
The following fees were advertised by RCP (as of 10 Oct
1999).
Tarifas RCP-Internet Per
CUOTAS MENSUALES
CONEXIONES DIAL UP LINEAS DEDICADAS(Digired)
UUCP InteractivoUUCP
+SLIP
9.6Kbps
19.2Kbps
64Kbps
128Kbps
256Kbps
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Tarifa Base $20.99 $21.99 $48.00 $330 $390 $600 $980 $1300
Institucionalo Individual
$18.99 $18.99 $43.00 $300 $360 $550 $900 $1200
CabinasPblica
$15.00
See AlsoThe next topic in this presentation: Access to Internet
Opportunity
Sources
Source: Holligan, Jane (October 25, 1999). Business Week.
"Peru:Putting the Net in the corner store."
Directorio Nacional de Cabinas Pblicas (surveyed as of 10 Oct
1999) Mangurian, David. (1997). IDB America Magazine Focus
Article:"Internet for the People"
Government of Peru, Peru en Numeros (1997). Telefonica del Peru
-- Variables Significativas Telefonica del Peru -- Regulacion y
Apertura del Mercado Organismo Supervisor de Inversion Privada en
Telecomunicaciones(OSIPTEL)
"Telecom Boom" (October 1997). Latin Trade, 5 (10), pg. 48.
The Case of Peru: Technical Capacity
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Research and Analysis by Topic
Telecommunications PolicyOverview(This topic was originally
discussed in Presentation 2)
Peru has seen a rebirth in the telecommunications industry and
adramatic improvement in infrastructure in the past decade. Muchof
this can be attributed to recent change in
telecommunicationspolicies and movement by the major telecom
players in the region.A 1991 Telecommunications Reform Act phased
out ENTEL Peru,the former telecom conglomerate, to allow foreign
investment,provide for the transition to a more liberalized market,
andestablish a new regulation process for the industry. Telefonica
delPeru (http://www.telefonica.com.pe/) was bought by Telefonica
delEspana, or TISA, (http://www.telefonica.es/) in 1994,
thusprompting a five-year exclusivity period for TISA -- a
controversialpolicy of legalized monopoly.
During this period, Telefonica blanketed Peru with an
advertisingcampaign featuring a piano tuner tuning a grand piano,
with themessage "It sounds worse before it sounds better." As can
beinferred, policy changes showed mixed results. A large number
ofcomplaints were registered with the new government regulator,and
some challenged that the spectacular growth was not as largeas many
thought would have been possible without the monopoly.
Today, the telecommunications market is entirely privatized
andthe Peruvian government has mandated interconnection.
See AlsoThe next topic in this presentation: Intellectual
Property Overview
Sources"Telecom Boom" (October 1997). Latin Trade, 5 (10), pg.
48. Mayo, John K.; Heald, Gary R.; Klees, Steven J.
"CommercialSatellite Telecommunications and National Development:
LessonsFrom Peru." Telecommunications Policy, 16(1). pp. 67-80.
(1992).
O'Neill, Judith. "Dynamics of Telecommunications Sector
The Case of Peru: Telecom Policy
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Restructuring." Telecommunications Int'l Edition, pp.
70-75.(January 1991).Bowen, Sally. (August 9, 1991). "Peru Telecoms
MarketConnection" Financial Times (London), p. 3.
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Research and Analysis by Topic
TelecommunicationsPrivatization (1994)(This topic was originally
discussed in Presentation 3)
In 1994, the intent of telecommunications reform legislation
isrealized and the telephone industry is privatized in Peru. Parts
ofENTEL (the formerly state-owned monopoly) and CPTSA
becomecontrolled by the Telefonica Peru Holding. In February, a
majorityshare in Telefonica is sold at auction to Telefonica de
Espana(TISA) for $1.6 billion. The purchase provides a source
ofmuch-needed foreign capital to expand and modernize (and
thepurcase price provides the state much-needed revenue).
Whileprivatization was achieved in 1994, market liberalization was
not:TISA is given a five year exclusivity period (monopoly) in
manymarkets to protect its investment. A schedule is established
tophase out the remaining (minority share) state ownership
ofTelefonica over the next five years by selling these shares
toprivate investors. While the purchase price for Telefonica del
Peruwas thought by some to be an overvaluation of the
existingsystem, others complained that the grant of a five-year
legalmonopoly TISA was a corporate giveaway that would
ultimatelyhurt consumers.
See AlsoThe next topic in this presentation: RCP's Beginnings
(1991-1994)
SourcesTelefonica del Peru -- Variables Significativas
Telefonica del Peru -- Regulacion y Apertura del Mercado Organismo
Supervisor de Inversion Privada enTelecomunicaciones (OSIPTEL)
"Telecom Boom" (October 1997). Latin Trade, 5 (10), pg. 48.
The Case of Peru: Telecom Privatization
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Research and Analysis by Topic
Telefonica's InfrastructureInvestment (1995-1999)(This topic was
originally discussed in Presentation 3)
In 1995 the now-private telecommunications monopoly
officiallychanges its name to Telefonica del Peru, SA and embarks
on amassive program of investment that would total US$1.5
billiondollars -- US$1.1 billion of this has been for basic
telephony. Theaverage wait time for a telephone line to be
installed plummetsfrom 35 months in 1994 (77 in 1995) to 5 months
in 1995, then to2 months by 1996 (see graph).
After two years of development, network digitization stood at
77%.Telefonica goes pubic in July of 1996 by issuing ADRs
throughthe NYSE (symbol: TDP) in the United States. The
offering,valued at $1.1 billion, was the largest equity sale in a
LatinAmerican stock since the Mexican peso crisis and
resultant"tequila hangover." Analysts say that it's success was
abenchmark of returning confidence in the region. Also in 1996,
theState's shares of Telefonica are offered publicly in Peru.
By 1997 Spanish parent company TISA planned on spending$600
million in Telefonica development. Telefonica has developeddouble
the phone line penetration in Peru than since it wasprivatized
(6.7% in compared to 3.4% in 1994), a
remarkableimprovement.Expansion and Modernization Program of
Telefonica, 1994-1998
1994 1995 1996 1997 1998 planned real planned real planned real
planned planned
Installationofadditionallines
104,000 116,682 140,000 439,239 216,000 445,714 259,300
259,300
Substitutionof installedlines
20,000 63,486 30,000 111,781 50,000 45,096 50,000 50,000
Source: Peru en Numeros, 1997
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See AlsoThe next topic in this presentation: Telefonica: Ending
theMonopoly (1997-1999)
SourcesGovernment of Peru, Peru en Numeros (1997). Telefonica
del Peru -- Variables Significativas Telefonica del Peru --
Regulacion y Apertura del Mercado Organismo Supervisor de Inversion
Privada enTelecomunicaciones (OSIPTEL)
"Telecom Boom" (October 1997). Latin Trade, 5 (10), pg. 48.
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Research and Analysis by Topic
Access to Internet Opportunity(This topic was originally
discussed in Presentation 1)
While many of the aspects described in other sections reveal
apromising picture for Peru, it must be remembered that despitesuch
promise, MANY of Peru's citizens are and will continue to
beexcluded from Peru's Internet revolution. Among these are thepoor
in urban and rural areas, the uneducated and illiterate, andthe
isolated people outside of large urban centers. It is highlylikely
that many people fall under more than one of thesedescriptions. The
poor cannot afford education, even at the mostprimary levels. Other
families in the middle class may still beunable to afford higher
education.
A useful framework for considering how people may be
excludedcould be through the lenses of Dispersion, Content, and
Poverty.As mentioned in the geography section, populations
dispersedoutside of urban areas may not have the communication
lines tomake the leap to Internet technology. In terms of content,
the webis still primarily an English language medium-while
Peruviancontent is growing in leaps and bounds, for many Peruvians
eventhat content may not be relevant to their lives. In addition,
thelarge indigenous population of Peru may not access the
webbecause of a language difference (speaking Quechua and
notSpanish).
However, the most glaring obstacles to opportunity and accessare
economic. 54% of Peru's population lives below the povertyline, and
national consumption of products is heavily biasedtoward the
highest 10% income earners. Even Peruvians whoaren't destitute
would still encounter difficulties in getting on-line,as evidenced
from a simple comparison of wages and the costs ofequipment and
training (see table).
On a positive note, Peru seems to be doing well given
thissituation. RCP has proven to be a true believer in
UniversalAccess through the innovative "Cabinas Publicas" (low cost
publicInternet cabins) project and through other initiatives to
providePeruvian content and education. Such action enables NGOs
andadvocacy groups to put up sites on the web to benefit
varioussectors of the Peruvian population. In this sense, Peru (and
RCPin particular) are doing the best with what they have to
increase
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opportunity and access to the Internet throughout the
country.
See AlsoThe next topic in this presentation: Introducing Red
CientificaPeruana
SourcesOECD, Development Indicators -- Economic Well-being
(1999). U.S. Central Intelligence Agency, "Peru," CIA World
Factbook(1999).
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Labor
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Slide 1 of 14
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Labor
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Education, Labor Markets andTechnical CapacityOctober 25,
1999
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Table of Contents
Peru Snapshot
Labor
Labor: A receptive population?
Education: Long TermInvestment is the key to success
Education: Short TermGood higher level training / education
Technical CapacityPhysical Network Invigorated
Wait For Telephone Line In Months,1993-1996
Technical Capacity Internet: RemarkableGrowth
Red Cientfica Peruana
Opportunity: Many Still Excluded
Opportunity: Wages & Costs
Opportunity: Doing Well With the Situation
Opportunity: Promoting Peruvian Content
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Conclusions
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Labor A receptive population?
Cost of Labor: $2.04/hr. (Mfg. Sector)
Labor Distribution:
Agriculture: 5.9% Industry 21.6% Services 72.4%Services
Breakdown:Commerce: 33.3% Transportation: 9.2% Finance: 8.8% Other:
25.3%
SOURCES:
www.odci.gov/cia/publications/factbook/pe.htmlwww.oit.org.pe/spanish/260ameri/info/estadis/estadis.shtml
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Peru Snapshot
Population 26.6 million
Land area 496,225 sq. mi.
Languages: Spanish; Quechua; Aymara
Urban 71.2%; Rural 28.8%
Age Structure: 0-14 35% 15-64 60% 65+ 5%
GDP per capita (1998): US$ 2,209 SOURCES:
http://www.odci.gov/cia/publications/factbook/pe.htmlwww.iadb.org/oce/IPES98_ENG/Appen_Eng.pdf
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The Main EventRCP vs. TelefonicaDecember 1, 1999
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Table of Contents
Title Slide
RCP and Telefonica del Peru The Ring
Telecom Beginnings Govt origins of todayssector
Telecom Reform Act Regulatory changes setthe stage
Telefonica del Peru Privatization changes thelandscape
Red Cientfica Peruana Network beginnings
RCP: Internet host A new role
RCP: Vision of Internet Progressive model ofaccess
RCP: Education Knowledge deployment
RCP: Public Cabins Universal Internet access
Telefonica del Peru Investment expandsinfrastructure
Telefonica del Peru End of monopoly bringscompetition
Telefonica del Peru Challenges for today
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RCP and Telefonica del Peru The Ring
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Telefonica del Peru Moving fast...
Telefonica del Peru Challenges for the future
RCP vs. Telefonica A history of conflict
RCP: Today and tomorrow Challenges for thefuture
Conclusions An ironic Symbiosis
Conclusions RCP--an alternative model
Conclusions Who is outside the ring?
The Dream of Universal Access (photo)
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PPT Slide
SOURCE: Holligan, Jane. Peru: Putting the Netin the Corner
Store. BusinessWeek (intl ed.)October 25, 1999.
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Software Piracy
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Intellectual Property Policy
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Sources of Financing
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Creating Internet OpportunitiesPublic and Private
InitiativesNovember 10, 1999
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Table of Contents
Introduction
Telecommunications Policyto keep state participation small but
strong
Telecommunications PolicyIt sounds worse before it sounds
better
Technology PolicyNot the first priority
Intellectual Property PolicySteps toward protection
Software PiracyStill a major problem
Sources of FinancingGood precedents pave the way
Sources of FinancingMedium & Large Companies: Internal
Sources of FinancingMedium & Large Companies: External
Sources of FinancingSmall companies dont have options
Sources of Financing
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Notable shortcomings
Sources of FinancingGood prospects for the future
Conclusions:Obstacles outnumber opportunities
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Software Piracy Still a major problem
Piracy decreasing 1995
1996
1997
Piracy rates
84%
74%
66%
Piracy losses
$40,522
$32,437
$31,017
but still a major source of lost revenue
75% of businesses use illegal software
6 out of 10 applications in L.A. pirated
On Watch List for having serious intellectual property rights
deficiencies
CS 377C - CLAS 194 Fall 1999
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Sources of Financing Good precedentspave the way
CS 377C - CLAS 194 Fall 1999
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Technical Capacity
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Technical Capacity Physical NetworkInvigorated
Revitalized Telephone SystemPrivatization, Liberalization, &
Expansion
Telephone Penetration (lines/100)
Installed Capacity: 1.7 million lines
Slower CATV, cellular deployment SOURCES: Peru en Numeros,
1997
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Technical Capacity
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Wait For Telephone Line In Months,1993-1996
CS 377C - CLAS 194 Fall 1999
SOURCES: Peru en Numeros, 1997
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Research and Analysis by Topic
Geography and Demography(This topic was originally discussed in
Presentation 1)
Looking at a map of Peru, one immediately notices the
greatvariety of terrain, resulting in widely scattered cities
across anoften impassable landscape. Two of the most salient
geographiccharacteristics are the enormous percentage of
mountainousterrain on one side of the country and the vast expanse
of denserainforest on the other side.
Impassable terrain directly affects the teledensity of a region,
ashigh geographic obstacles (such as mountains of jungle) result
inhigh installation costs of telephone lines. Communities that
findthemselves in peripheral inaccessible areas of the country
aretherefore double-isolated, through geography and lack
ofcommunications. Despite the great strides that have occurred
inPeru's telecommunications landscape, geography continues to beone
major obstacle to wide-spread and complete Internet growthin
Peru.
In addition, the geographic make-up of a country
directlyinfluences the type of labor its population engages in. In
Peru'scase, such a high variety of terrain results in a low
percentage ofarable land. Peru therefore has a very low percentage
of itspopulation engaged in agriculture (7% of GDP) and is thus
highlydependent on food imports.
In addition, Peru is a highly centralized nation, with 71.2% of
thepopulation living in Urban areas. This is one factor mitigating
andexacerbating the difficulty in reaching the outer regions of
thecountry. With so much of the population in cities (63.3% of
totalpopulation in Lima), much of the population can be wired or
atleast have access to an area with telephones. At the same
time,there is not much incentive for the powers that be
(government,telephone company) to consider the minority population
who is notwired, since wiring such a minority stake across an
impassablegeography is costly and inefficient. On one hand,
Peru'sgeography is an advantage to city dwellers who have access to
acentralized area of decent telecommunications activity. On
theother hand, those in non-urban isolated areas are excluded.
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See AlsoThe next topic in this presentation: Labor Market
Sources"Peru." Encyclopdia Britannica Online. Government of
Peru, Peru en Numeros (1997). U.S. Central Intelligence Agency,
"Peru," CIA World Factbook(1999).
The Case of Peru: Geography and Demography
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Research and Analysis by Topic
Labor Market(This topic was originally discussed in Presentation
1)
Peru's labor market is highly shaped by the nation's
geography.Much of Peru's land is not arable, due to extreme terrain
such asmountains or rain-forests. Corresponding to the low
percentage ofarable land, a low percentage of Peru's population is
engaged inagriculture (7% of GDP). However, in terms of the
Internet, ourgroup considers this factor to be a relative
advantage-a lowpopulation in agriculture could signify a population
that is engagedin more service or commerce, sectors which have
benefitedgreatly from the Internet in the developed world.
This is indeed the case-Peru has a higher percentage of
itspopulation engaged in Industry (21.6%) and Services (72.4%)than
most of its Latin American neighbors. At the same time,these
sectors are quite difficult to define. Roaming small marketvendors
or providers of other services (i.e. shoe-shining orlamination) can
fall under the service sector yet still have no greatlabor benefit
from the Internet. Considering the imbalancebetween workers in
formal and informal labor (Informal + "SmallBusiness" = 59.3%,
Formal = 40.7%) and the difficulty inmeasuring underemployment, it
is likely that many Peruvians facethe same situation. In addition,
it is highly unlikely that any of the7.7% of the population that is
unemployed would be able toaccess the Internet.
Beyond the labor sectors that the population works in, it
isimportant to determine what kind of specific labor is
beingundertaken-a large population in "Services" says nothing
abouthow many of those workers are manual transportation laborers
orhow many are involved in information services. With the
averagecost of labor at $2.04/hr. (from the manufacturing sector),
it islikely that many within Services and Industry are engaged
inlow-value-added work, rendering the Internet not as relevant
totheir lives.
Beyond these obstacles, however, Peru's labor market
stilldemonstrates a "decent seed" that could be taken advantage
offurther in terms of diffusion of the Internet.
The Case of Peru: Labor
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See AlsoThe next topic in this presentation: Education:
Long-term outlook
SourcesOIT Regional Office for Latin America & The
Caribbean, ILOLabor Statistics (1999).
OIT Regional Office for Latin America & The
Caribbean,Estructura del Empleo no Agropecuario 1990-1997
(1999).
Government of Peru, Peru en Numeros (1997). U.S. Central
Intelligence Agency, "Peru," CIA World Factbook(1999).
The Case of Peru: Labor
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Opportunity
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Opportunity
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Opportunity
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Opportunity Wages & Costs
Average Monthly Wage, in US dollars
Cost of a Computer = $1,000-$2,000
Cost of Training = $15-75/month
Cost of Access = $15-~$30/month SOURCES: Peru en Numeros, 1997
Personal interview with Ricardo
Wilsonekeko.rcp.net.pe/educacion/regulares.htm
Previous slide Next slide Back to first slide View graphic
version
Opportunity
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Research and Analysis by Topic
Introducing Red CientificaPeruana(This topic was originally
discussed in Presentation 1)
Formed in 1991 as a national network of universities and
researchfacilities, La Red Cientifica Peruana, or RCP has since
grown tobe the major mover and shaker in the Peruvian Internet
scene. Inthe development of the organization, RCP's goal has
remainedsimple and sincere: To provide Peru with the tools to
adequatelyand fairly use the Internet to the country's advantage.
This visionhas led RCP to undertake several different initiatives
that havegreatly bolstered Peru's Internet presence internally
andinternationally.
To begin with, it could be fairly said that RCP was
primarilyresponsible for the increase in Internet users-through
communityeducation, informative chats, conferences, and provincial
outreachprograms, the non-profit organization convinced many
Peruviansof the importance of the Internet-in this sense, RCP
"grew" its ownmarket of Internet users. Today it continues to do
so, providingeducation and training to its ISP subscribers and
maintaining thetradition of free informative chats to the public
from their office inLima.
RCP has taken this vision of education and Internet
provisionmuch further than Lima, however. With its star project,
"CabinasPublicas," RCP envisioned and created a new model for
internetprovision, matching the realities of most Peruvians, who
haveneither a telephone line nor a Personal Computer.
Affordablepublic Internet cabins address these realities, and they
havealready sparked national growth in Internet use, contributing
to themore than 400,000 final internet users in Peru.
Finally, RCP undertakes a number of smaller projects as
well,including Proyecto Ciudadano, a RCP sponsored web-site
thatprovides information to people outside of Lima about civic
rightsand social services. In this sense, RCP stands by its ideal
of theInternet for Democratization.
See Also
The Case of Peru: Introducing RCP
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The beginning of the next presentation: Summary of
Presentation2
SourcesPersonal interviews with Peruvians, October 1999 Articles
from El Comercio (Peruvian Newspaper) See: RCP PressInformation.
(February 25, 1999 and others).
The Case of Peru: Introducing RCP
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Research and Analysis by Topic
Summary of Presentation 2(This topic was originally discussed in
Presentation 2)
In order to foster Internet development and growth,
certaininstitutions need to be in place. Specifically,
thetelecommunications sector, intellectual property protection,
andthe availability of financing support the growth of
Internetventures.
Telecommunications serves as a basis for the Internet
byproviding many of the lines and infrastructure due totelephone
expansion. Many telecom companies thatpreviously dealt with
telephone, cable, and wireless arecreating Internet divisions to
compete in the Internet serviceprovision market or leasing their
lines to other serviceproviders to do the same. In Peru, recent
changes intelecommunications policy, such as the buyout of
Telefonicadel Peru and the ensuing monopoly by its buyer,
Telefonicadel Espana, have affected consumer satisfaction and
linecontrol.
Intellectual property rights must also be in place beforemany
Internet ventures can take place, especially in thecase of
e-commerce and online businesses. Peru has takenstrides toward
preserving intellectual property, but manylaws are unenforced. In
order to secure entrepreneur's trust,the government must step up
its intellectual propertyprotections.
Finally, financing options must be in place for a company
toexplore Internet options. Developing a business,establishing a
web presence, or increasing Internet accessis a costly venture and
unlikely to succeed with only privatefunds. Most companies are
forced to look outside of Peru formonetary support because of the
lack of a venture capitalmodel like the U.S. and the government's
reluctance to backtechnology enterprises.
See AlsoThe next topic in this presentation: Telecommunications
PolicyOverview
The Case of Peru: Summary 2
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Sources
The Case of Peru: Summary 2
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[12/13/1999 4:33:47 PM]
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Research and Analysis by Topic
Cabinas Publicas(This topic was originally discussed in
Presentation 3)
RCP has been a pioneer of an alternative model for access to
theInternet: Cabinas Publicas (Public Cabins). Rather than
assumeeveryone has telephone, RCP brings access to those
withouthardware. Cabinas Publicas are available for a low
monthlysubscription fee. They may be as small as one computer,
orcontain a lab of many computers. They typically function as a
sitefor training and outreach as well as access. Cabinas Publicas
areavailable throughout the country. 200 cabins currently exist
underthe direct responsibility of RCP, while even more
privatefranchises bring the total number of cabinas to 600.
CabinasPublicas, when operated as a franchise, have typically
beenprofitable. This model of providing access has been emulated
byseveral other Latin American countries -- Uruguay, Columbia,Togo,
Mauritania have asked RCP for assistance.
See AlsoA picture of a single-computer cabin (called a
"monocabin") in arural areaThe next topic in this presentation:
Telefonica: InfrastructureInvestment (1995-1999)
SourcesRed Cientifica Peruana (RCP) Red Cientifica Peruana,
"Cabinas Publicas RCP: Modelo deacceso universal"
Holligan, Jane. "Peru: Putting the Net in the Corner
Store."BusinessWeek [intl ed.] (October 25, 1999).
The Case of Peru: Cabinas Publicas
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Embedded Secure DocumentThe file
http://www.stanford.edu/~csandvig/cs377c/Peru_Final_Handout.pdf is
a secure document thathas been embedded in this document. Double
click the pushpin to view Peru_Final_Handout.pdf.
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The Case of PerAnd The Information Revolution in Latin
America
S U M M A R YOur final analysis of the Internet Revolution in
Per focuses on an examination of two casestudies, Red Cientfica
Peruana (a.k.a. RCP, a nonprofit Internet Service Provider)
andTelefnica del Per (the dominant telecommunications carrier, and
a former state-run monopoly).This handout is provided as a
reference for background information about the state of Per that
istoo lengthy to include in our spoken presentation, and a
repetition of our concluding points aboutthe Internet in Per.
B A C K G R O U N DPopulation: Just over 26.6 million, or a
little less thanCalifornia. Land area: 496,225 sq. mi., or about
the sizeof Alaska. Languages: Spanish, Quechua, Aymara.63% of the
population resides in greater Lima. GDP percapita: US$2,209 (1998).
Cost of labor: About US$2.04per hour in manufacturing.
G E O G R A P H YThere is a shortage of arable land due to the
largelymountainous terrain. There is a heavy reliance on
foodimports, and agriculture is a relatively small economicsector
(7% of GDP). Many areas in the interior of Peruare extremely remote
and difficult to reach. In manyrural areas it is simpler to use
satellite communicationsthan to install landlines.
E D U C A T I O NLiteracy rate: 94.3% While official figures for
primaryenrollment are very good (100%+), other reports indicateit
may be closer to 60%. 59% of universities offerComputer Science
degrees, while vocational training incomputer skills is widely
available.
T E L E P H O N EN E T W O R KPrivatization of the monopoly
carrier Telefnica del Perled to massive infrastructure investment
(US$1.5 bn) bythe buyer, Telefnica of Spain. Telephone
penetration:5.9 lines in service per 100 people, and climbing
rapidly.Installed capacity: 1.7 million lines.
I N T E R N E TPeru has been ranked one of the Internet growth
leadersof Latin America. There are 10-12 national ISPs.Personal
computer ownership rose from 5.9 per 1,000 in1996 to 27.9 per 1,000
this year. The largest ISP, RedCientfica Peruana, offers
Peruvian-specific content,hosting, and a search engine. Low-cost
Internet access(US$15/month) and training is available from
manypublic access sites.
F I N A N C I N GNew ventures are often financed by individual
angelinvestors typically family. No tax incentives orsubsidies for
technology investment are available. NoWorld Bank loans have been
made intelecommunications. Interest rates for bank loans arevery
high (15-167%). No venture capital or angelnetworks exist.
K E Y P O I N T S In Per, a non-profit organization (RCP)
dedicated to
scientific and educational development wasessential in
developing an Internet culture, and isnow the largest Internet
service provider.
At the same time, massive private foreigninvestment (by
Telefnica) in infrastructure wasrequired to improve the
telecommunications networkto the point where Internet service was
possible formore than a few, we call this the "necessary giant.
This investment was stimulated by governmentaction: the grant of
a five-year monopoly period tothe buyer of the formerly state-run
telecommonopoly to help guarantee a return.
An innovative non-profit program called cabinaspblicas (public
cabins) has made a form ofuniversal access possible over 600 sites
offerpublic Internet access. Cabinas are organized on afranchise
basis, and are profitable. This is beingused as a model by other
Latin American countries.
While the Internet is expanding in Per, the nationseconomic
inequality makes the prime barrier to awide scale Internet
revolution an economic one. Asit stands, the benefits of any
development are likelyto benefit those that are already of
means.
L E A R N M O R EFor references and additional information on
this topic,please visit our Web site at:
http://www.stanford.edu/las194/Choose links to group projects,
then Team Peru
CS377C / CLAS194: Fall 1999
About this Handout
This handout was prepared by John Bilderbeck, Debbie Jaffe,
Karen Libby, and Christian Sandvig for the course "The Information
Revolution in Latin America: Obstacles and Opportunities Through
the Internet" offered Fall Quarter 1999, by the Center for Latin
American Studies and the Department of Computer Science, Stanford
University.
Copyright (C) 1999 John Bilderbeck, Debbie Jaffe, Karen Libby,
and Christian Sandvig, All Rights Reserved
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Research and Analysis by Topic
Overall Conclusions(This topic was originally discussed in
Presentation 3)
In Peru, a non-profit organization (RCP) dedicated to
scientificand educational development was essential in developing
an"Internet culture," and is now the largest Internet service
provider.
At the same time, massive private foreign investment
(byTelefonica) in infrastructure was required to improve
thetelecommunications network to the point where Internet
servicewas possible for more than a few, we call this the
"necessarygiant". This investment was stimulated by government
action: thegrant of a five-year monopoly period to the buyer of the
formerlystate-run telecom monopoly to help guarantee a return.
An innovative non-profit program called cabinas publicas
(publiccabins) has made a form of universal access possible-over
600sites offer public Internet access. Cabinas are organized on
afranchise basis, and are profitable. This is being used as a
modelby other Latin American countries.
While the Internet is expanding in Peru, the nation's
economicinequality makes the prime barrier to a wide scale
Internetrevolution an economic one. As it stands, the benefits of
anydevelopment are likely to benefit those that are already of
means.
See Also
The handout for this presentation: Overview Handout
(318K)(Requires Adobe Acrobat Reader)
SourcesBourrie, Sally Ruth, "Peru awaits PCS Entrants," Wireless
Week,June 28, 1998.
Telefonica del Peru -- Tarifas Servicios Telefonicos Basicos
Telefonica del Peru -- Variables Significativas
The Case of Peru: Conclusions
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The Case of Peru: Conclusions
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Research and Analysis by Topic
A History of Conflict(This topic was originally discussed in
Presentation 3)
RCP and Telefonica present the unusual case of a for-profit and
anon-profit organization in direct competition in the ISP market.
Inaddition, RCP is a customer in competition with its most
importantsupplier, Telefonica. RCP must telefonicas lines to
provideInternet service. In the ISP market, RCP is in the lead with
amarket share of 56%, while Telefnica and IBM about evenly splitthe
next 44%.
At one time the RCP home page featured a working clockcounting
down the days until telefonica's legally-sanctionedexclusivity
period (monopoly) in some markets was due to expire.RCP has
repeatedly accused telefonica of unfair practices,including
stalling line installation to RCP clients, cutting lines
todiscredit RCP, preventing the use of Aplio (an Internet
telephonyproduct), and unfair use of lobbying power with the
Peruviangovernment.
See AlsoThe next topic in this presentation: Overall
Conclusions
SourcesDiario de la Republica, Revista Domingo, (Dec 8, 1996).
Red Cientifica Peruana (RCP) Holligan, Jane. "Peru: Putting the Net
in the Corner Store."BusinessWeek [intl ed.] (October 25,
1999).
"Telecom Boom" (October 1997). Latin Trade, 5 (10), pg. 48.
The Case of Peru: Telecom Conflict
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4:34:47 PM]
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Research and Analysis by Topic
Ending the Monopoly(1997-1999)(This topic was originally
discussed in Presentation 3)
While a state-sanctioned monopoly in some markets, it
isimportant to note that Telefonica is not protected by a
legalmonopoly in the market for Internet Service Provision, or in
theLima wireless market. In 1997, BellSouth moves into the
Limawireless market by acquiring 58.8% of Tele2000 -- creating
stiffcompetition for Telefonica. The initial growth of the Internet
seemsto have caught Telefonica unaware, allowing RCP to acquire
asignificant lead and a majority market share that persists
today.
In July of 1997, The courts rule that Telefonica must
provideaccess to its national cellular network outside of Lima
forcompetitors. This is the first step in a series of
interconnectionmandates that would be encouraged by OSIPTEL and
upheld bythe courts.
In 1998, Telefonica's national exclusivity on cellular outside
ofLima ended when Tele2000 won the B Band license. In the
thirdquarter of that year Telefonica's market share fell from 76%
to66%, and TDP's profit margins would drop about 8 percent in
theyear as a whole. While this was a sign of the economic
recessioncaused by el Nino and the emerging financial market
crisis,competition surely played a role.
On August 1, 1998, the government announced the opening oflocal,
national and international long-distance markets this
year,eliminating, by mutual agreement (in exchange for
priceconcessions), TDP's original monopoly. The monopoly was set
toexpire June 27, 1999 -- this makes the openeing of the
marketalmost one year ahead of schedule. The government was
willingto grant Telefonica significant concessions because
Telefonicahad satisfactorily completed its program of network
expansion andinvestment, as promised. By the end of 1998, Peruvian
telephonenetwork digitization reaches 90%.
See AlsoThe next topic in this presentation: Telefonica: Future
outlook
The Case of Peru: Ending the Monopoly
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SourcesBourrie, Sally Ruth, "Peru awaits PCS Entrants," Wireless
Week,June 28, 1998.
Telefonica del Peru -- Tarifas Servicios Telefonicos Basicos
Telefonica del Peru -- Variables Significativas Telefonica del Peru
-- Regulacion y Apertura del Mercado Organismo Supervisor de
Inversion Privada enTelecomunicaciones (OSIPTEL)
The Case of Peru: Ending the Monopoly
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Research and Analysis by Topic
Future outlook for Telefonica(This topic was originally
discussed in Presentation 3)
As of this year (1999) the markets where Telefonica competes
areentirely private. The last government-owned shares of
theformerly state-owned company have been sold. As ofmid-November,
TDP had market capitalization of $2.7 billion.
Telephonica's price for telephone service (to dial-up to ISP)
(innuevo soles):
Commercial installation: 520.38 ( = US$148.83)Basic monthly
subscription: 55.94 ( = US$16.00)Peak rates: 0.094/minute ( =
US$0.027)
This year, Telefonica del Peru sold its Internet properties to
Terra(which is owned by Telefonica de Espana). Telefonica del
Peruwas signigicantly underpaid ($30 million) -- a
profit-generatingstrategy by Telefonica de Espana that may be
duplicated in otherLatin American countries where the dominant
telephone provideris owned by Telefonica de Espana. Telefonica's
Internet Service(TSI) offers a portal service called Ole Peru with
Peru-specificcontent. This places TSI in direct competition with
RCP.
In the year 2000, telephone penetration is expected to be 10%
inthe country, thanks to investment by Telefonica.
See AlsoThe next topic in this presentation: A History of
Conflict
SourcesBourrie, Sally Ruth, "Peru awaits PCS Entrants," Wireless
Week,June 28, 1998.
Telefonica del Peru -- Tarifas Servicios Telefonicos Basicos
Telefonica del Peru -- Variables Significativas
The Case of Peru: Telefonica's Future
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Research and Analysis by Topic
Education: Long-term outlook(This topic was originally discussed
in Presentation 1)
It is most useful to divide analysis of Peru's educational
systeminto Short Term and Long Term components. In the long
term,Peru displays great potential, some tapped, some untapped.
Tobegin with, Peru has a respectable literacy rate of 89%,
especiallyconsidering the large Indigenous population. From this
literacyrate we can extract the basic point that if citizens wanted
to learnthe Internet, most would be able to. In addition, Peruvian
contenton the Internet would be accessible to most of the
population.
Also in the long term, Peru seems to have a very high
primaryschool enrollment, with figures reaching 122% from
compulsoryprimary enrollment. However, upon closer inspection, this
numberis misleading. Some data report that the actual attendance
(asopposed to enrollment) figure in primary school is 59%. This
lowpercentage is likely related to the large incidence of
povertyamong children and their families, as many children must
useschool-time to supplement family earnings by working or
begging.
This low percentage of primary school attendance is troubling
forthe big Internet picture in Peru. Studies of the East Asian
Tigers(South Korea, Hong Kong, Singapore, and Taiwan)
havehighlighted the importance of primary education MORE
thansecondary or tertiary education as being a determinant of
successin technological adoption and diffusion. In order to improve
thestate of primary education, the Peruvian government should
stepup programs to increase attendance and increase the amount
ofpublic expenditure on education (currently > 3% of GDP).
Theamount of public expenditure may not be as important as the
usesto which that money goes. Some possibilities include
providingeducational resources or incentives to children who
wouldnormally have to miss school for economic reasons.
The short term prospects for Peru's Internet development are a
bitmore promising. Peru can claim a good level of higher
leveltraining and education with regard to computing and the
Internet.59% of the universities offer Computer Science degrees,
withcurricula similar to the United States and for most
universities, atleast adequate resources. Private universities are
more likely tooffer better programs and computing resources.
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Beyond the universities, other mechanisms exist for Peruvians
tolearn new Internet technologies. Several vocational schools
inLima offer courses in computing, and one non-profit
institution,Red Cientfica Peruana (RCP) is responsible for much of
a morewide-spread Internet training effort in Peru. RCP
providesaffordable Internet and computer classes and is also
responsiblefor holding conferences, round table discussions, and
"informativechats" about the importance and use of the Internet to
Peruvians.In addition, Peru has made great strides in spreading
this publiceducation of the Internet to citizens in the farther
regions of Peru.
See AlsoThe next topic in this presentation: Education:
Short-term outlook
SourcesJanet Matthews Information Services Quest
EconomicsDatabase-Countrywise Publishing Ltd, Country Market
Report(1998).
UNESCO Statistical Yearbook "Peru." Encyclopdia Britannica
Online. Government of Peru, Peru en Numeros (1997). U.S. Central
Intelligence Agency, "Peru," CIA World Factbook(1999).
The Case of Peru: Education, Long-Term
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Research and Analysis by Topic
Education: Short-term outlook(This topic was originally
discussed in Presentation 1)
The short term prospects for Peru's Internet development are a
bitmore promising than the long-term outlook. Peru can claim a
goodlevel of higher level training and education with regard
tocomputing and the Internet. 59% of the universities offerComputer
Science degrees, with curricula similar to the UnitedStates and for
most universities, at least adequate resources.Private universities
are more likely to offer better programs andcomputing
resources.
Beyond the universities, other mechanisms exist for Peruvians
tolearn new Internet technologies. Several vocational schools
inLima offer courses in computing, and one non-profit
institution,Red Cientfica Peruana (RCP) is responsible for much of
a morewide-spread Internet training effort in Peru. RCP
providesaffordable Internet and computer classes and is also
responsiblefor holding conferences, round table discussions, and
"informativechats" about the importance and use of the Internet to
Peruvians.In addition, Peru has made great strides in spreading
this publiceducation of the Internet to citizens in the farther
regions of Peru.
See AlsoThe next topic in this presentation: Technical
Capacity
SourcesJanet Matthews Information Services Quest
EconomicsDatabase-Countrywise Publishing Ltd, Country Market
Report(1998).
UNESCO Statistical Yearbook "Peru." Encyclopdia Britannica
Online. Government of Peru, Peru en Numeros (1997). U.S. Central
Intelligence Agency, "Peru," CIA World Factbook(1999).
The Case of Peru: Education, Short-Term
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The Case of Peru: Education, Short-Term
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http://www.stanford.edu/class/las194/
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Research and Analysis by Topic
Going Public(This topic was originally discussed in Presentation
2)
Offering shares on the Peruvian stock market (Bolsa) or on
theNew York Stock Exchange (NYSE) in the form of ADRs may bean
option for larger infrastructure companies, like Telefonica delPeru
(TDP on the NYSE). As of November 5, 1999, TDP had amarket
capitalization of over $2.7 billion dollars on the NYSE. With this
precedent, the RCP could possibly have a successfulIPO locally, but
not likely in the NYSE.
Going public, particularly offering ADRs on the NYSE, is not
aviable option for smaller Peruvian Internet companies, as it is
forUS start-ups. Whether offered only on the Peruvian Bolsa, or
alsoon the NYSE, neither Peruvian nor international investors
aretypically willing to take the high risks associated with
thisyet-unproven model of financing in Peru. One
Peruvianentrepreneur we spoke with (Alvaro Ferrand),
consideredincorporating his Internet business (which provides
business tobusiness eCommerce from South America to the United
States) inthe U.S. to have better access to technology and
capital.
See AlsoThe next topic in this presentation: Financing:
MultinationalVentures and Acquisitions
SourcesEmail correspondence with Latin American Venture
Capitalist andEntrepreneur from Sandro Trosso
Conversation with Peruvian Congressman Oswaldo
SandovalAguirre.
Conversation with Latin American Venture Capitalist
OswaldoSandoval Zavala.
Proyecto De Ley Promocion de la Inversion en
DesarrolloTechnologico (Law Project for the Promotion of Investment
inTechnical Development)
IADB story on Internet for the People
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http://quicken.excite.com/investments/quotes/?symbol=TDPmailto:[email protected]:[email protected]:[email protected]:[email protected]://www.congreso.gob.pe/ccd/proyectos/pr9908/00505495.htmhttp://www.congreso.gob.pe/ccd/proyectos/pr9908/00505495.htmhttp://www.iadb.org/exr/IDB/stories/1997/eng/e11f2.htm
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Endeavor Initiative LatPro's "Can the Venture Capital Model Work
for Latin America?" World Bank Inter-American Development Bank Red
Cientifica Peruana Banco de Comercio interest rate table The
Industry Standard company description of FirstComCorporation
Quicken.com/Excite page on FirstCom Montealegre, Ramiro, "A
temporal model of institutionalinterventions for information
technology adoption inless-developed countries", Journal of
Management InformationSystems.
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http://www.endeavor.org/http://www.latpro.com/articles/venture-capital.htmhttp://www.worldbank.org/http://www.iadb.org/http://www.rcp.net.pe/http://www.bancomercio.com/tasas/opera.htmhttp://www.industrystandard.net/companies/company_display/0,1591,52694,00.htmlhttp://www.industrystandard.net/companies/company_display/0,1591,52694,00.htmlhttp://quicken.excite.com/investments/quotes/?symbol=FCLXhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/~jaffed/classes/las194/articles/it_adoption.htmlhttp://www.stanford.edu/class/las194/
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Research and Analysis by Topic
Multinational Ventures andAcquisitions(This topic was originally
discussed in Presentation 2)
Acquisitions of Peruvian companies, joint ventures, and
localoffices of multinational organizations has proven to be
anexcellent source of financing, primarily for larger
Internetinfrastructure companies.
The Peruvian telephone company, Telefonica del Peru
wasprivatized and bought by the Spanish telephone
company,Telefonica del Espana. Telefonica del Espana was an
excellencesource of financing for TDP. Telefonica del Espana
purchasedTDP for almost $2 billion (many analysts have said that
theyoverpaid!). TDP has invested this money in line expansion
andother infrastructural projects, as discussed in the last
project. (Aninteresting aside: Telefonica de Espana is trying to
spin out all ofits Internet properties and go public with a company
called Terra. It is somewhat controversial because Espana purchased
theseInternet properties from all of its subsidiaries -- including
TDP -- atextrememly bargain rates, and will undoubtedly make a lot
ofmoney on an IPO.)
FirstCom (formerly InterAmericas Communications)
provideshigh-bandwidth integrated telecommunications services
tobusiness customers and to other telecommunications carriers
inLatin America. FirstCom has 90 kilometers of fiber-optic
cablenetwork in Lima, Peru, another 120 kilometers in Santiago,
Chileand other networks in Colombia.
FirstCom issued high yield bonds and had an initial public
offeringin NASDAQ. This influx of money helped finance its fiber
networkin Peru. FirstCom believes it is the first licensed long
distancecarrier to actively begin competing with Telefonica del
Peru. Recently, Osiptel, the regulatory body that is supervising
theprocess of deregulating Peru's telecommunications
market,mandated that TDP must formally interconnect its network
toFirstCom's.
On November 1, 1999 AT&T announced its intention to
purchaseFirstCom as part of its AT&T Latin America division.
FirstCom isbased out of Miami, FL.
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These precedents suggest opportunities for other
informationtechnology related companies to benefit from joint
ventures oracquisitions. For example, it is possible that the
Peruvian searchengine, Yachay, could be purchased by a regional
portal companyor even Yahoo!.
See AlsoThe next topic in this presentation: Financing:
Multinational Aid
Source