Download The Internet in Peru - The Global Diffusion of the Internet Project

Technische Universität
Braunschweig
Institut für Allgemeine Betriebswirtschaftslehre,
Wirtschaftsinformatik, und Informationsmanagement
Diplomarbeit
The Diffusion of the Internet in Perú
von cand. Wirtsch.-ing. Torge Thielemann
Aufgabenstellung und Betreuung:
Prof. Dr. S. Voß
Prof. Dr. P. Wolcott
Braunschweig
September 12, 2003
Copyright ©2002 Torge Thielemann. All rights reserved.
This document was created using LATEX 2ε . Last edited September 12, 2003.
Torge Thielemann <[email protected]>
III
Preface
The Internet is one of the most diffuse and complex systems that exist on a worldwide level and has arguably been the most rapidly growing information technology
of the last decade. The ability of individuals and organizations within a country to
develop and apply the Internet as part of their information technology blend is a
critical component of effectively addressing economic, social, military, and technological issues. Thus, understanding the status of the Internet capability of a country
is important to a multitude of individuals and organizations, such as policy-makers,
analysts, military strategists, and general decision-makers. The lack of a theoretical
framework for researching this issue was the main motivation for starting the Global
Diffusion of the Internet Project. Its stated objective is to examine the diffusion and
level of absorption of the Internet within a given country. The research conducted in
the context of this project resulted in a series of articles and reports that have developed an analytic framework for ascertaining the Internet within a country. So far,
the framework has been applied to nearly thirty countries1 . In general, the majority
of the case studies that have been conducted have focussed on third world and less
developed countries (LDC). A broad range of research indicates that there is a clear
correlation between the level of industrialization and the degree of absorption of the
Internet [Mon99a, p.1], [Han90, p.148 et seqq.]. In addition, Pippa Norris [Nor00,
p.3] suggests that the emergence of the Internet has even reinforced the lead of industrial states during the phase of the new economy and widened the gap between
the information rich and poor countries. Hence, the assessment of the status of the
Internet in non-developed and developing countries is of particular interest because
the Internet has the potential to help leveling the different states of development and
allow LDCs to catch up with post-industrial countries [Nor00, p.2].
This paper will apply the above mentioned framework to the Republic of Perú.
It is integrated in the context of the Global Diffusion of the Internet Project and its
objective is to provide a detailed and in-depth analysis of the status of the Internet in
Perú. Perú was chosen as the target country for this study for several reasons. First,
1
See [Mos02, p.1] for some of these reports and articles
IV
Preface
the South American subcontinent has thus far been neglected by researchers utilizing
this framework, who until today focussed mainly on developing countries in Asia and
the Middle East. Looking at Latin America as a whole, only Cuba and very recently
Mexico have been the focus of studies based on the Global Diffusion of the Internet
Framework. However, Latin America has had the highest growth rates in terms of
Internet users per capita throughout most parts of the last decade. Therefore, it
seems very compelling to scrutinize a country of that region, particularly of South
America, in more detail. Second, Perú stands out among other South American
countries because its road towards the Internet and the processes involved in that
development are unique and partly very unconventional. For instance, Perú is one
of few countries where the initial stage of access to the Internet developed without
any government support. Another distinct feature of Perú’s Internet landscape are
the “Cabinas Públicas”, a special form of Internet cafe that had its origin in Perú.
This successful model of alternative Internet access did not only spread all over
the country but its concept has been exported to other LDCs in Latin America
and Africa. Finally, Perú is a very centralistic country, with great social differences
and an extremely multifarious society structure. Accordingly, the development of
the Internet in Perú is not linear and straightforward but rather heterogenous, with
multiple facets and unique features, which makes the country especially appealing
for a research study and turned the balance towards Perú to be the first country of
South America to be assessed with the Global Diffusion of the Internet Framework.
Chapter 1 of this paper gives a brief introduction to the history and the structure of the Internet and especially focusses on the development of the Internet in
South America. In addition, a brief introduction about the theoretical background of
the Global Diffusion of the Internet Framework is being provided. Chapter 2 makes
available generic economical, political, geographic, and social information on Perú.
Chapter 3 is concerned with the development of the telecommunications infrastructure in Perú, and chapter 4 provides insights on government policies that affected
and will affect the development and diffusion of the Internet. Chapter 5 will apply
the framework to the actual situation in Perú and is broken down into six main
sections, each representing one of the dimensions of the framework. Finally, chapter
6 will provide conclusions and future prospects for the Internet in Perú.
V
Contents
1 Introduction
1.1
1.2
1
The Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1.1.1
The Structure of the Internet . . . . . . . . . . . . . . . . . .
1
1.1.2
General History of the Internet . . . . . . . . . . . . . . . . .
2
1.1.3
The Internet in Latin America . . . . . . . . . . . . . . . . . .
4
The Global Diffusion of the Internet Framework . . . . . . . . . . . .
8
1.2.1
The Dimensions of the Framework
. . . . . . . . . . . . . . .
10
1.2.2
The Determinants of the Framework . . . . . . . . . . . . . .
18
1.2.2.1
Factors that Influence the Quality of the Technology
19
1.2.2.2
Factors Impacting the Technology Cluster . . . . . .
19
1.2.2.3
External/Surrounding Factors . . . . . . . . . . . . .
20
1.2.2.4
Relation between Determinants and Dimensions . . .
21
2 General Background and Country Information
23
3 Network and Internet development
28
3.1
Basic Telecommunications Services . . . . . . . . . . . . . . . . . . .
29
3.2
First Steps towards the Internet . . . . . . . . . . . . . . . . . . . . .
34
3.3
Characteristics of Perú’s Internet Development . . . . . . . . . . . . .
35
3.3.1
The Peruvian Scientific Network (RCP) . . . . . . . . . . . . .
36
3.3.2
Market Development after the End of RCP’s Monopoly . . . .
40
3.3.3
Cabinas Públicas . . . . . . . . . . . . . . . . . . . . . . . . .
46
4 Government Policies
4.1
4.2
53
The Liberalization Process of the Telecommunications Market . . . .
54
4.1.1
Situation prior to the Privatization of the Market . . . . . . .
54
4.1.2
Regulations and Administrative Changes related to Market
Privatization . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
IT-related Policies after the Liberalization . . . . . . . . . . . . . . .
61
VI
Contents
5 Applying the GDI Analytic Framework
5.1
66
Pervasiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66
5.1.1
Access Opportunities . . . . . . . . . . . . . . . . . . . . . . .
71
5.1.2
Cost of Access . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
5.1.3
Perceived Value . . . . . . . . . . . . . . . . . . . . . . . . . .
74
5.1.4
Ease of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75
5.2
Geographic Dispersion . . . . . . . . . . . . . . . . . . . . . . . . . .
77
5.3
Sectoral Absorption . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
5.3.1
Academic Sector . . . . . . . . . . . . . . . . . . . . . . . . .
82
5.3.2
Commercial Sector . . . . . . . . . . . . . . . . . . . . . . . .
85
5.3.3
Health Sector . . . . . . . . . . . . . . . . . . . . . . . . . . .
87
5.3.4
Public Sector . . . . . . . . . . . . . . . . . . . . . . . . . . .
87
5.4
5.5
Connectivity Infrastructure
. . . . . . . . . . . . . . . . . . . . . . .
88
5.4.1
Domestic Backbone . . . . . . . . . . . . . . . . . . . . . . . .
88
5.4.2
International Connectivity . . . . . . . . . . . . . . . . . . . .
94
5.4.3
Internet Exchanges . . . . . . . . . . . . . . . . . . . . . . . .
97
5.4.4
Access Methods . . . . . . . . . . . . . . . . . . . . . . . . . .
98
Organizational Infrastructure . . . . . . . . . . . . . . . . . . . . . . 101
5.5.1
The Structure of the Internet Service Market . . . . . . . . . . 102
5.5.2
The Structure of the Basic Domestic and International Telecommunications Services Market . . . . . . . . . . . . . . . . . . . 107
5.5.3
5.6
5.5.2.1
Long Distance Services . . . . . . . . . . . . . . . . . 107
5.5.2.2
Local Leased Circuits . . . . . . . . . . . . . . . . . 110
5.5.2.3
Local Telephony . . . . . . . . . . . . . . . . . . . . 111
Collaborative Efforts and Agreements . . . . . . . . . . . . . . 112
Sophistication of Use . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
5.6.1
Sophistication of Use among Organizations . . . . . . . . . . . 114
5.6.2
Sophistication of Use among Individuals . . . . . . . . . . . . 116
5.6.3
Electronic Commerce . . . . . . . . . . . . . . . . . . . . . . . 117
6 Conclusions and Recommendations
Appendices
122
126
A Continuative Issues
127
A.1 Internet Domain Survey Background . . . . . . . . . . . . . . . . . . 127
A.1.1 The Old Survey . . . . . . . . . . . . . . . . . . . . . . . . . . 127
VII
Contents
A.1.2 The New Survey . . . . . . . . . . . . . . . . . . . . . . . . . 127
A.1.3 The Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
A.1.4 Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
A.2 RCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
A.2.1 RCP’s Mission . . . . . . . . . . . . . . . . . . . . . . . . . . 130
A.2.2 RCP’s Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . 130
A.2.3 Perú’s First E-mail . . . . . . . . . . . . . . . . . . . . . . . . 131
B Additional Figures and Tables
132
B.1 Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
B.1.1 Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
B.1.2 Cabinas Públicas . . . . . . . . . . . . . . . . . . . . . . . . . 134
B.1.3 Microwave Transmitters . . . . . . . . . . . . . . . . . . . . . 135
B.2 Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
B.2.1 Assessment of Sophistication of Use of Peruvian Companies . 136
C Abbreviations & Acronyms
140
Bibliography
144
VIII
List of Figures
1.1
ARPANET (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
1.2
Internet domain survey - Host count . . . . . . . . . . . . . . . . . .
5
1.3
Number of Internet users in Latin America . . . . . . . . . . . . . . .
6
1.4
Percentage of countries that have privatized telecommunications operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
1.5
Dimensions and the Internet technology cluster . . . . . . . . . . . .
11
1.6
Determinants of the Internet diffusion . . . . . . . . . . . . . . . . . .
18
2.1
Map of Perú . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
2.2
Foreign investments by economic sector (June 2001) . . . . . . . . . .
27
3.1
Installation of new phone lines in Perú and Lima between 1995 and
1998 [tsd] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
3.2
Telephone access in Perú in 2001 . . . . . . . . . . . . . . . . . . . .
31
3.3
Dial-up service for CPIs . . . . . . . . . . . . . . . . . . . . . . . . .
43
3.4
Dial-up service for independent ISPs . . . . . . . . . . . . . . . . . .
44
3.5
Main Players of the Internet market in 1998 . . . . . . . . . . . . . .
46
3.6
A monocabina in the countryside of Perú . . . . . . . . . . . . . . . .
51
4.1
Timeline of the development of the IT sector . . . . . . . . . . . . . .
54
5.1
Relation between Internet users and subscribers in Latin America (2001) 69
5.2
A South American country comparison: Total PCs per 100 inhabitants 72
5.3
Comparison of penetration of fixed telephone service in urban and in
rural areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
5.4
TdP’s fiber optic backbone in Perú as of 2002 . . . . . . . . . . . . .
91
5.5
ATTLA’s fiber optic backbone in Lima and Callao . . . . . . . . . . .
92
5.6
Schematic diagram of wireless broadband technology . . . . . . . . .
92
5.7
International IP links in South America as of 2000 . . . . . . . . . . .
95
5.8
Fiber optic ring around South America from Global Crossing . . . . .
97
IX
List of Figures
5.9
Number of ILD operators by departments, Nov. 2002 . . . . . . . . . 109
5.10 Sophistication of use rating of web sites of Peruvian organizations . . 116
6.1
Kiviat diagram of the Internet diffusion in Perú (2002-2003) . . . . . 123
6.2
Kiviat diagram of the Internet diffusion in Perú (1994 to 2002-2003) . 124
B.1 Topographic map of Perú
. . . . . . . . . . . . . . . . . . . . . . . . 133
B.2 Outside view of a cabina pública in a low class neighborhood in Lima 134
B.3 Inside view of a cabina pública in Villa El Salvador, department of
Huanuco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
B.4 Microwave tower for wireless data transmission . . . . . . . . . . . . . 135
B.5 Microwave transmitter installed on the roof of a high office building
in Lima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
X
List of Tables
1.1
Economic indicators for Latin America 1995-2001 . . . . . . . . . . .
8
1.2
Connectivity infrastructure . . . . . . . . . . . . . . . . . . . . . . . .
12
1.3
Organizational infrastructure . . . . . . . . . . . . . . . . . . . . . . .
13
1.4
Geographic dispersion . . . . . . . . . . . . . . . . . . . . . . . . . .
14
1.5
Pervasiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
1.6
Internet-using sectors of the economy . . . . . . . . . . . . . . . . . .
15
1.7
Assessing sectoral absorption . . . . . . . . . . . . . . . . . . . . . . .
16
1.8
Sectoral absorption rating . . . . . . . . . . . . . . . . . . . . . . . .
16
1.9
Sophistication of use . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
1.10 Relation between determinants and dimensions
. . . . . . . . . . . .
22
2.1
Perú in statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
2.2
Foreign investments in Perú [in million US$], , 1994-2001 . . . . . . .
26
3.1
Telecommunication indicators in Perú, 1993-1999 . . . . . . . . . . .
33
3.2
Growth of PCs and Internet hosts from 1995-1998 . . . . . . . . . . .
41
3.3
Perú’s Internet market between 1996 and 1998 . . . . . . . . . . . . .
45
3.4
Monthly fees of RCP’s services in 1996 . . . . . . . . . . . . . . . . .
47
3.5
Bandwidth distribution of cabinas públicas as of June 2001 . . . . . .
48
3.6
Distribution of socioeconomic levels across Lima’s population as of 2000 51
4.1
Plan for expansion and modernization of the telephone network . . .
58
4.2
Re-balancing plan for maximum rates . . . . . . . . . . . . . . . . . .
58
4.3
Summary of main events during the liberalization process . . . . . . .
61
5.1
Estimated number of Internet users in Perú . . . . . . . . . . . . . .
68
5.2
Pervasiveness rating for Perú . . . . . . . . . . . . . . . . . . . . . . .
70
5.3
Socio-economic characteristics of income groups in Lima as of July 2000 73
5.4
Geographic dispersion rating for Perú . . . . . . . . . . . . . . . . . .
77
5.5
Assessment of sectoral absorption per sector in Perú . . . . . . . . . .
83
XI
List of Tables
5.6
Sectoral absorption rating of Perú . . . . . . . . . . . . . . . . . . . .
83
5.7
Types and number of educational institutions in Perú (Dec. 2002) . .
84
5.8
Services employed by companies with Internet connection . . . . . . .
86
5.9
Connectivity infrastructure rating of Perú . . . . . . . . . . . . . . .
89
5.10 International connectivity of Perú in September 1999 . . . . . . . . .
94
5.11 Types of Internet subscribers in Perú (June, 2001) . . . . . . . . . . .
99
5.12 Bandwidth of dedicated lines in Perú as of June 2001 . . . . . . . . . 100
5.13 Organizational infrastructure rating for Perú . . . . . . . . . . . . . . 102
5.14 Changes in monthly rates for dedicated access due to competition . . 104
5.15 Development of the different segments of Perú’s telecommunications
market between Aug. 1998 and Dec. 2000 . . . . . . . . . . . . . . . . 108
5.16 Sophistication of use rating for Perú . . . . . . . . . . . . . . . . . . . 114
5.17 Sophistication of use of corporate web sites . . . . . . . . . . . . . . . 115
5.18 Frequent Internet activities according to a study by Soong . . . . . . 117
B.1 Assessment of sophistication of use of Peruvian companies . . . . . . 139
XII
Chapter 1
Introduction
“The Internet brings people together, so that they can stay where they want to”
Klaus Klages, Philosopher
1.1
The Internet
This paper’s purpose is to assess the status of the diffusion of the Internet in Perú and
to give outlooks and recommendations for the future development in that country.
The Internet is a very complex and multi-layered system, which is composed of
various subsystems and multifarious technologies. Therefore, this chapter will give a
brief overview about the substance of the Internet and its historical development. In
addition, the composition and the development of the Internet in Latin America will
be briefly examined because Perú is partially embedded in the structure and buildup
of the Internet in Latin America. Moreover, a brief overview about the theoretical
background and structure of the Global Diffusion of the Internet Framework will be
provided.
1.1.1
The Structure of the Internet
The Internet today is a widespread information infrastructure. Its evolutionary development is complex and involves many different aspects (e.g. technological, organizational, community, etc.). Its influence reaches not only to the classical technical
fields of computer communications but throughout all kinds of areas of society as
the world moves towards an increasing use of online tools that accomplish electronic
commerce, information acquisition, or administrative operations. Initially, the In1
Introduction
The Internet
ternet was used for file transfer, remote login, and electronic mail (e-mail). Other
forms of applications that were superimposed later include IP (Internet Protocol)
telephony and live stream audio and video.
Due to the intricate nature of the Internet is it generally very problematic to
define the Internet in a manner that accommodates all its features and stays abreast
of all changes that the Internet incurs. The Federal Networking Council (FNC) 1
came up with a definition on October 24, 1995 that captures the quintessence of the
Internet in a relatively good manner:
“Internet” refers to the global information system that:
(i). Is logically linked together by a globally unique address space based
on the Internet Protocol (IP) or its subsequent extensions
(ii). Is able to support communications using the Transmission Control
Protocol/Internet Protocol (TCP/IP) suite or its subsequent extensions and/or other IP-compatible protocols
(iii). Provides, uses, or makes accessible, either publicly or privately, high
level services layered on the communications and related infrastructure described herein
[Lei00, p.17]
1.1.2
General History of the Internet
In 1957, the Soviet Union launched the first satellite, Sputnik I, triggering US President Dwight Eisenhower to create the Advanced Research Project Agency (ARPA)
to regain the technological lead in the arms race. J.C.R. Licklider was appointed
head of this new organization. ARPA contemplated about possible measures that
could be taken in order to respond to the threat of a space-based nuclear attack
of the Soviet Union. One result of these deliberations was that the creation of a
country-wide communications network was being pursued [Ste02, p.1 et seq.]. This
network would yield great potential benefits in case of a nuclear attack because it
would be designed to work even if some sites would be destroyed. Routers direct
1
The FNC was created in order to act as a forum for networking collaborations among US federal
agencies to meet their research, education, and operational mission goals and to bridge the gap
between the advanced networking technologies being developed by research FNC agencies and the
ultimate acquisition of mature version of these technologies from the commercial sector. in 1997, the
FNC ceased to exist and its activities are now carried out by several interagency working groups,
one of them being the Large Scale Networking group (LSN)
2
Introduction
The Internet
traffic around the network via alternative lines in the case that the most direct route
is not available [How01, p.2].
The development of the network was based on the concept of packet switching.
Leonard Kleinrock was the first to publish a paper on packet switching theory in
May 1961 [Kle61]. This paper laid the foundation for the feasibility of conducting
communications by using packets rather than circuits. This was a major step on the
path towards computer networking. One year later, in August 1962, J.C.R. Licklider
conducted the first recorded actual networking communication [Lei00, p.2]2 .
In 1969, the precursor of the Internet,
SRI
ARPANET, was brought online by ARPA.
XDS
940
It constitutes the first truly successful largescale packet-switched network [Thi01a, p.1].
IMP
ARPANET connected initially four major
IMP
computers at Universities in the southwest-
DEC
PDP-10
Utah
ern United States (University of California
at Los Angeles (UCLA), Stanford Research
Institute (SRI), University of California at
Santa Barbara (UCSB), and the University
of Utah). Figure 1.1 displays the connection
IBM
360/75
IMP
UCSB
IMP
scheme of the initial ARPANET in 1969.
XDS
940
It shows the respective models of comput-
UCLA
ers that were used and connected with each
other at the four universities. The research
Figure 1.1: ARPANET (1969)
computers at each node were connected to identical processors (switches), which
in turn were connected to leased common-carrier circuits in order to form a subnet.
These specific processors are called Interface Message Processors (IMP) and were the
first switches that were capable of handling a large-scale computer network [Thi01b,
p.1].
Computers at various locations were added quickly to the ARPANET during
the following years and in 1973, the first international connections were established
with the University of London, England and the Royal Reder Establishment of Norway [Jau98, p.2]. In 1974, Vinton Cerf and Robert Kahn3 created the Transmission
Control Protocol (TCP), which further developed into the Transmission Control Pro2
Admittedly, this communication was conducted by the use of circuit switching technology, which is
technically and economically insufficient for network communication [Thi01a, p.2]
3
Both, Cerf and Kahn are researchers and specialists for networking and protocols and worked in
1974 for ARPA when they developed TCP/IP
3
Introduction
The Internet
tocol/Internet Protocol (TCP/IP). TCP enables two hosts to establish a connection
and exchange streams of data. It guarantees delivery of data and also guarantees that
packets will be delivered in the same order in which they were sent. The Internet
Protocol (IP) specifies the format of packets and the addressing scheme. Today, most
networks use the combined version of both protocols (TCP/IP), and there are even
networks that use their own protocols support TCP/IP. It is the de facto standard
to connect hosts on the Internet.
During the early 1980s, several other networking projects were established, such
as the Because It’s Time Network (BITNET), CSNET4 , and the European Unix
Network (EuNET)5 . By the end of the 1980s all large-scale networks had converted to
TCP/IP. This standardization helped to foster the growth of the Internet enormously
and by 1989, the number of connected servers reached 100,000.
In 1992, the World Wide Web was developed at the European Physics Laboratory in Switzerland. This development allowed for Internet navigation in hypertext
and multimedia (language) format. This technology caused a dramatic change in the
appearance of the Internet and improved its usability [Jau98, p.35]. The World Wide
Web is considered to be the main factor in facilitating the phenomenal growth of the
Internet in terms of hosts and users during the 1990s as illustrated in figure 1.26 . Today, instant access to the internet and the opportunity of real-time connections with
hundreds of thousands of hosts are for millions of users around the world self-evident.
The speed by which people of all cultures and ethnical backgrounds assimilated the
technology of the Internet and the rapidity by which it was used on a worldwide
scale are truly remarkable.
1.1.3
The Internet in Latin America
Latin America’s Internet origins go back to 1988 when academic professionals and
researchers from Chile and Brazil first joined BITNET. The first actual Internet connection in Latin America was established one year later in September 1989 by the
Brazilian Ministry of Science and Technology [Jau98, p.35]. In the following years
4
Funded by the National Science Foundation(NSF) to provide networking for universities, industry,
and government computer science groups [Cer01, p.3]
5
EuNET lay the foundation for USENET, a group discussion service that allows users to exchange
news, political, religious, and other ideas. Today, USENET is used by millions of users daily [Jau98,
p.34]
6
Between 1994 and 1998, the methodology of the survey was slightly changed and therefore, there are
an old, a new, and an adjusted data row in the graphic. Refer to appendix A.1 for more information
on the background of the survey
4
Introduction
The Internet
Figure 1.2: Internet domain survey - Host count
Source: Internet Software Consortium <http://www.isc.org>
various networks were created within Latin America, which allowed the respective
countries to be interconnected as well as to be connected to the rest of the world. A
great number of international organizations supported these endeavors substantially
with financial means, technical consultation, or specialized training programs [Hah95,
p.1]. Among these organizations are the American States Organization (ASO), the
United Nations Development Program (UNDP), the United Nations Educational Scientific and Cultural Organization (UNESCO), the European Economic Commission,
the International Development Bank (IDB), the Pan American Health Organization (PAHO), and the Latin Union. Among the most prominent Latin American
networks that were created are the “Red Hemisferica Interuniversitaria de Información Cientifica y Tecnologica” (RedHUCyT)7 , the Sustainable Development Networking Program (SDNP), the “Red de Fondos Ambientales de Latinoamérica y
el Caribe” (REDALC)8 , and the Non-commercial Communication Network. RedHUCyT for instance, was initiated by the OAS in 1994. Its main objective is to
connect the member states of the OAS to the Internet by integrating an electronic
network for the exchange of specialized information among different academic and
scientific institutions. The OAS allocated financial resources as seed money to start
the project and buy urgently needed equipment and human capital. It was later
joined by the United States and other governments that provided RedHUCyT with
financial support. Moreover, the OAS sponsored technical workshops in the region
7
Hemispheric interuniversity network of scientific and technological information
8
Networks in Latin America and the Caribbean
5
Introduction
The Internet
to prepare technical projects, improve skills, share technical knowledge, and train
network managers [Jau98, p.34].
Today, there are about thirtythree million Spanish and Portuguese speakers online in Latin America, constituting one of the most dynamic markets in the world.
The leading markets in the region are Brazil, México, Chile, and Argentina. The Portuguese speaking Brazilian market is the single largest one, whereas the rest of the
Spanish speakers are distritbuted throughout the rest of the countries [Rao01, p.2].
The Latin American market experienced a phenomenal growth in telecommunications throughout the last decade [Fer00a, p.1]. In 1999, the number of Internet users
grew faster in Latin America than in any other region of the world and surpassed
the milestone of ten million users (see figure 1.3). Even more striking is the fact that
between 1995 and May 2002 the increase in the number of Internet users was roughly
sixtyfold. In addition, the amount of Internet hosts in Latin America increased in
1999 by 136%. That growth rate surpasses the growth rate of seconded-ranked North
America by almost two times (North America had a growth rate of 74% in 1999)
[ITU00, p.6 et seq.].
Figure 1.3: Number of Internet users in Latin America
Source: International Telecommunication Union <http://www.itu.int>
A foundation for the enormous growth of the Internet during the last decade in
Latin America is the fact that the privatization of telecommunications was extremely
6
Introduction
The Internet
boosted by most governments in the region. It started out at the beginning of the
1990s in Chile where the first state owned telecommunications monopoly was dissolved and privatized. Perú followed that example a few years later. By the end of
1999, about 25% of all incumbent public telephone operators worldwide that had
been privatized were domiciled in Latin America [ITU00, p.2]. Figure 1.4 corroborates the fact that privatization of telecommunications operators was enthusiastically
taken on in Latin America. It illustrates that more than two thirds of the countries
of the Americas have either partially of fully privatized their telecommunications
companies. In other developing regions such as the Arabic States or Africa, the ratio
is only one third or less.
Figure 1.4: Percentage of countries that have privatized telecommunications operators
Source: International Telecommunication Union <http://www.itu.int>
The incremental privatization of the telecommunications markets throughout
Latin America and the steady growth of the Internet user community attracted foreign capital and led to an expansion of the telecommunications infrastructure. Big
international telecommunications operators and independent consortia helped to escalate the existing infrastructure and connect Latin America with U.S. backbones,
using fiber optic cables and setting up new submarine backbones. As of December
2000, at least nine projects were under construction or in the design stage in the
Latin American region that together involve the laying of 170,000 kilometers of submarine cable until 2003. The total volume of the investments during this period in
the Americas amounts to some $20 billion out of a total of $27.5 billion to be invested in submarine cables worldwide [Fer00a, p.3]. These tremendous investments
are driven by projections of an even higher growth rate of the demand of data ser7
Introduction
The Global Diffusion of the Internet Framework
vices in the coming years. The projections are encouraged by certain trends, such as
an increasing availability of internet access, a wider range of technologies for the last
mile, and proliferation of web-based applications [Mou00, p.1].
The tremendous growth of the Internet user base as well as number of hosts in
Latin America is even more remarkable considering the relative problematic economic
situations of most countries in the region. Table 1.1 shows some selected economic
indicators of South America for the years 1995 to 2001.
1995
1996
1997
1998
1999
2000
2001
Population [mil]
409.9
416.2
422.6
428.9
435.3
441.7
448.8
GDP per capita [US$]
3864
4142
4482
4427
3801
4166
4074
GDP [US$ bil]
1584
1724
1894
1899
1655
1840
1828
7.7
7.1
6.9
7.5
7.8
6.8
7.7
Unemployment [%]
Table 1.1: Economic indicators for Latin America 1995-2001
Source: Latin Focus Consensus Forecast <http://www.latin-focus.com/countries/latam/latindex.htm>
The GDP (Gross Domestic Product) per capita in Latin America is considerably
lower than it is in industrial countries9 and its growth over the last six years was
relatively low [Lat02, p.2]. Moreover, the percentage of the population in South
America that lived below the poverty line in 2001 was approximately 33% [Glo01a,
p.1], [Glo01b, p.1]. For those reasons, only one in ten people in the region has a
phone line, which compares to seven out of ten in the U.S. Furthermore, to obtain
PCs remains well beyond the reach of the majority of the population [Kat99, p.1].
1.2
The Global Diffusion of the Internet Framework
As discussed in the preface, the Internet is like other infrastructure that covers the
globe (e.g. highways, railroad tracks, telephone lines, power grids, etc.) of great interest to policy makers. Larry Press emphasizes that,
telecommunications infrastructure planning is implicit social planning.
Policy makers may see the Internet as an economic and cultural resource,
a threat to political stability and cultural values, or both, but nobody
can ignore it; infrastructure and society are inextricable interdependent.
9
GDP per capita in 2001: US= $36,000; European Union= $20,900; Japan= $27,200 [CIA02, p.1 et
seqq.]
8
Introduction
The Global Diffusion of the Internet Framework
While this is the case for all nations, a relatively small networking investment may have a significant impact in developing nations [Pre99,
p.2].
Policy makers and investors need information about the state of the Internet. An
initiative of the World Bank’s Information for Development Program helps to provide
these information. The program funds studies that provide accurate, descriptive,
and sophisticated measures about the IT infrastructure and e-readiness of countries
[Inf01, p.1]. In the early days of the Internet, before it became commercialized, the
NSF could track its growth and diffusion because they operated the backbone for
most of the world and the pervasiveness of the Internet was relatively low. Today,
this is no longer the case and there are more than 30 national backbones in the U. S.
alone [Pre97, p.1]. Thus, tracking the Global Diffusion of the Internet is a daunting,
but increasingly important task.
Over the last five years a number of people and groups have been tracking the
diffusion of the Internet and a number of assessment tools10 have been developed.
Most approaches focus on tracking single indicators such as number of hosts [Wol01,
p.2]. However, to gauge the diffusion of a country meaningful, beyond these obvious
single-measure approaches, is exceedingly difficult. The topology of the Internet is
constantly changing and the Internet is experienced differently in various countries.
New networks are added to the Internet every day and countries that were a decade
ago considered to be hopelessly outside of the mainstream of IT activity caught up
with tremendous speed and are actively participating in the global IT-world [Wol96,
p.6].
In order to satisfy the above described need for a more sophisticated framework
that allows for consideration of all factors that influence the development of the Internet in a country, the Mosaic Group as part of the Global Diffusion of the Internet
(GDI) Project developed the Global Diffusion of the Internet Framework. The latest and revised analytic framework and its theoretical foundation are presented in
[Wol01]. Initially, it was formulated in [Goo98a] based on a general analytic model
introduced in [Wol96]. The framework was designed on the premise that it should
be capable of capturing all social, political, and economic factors that shape the
implementation of the Internet in a given country. At the same time, the amount
and the format of the variables should not grow so complex that a meaningful assertion about the status of the Internet becomes so convoluted that it can not be
10
See <http://www.bridges.org/ereadiness/report.html> for a detailed report on the different
assessment tools
9
Introduction
The Global Diffusion of the Internet Framework
easily comprehended and kept in mind. However, they should be broad enough to
encompass almost all plausible and essential aspects of the Internet in a country and
most importantly, they must be measurable.
In general, the Global Diffusion of the Internet Framework that is used in this
study consists of dimensions and determinants. The dimensions are represented by
six variables that assess the state of the Internet of a country at a given time; Pervasiveness - Sophistication of Use - Sectoral Absorption - Organizational Infrastructure
- Geographic Dispersion - Connectivity Infrastructure. Each dimension may be assigned one of five levels (0 - 4). After a study of a particular country is conducted,
the allocated levels indicate the state of the Internet in the country at a given time.
Using this sort of a level system as supposed to absolute numbers has the advantage
that, in spite of the fact that data about the Internet is often incomplete, rapidly
changing, and of questionable credibility, two researchers that assess the same country at the same time are likely to arrive at the same result. In addition, this kind of
measurement system has both quantitative and qualitative elements. The qualitative
components ensure that if a country progresses from one level to another that the
change is substantial enough that one is able to notice the advancement [Wol00, p.7].
The determinants are factors that influence the dimensions and lead to the observed
state. They lie at the roots of the dimensions and are likely to influence the Internet
development in the future. They will be briefly described in chapter 1.2.2.
1.2.1
The Dimensions of the Framework
The dimensions are chosen in a way that they cover most facets that might reasonably
be of importance for an assertion of the Internet. Figure 1.5 shows the different
dimensions embedded in a simple model of the Internet technology cluster.
At the bottom of the technology cluster model is the underlying networking infrastructure, while the top consists of the technologies used by the end users (individuals
as well as organizations). The Internet services infrastructure level bridges between
the other two levels. Connectivity infrastructure is the dimension that corresponds
most closely with the bottom level of the technology cluster model. It measures the
scope, robustness, and general sophistication of the physical structure of a country’s
networks and comprises four main elements:
• The aggregate bandwidth of the domestic backbone(s)
• The aggregate bandwidth of the international IP links
• The number and type of interconnection exchanges
10
Introduction
The Global Diffusion of the Internet Framework
Individual Users
Individual Users
Pervasiveness
Pervasiveness
Organizational Users
Organizational Users
Sophistication of
Sophistication
of
use
use
Sectoral
Sectoral
Absorption
Absorption
Internet Services Infrastructure
Internet Services Infrastructure
Organizational
Organizational
Infrastructure
Infrastructure
Geographic
Geographic
Dispersion
Dispersion
Telecommunications Infrastructure
Telecommunications Infrastructure
Connectivity
Connectivity
Infrastructure
Infrastructure
Figure 1.5: Dimensions and the Internet technology cluster
Source: [Wol01, p.9]
• The type and sophistication of local access methods being used
On which basis the assessment of the status of each of these components is conducted is illustrated in table 1.2. Level 0 would be assigned to a country that has
practically no Internet presence, while Level 4 on the opposite side of the scale would
be associated with a country that has an extensive and sophisticated infrastructure,
several high-speed international links, and multiple internet exchange points.
The Internet services infrastructure in a country serves the purpose to make the
Internet accessible for end users by utilizing the existing telecommunications infrastructure. The framework used in this paper identifies two dimensions to depict the
Internet Service Provider (ISP) situation in a country, organizational infrastructure
and geographic dispersion. Similar to the connectivity infrastructure variable, which
measures the robustness of the telecommunications infrastructure, the organizational
infrastructure dimension assesses the vitality of the ISP infrastructure by essentially
assessing the number of ISPs and their competitive environment. Table 1.3 displays
a rough scheme according to which an assessment of the ISP market can be conducted. A high level indicates low barriers to market entry, a non-restricted and very
11
Introduction
Level
The Global Diffusion of the Internet Framework
Domestic
International
Internet
Access
Backbone
Links
Exchanges11
Methods
0: Nonexistent
None
None
None
None
1: Thin
< 2 Mbps
< 128 Kbps
None
Modem
2: Expanded
2 Mbps – 200
128 Kbps – 45
1
Modem;
Mbps
Mbps
64 Kbps
leased lines
3: Broad
200 Mbps – 100
45 Mbps – 10
More than 1;
Modem;
Gbps
Gbps
bilateral or open
> 64 Kbps
leased lines
4: Extensive
≥ 100 Gbps
≥ 10 Gbps
Many; both
< 90% Modem;
bilateral and open
> 64 Kbps
leased lines
Table 1.2: Connectivity infrastructure
Source: [Wol01, p.8]
competitive market environment with a multitude of ISPs, and a low degree of monopolization. Government policies and regulations tend to have a profound impact
on this variable and hence, need to be examined relatively close.
Geographic dispersion (see table 1.4) is the other dimension that describes the
status of the Internet services infrastructure by reflecting the extent to which the
access opportunities of the ISPs’ services , along with the necessary telecommunications infrastructure, are spread across the entire country. This dimension is a good
reference point for the degree of digital division within a country between rich and
poor, different ethnic groups, and urban and rural areas.
At the top level of the technology cluster model are the dimensions pervasiveness, sectoral absorption, and sophistication of use, which, taken together, describe
the state of the technologies that are utilized by end users to employ the Internet.
Pervasiveness is a function derived from the number of Internet users per capita.
However, in contrast to many single-variable Internet diffusion assessment tools that
typically measure the absolute number of user per capita, the assessment of this
variable is according to the framework of a qualitative nature. In accordance with
the measurements of the other variables, the state of pervasiveness in a country is
ranked on a scale with five levels (see table 1.5). In order to be considered truly
11
An Internet Exchange Point (IXP) is a facility operated by a single entity to facilitate the exchange
of Internet traffic between two or more ISPs
12
Introduction
The Global Diffusion of the Internet Framework
Level 0
None: The Internet is not present in this country.
Level 1
Single: A single ISP has a monopoly in the Internet service provision
market. This ISP is generally owned or significantly controlled
by the government.
Level 2
Controlled : There are only few ISPs and the market is closely controlled
through high barriers to entry. All ISPs connect to the international
Internet through a monopoly telecommunications service provider. The
provision of domestic infrastructure is also a monopoly.
Level 3
Competitive: The Internet market is competitive. There are many ISPs
and low barriers to market entry. The provision of international
links is a monopoly, but the provision of domestic infrastructure is open
to competition, or vice versa.
Level 4
Robust: There is a rich service provision infrastructure. There are many
ISPs and low barriers to market entry. International links and domestic
infrastructure are open to competition. There are collaborative
organizations and arrangements such as public exchanges, industry
associations, and emergency response teams.
Table 1.3: Organizational infrastructure
Source: [Goo98a, p.9]
13
Introduction
Level 0
The Global Diffusion of the Internet Framework
Nonexistent: The Internet does not exist in a viable form in
this country. No computer with international IP connections
are located within the country.
Level 1
Single Location: Internet points of presence are confined to one
major populated center
Level 2
Moderately Dispersed : Internet points of presence are located
in multiple first-tier political subdivisions of the country
Level 3
Highly Dispersed : Internet points of presence are located in at
least 50% of the first-tier political subdivisions of the country
Level 4
Nationwide: Internet points of presence are located in essentially all first-tier political subdivisions of the country. Rural
access is publicly and commonly available
Table 1.4: Geographic dispersion
Source: [Wol00, p.8]
pervasive, the Internet should be available in the proximate area of almost every
citizen. When trying to estimate the number of Internet users one has to bear in
mind that user may access the Internet in various ways and from various locations
such as wireless connections, Internet cafes, home, work, school, or public libraries.
In addition, some accounts may be shared by multiple users and some users employ
the Internet intensively, while others might be only sporadic users.
The dimension of sectoral absorption reflects the extent to which organizations in
four major sectors - academic, commercial, health, and public - have utilized the Internet. These four sectors represent the major social and economic divisions within a
country and are not homogenous (see table 1.6). Potential personal use of the Internet
technologies within any of these organizations is not considered. Other organizations
(e.g. non-governmental organizations, religious organizations, or organized crime)
are explicitly omitted from this assessment because either information about them
is extremely intricately to acquire or their impact on the final outcome is negligible. For determination of the level of sectoral absorption of the commercial sector,
only companies with 100 and more employees are being considered. Including smaller
companies would make it almost impossible to come to a conclusive deduction because in developing countries many small business endeavors are typically extremely
ephemeral and of an informal12 nature so that accurate information are exceedingly
difficult to obtain.
12
Not registered
14
Introduction
'
Level 0
The Global Diffusion of the Internet Framework
Nonexistent: The Internet does not exist in a viable form in
$
this country. No computers with international IP connections
are located within the country. There may be some Internet
users in the country; however, they obtain a connection via an
international telephone call to a foreign ISP
Level 1
Embryonic: The ratio of users per capita is on the order of
magnitude of less than 0.1%
Level 2
Nascent: The ratio of Internet users per capita is on the order
of magnitude of at least 0.1%
Level 3
Established : The ratio of Internet users per capita is on the
order of magnitude of at least 1%
Level 4
&
Common: The ratio of Internet users per capita is on the order
of magnitude of at least 10%
Table 1.5: Pervasiveness
%
Source: [Wol01, p.10]
Sector
Subsectors
Academic
Primary and Secondary Education, University Education
Commercial
Distribution, Finance, Manufacturing, Retail, Service
Health
Hospitals, Clinics, Research Centers, Physicians/Practioners
Public
Central Governments, Regional and Local Governments, Public
Companies
Table 1.6: Internet-using sectors of the economy
Source: [Goo98b, p.6]
Internet use within each sector is rated at one of three levels (rare, moderate, or
common) according to the guidelines depicted in table 1.7. In order to rate a country
as a whole, each sector is, based on its rating, assigned points individually and then
these points are added together and the sum determines the final placement of the
country’s sectoral absorption dimension (see table 1.8). Each rare sector is assigned
one point, each moderate sector two points, and each common sector three points. If
there is no Internet activity detectable then this sector will be assigned zero points.
The last dimension of the framework is sophistication of use. This measure reflects how the people of a given country utilize the Internet. A scheme that helps to
rate a country is provided in table 1.9. Of particular importance is the point when
the Internet is starting to get employed by users outside a narrow community of tech-
15
Introduction
The Global Diffusion of the Internet Framework
Sector
Rare
Moderate
Common
Academic
<10% have leased-
10-90% have leased-
>90% have leased-
line Internet con-
line Internet con-
line Internet con-
nectivity
nectivity
nectivity
<10% have Internet
10-90% have Inter-
>90% have Internet
servers
net servers
servers
<10% have leased-
10-90% have leased-
>90% have leased-
line Internet con-
line Internet con-
line Internet con-
nectivity
nectivity
nectivity
<10% have Internet
10-90% have Inter-
>90% have Internet
servers
net servers
servers
Commercial
Health
Public
Table 1.7: Assessing sectoral absorption
Source: [Goo98b, p.7]
Sectoral point total
Sectoral Absorption dimension rating
0
Level 0
Nonexistent
1-4
Level 1
Rare
5-7
Level 2
Moderate
8-9
Level 3
Common
10-12
Level 4
Widely used
Table 1.8: Sectoral absorption rating
Source: [Goo98b, p.7]
nicians and computer-specialists. This is usually the case when a country advances
from level 1 to level 2. A second milestone is reached (level 3) when users begin to integrate the Internet in business processes in a way that results in significant incisions.
For instance, letting consumers customize and buy their products online will lead to
considerable changes within the production, delivery, and accounting processes of a
company.
16
Introduction
'
Level 0
The Global Diffusion of the Internet Framework
None: The Internet is not used, except by a very small fraction of
$
the population that logs into foreign services.
Level 1
Minimal : The user community struggles to employ the Internet in
conventional, mainstream applications.
Level 2
Conventional : The user community changes established practices
somewhat in response to or in order to accommodate the technology, but few established processes are changed dramatically. The
Internet is used as a substitute or straightforward enhancement for
an existing process (e.g. e-mail vs. post). This is the first level at
which we can say that the Internet has “taken hold” in a country.
Level 3
Transforming: The use of the Internet by certain segments of users
results in new applications, or significant changes in existing processes and practices, although these innovations may not necessarily stretch the boundaries of the technology’s capabilities.
Level 4
Innovating: Segments of the user community are discriminating
and highly demanding. These segments are regularly applying,
or seeking to apply, the Internet in innovative ways that push
the capabilities of the technology. They play a significant role in
driving the state-of-the-art and have a mutually beneficial and
&
synergistic relationship with developers.
Table 1.9: Sophistication of use
Source: [Wol01, p.19]
17
%
Introduction
1.2.2
The Global Diffusion of the Internet Framework
The Determinants of the Framework
The determinants stand behind the dimensions and help to establish their values.
The determinants cause the respective state of the Internet in a given country that
is reflected by the dimensions. Understanding these factors is essential for formulating strategies to further enhance the Internet development in a country. Figure
1.6 illustrates the top-level factors that are identified by the framework. Government
policies are identified as a separate determining factor because of its great impact on
technology innovation and because it is an indirect factor, shaping the dimensions
by having bearing on other determinants. Therefore, government policies in Perú
and their historical development as they apply to Perú’s Internet diffusion are examined separately and in further detail in chapter 4. Even though the arrows indicate
a one-way causality between the independent variables (determinants) and the dependent variables (dimensions), other causalities may very well be in existence but
are not further addressed by the framework because it would make the process of
ascertaining the variables even more complex and intransparent.
Determinants
Qualities of the Technology itself
Qualities value
of the Technology itself
- Perceived
- Perceived
- Ease
of use value
of the Internet
- Ease
use ofaccess
the Internet
- Cost
of of
Internet
- Cost of Internet access
Government
Government
Policies
Policies
Inter-Relationships within the
Inter-Relationships within the
Technology Cluster
Technology
Clustertechnologies
- Access
to constituent
- Access for
to constituent
- Demand
capacity technologies
- Demand for capacity
External/Surrounding Factors
External/Surrounding
Factors
- Adequacy
and fluidity of resources
- Adequacy
and fluidity of resources
- Ability
to execute
- Ability to execute
- Geography
- Geography
- Culture
of entrepreneurship
- Culture of entrepreneurship
- Regulatory/legal
framework
Regulatory/legal
- Forces for change framework
Forces
for
change
- Enablers of change
- Enablers of change
Dimensions
- Pervasiveness
- Pervasiveness
- Geographic
Dispersion
- Geographic
Dispersion
- Sectorial
Absorption
Sectorial
Absorption
- Connectivity Infrastructure
- Connectivity Infrastructure
- Organizational
Infrastructure
- Organizational
- Sophistication
of Infrastructure
Use
- Sophistication of Use
Figure 1.6: Determinants of the Internet diffusion
Source: [Wol00, p.13]
The studies that have been conducted prior to formulating the framework confirm
the importance of the set of determinants shown in figure 1.6 and identify it as the set
that in general most strongly affects Internet development [Wol01, p.35]. However,
this set is merely a subset of all possible factors that might influence Internet diffusion
and innovation processes and should not be viewed as an exclusive list. Other factors
might play significant roles in certain countries and the factors might be dependent on
one another. Moreover, the variables are high-level, generic factors, which might be
18
Introduction
The Global Diffusion of the Internet Framework
composed out of several more detailed sub-factors. In the following, a brief description
of the determinants will be provided along with a summarizing table that depicts the
relationship between the determinants and the dimensions used in the framework.
1.2.2.1
Factors that Influence the Quality of the Technology
Determinants that fall into this category are “perceived value, ease of use of the
Internet, and cost of Internet access”. Perceived value refers to the degree of value
that an individual or an organization sees in the Internet for themselves. Thus, this
is a subjective measure not solely based on technical facts but rather on individuals’
personal living circumstances, objectives, and even ethnic views. The value of the
Internet can also be negative if a person or an organization perceives the Internet
as a threat to their goals. However, for the Internet to be widely accepted and
spread, the net value must be positive. Differing cultural values as well as discriminate
interests and goals may strongly influence if the Internet is perceived as a threat or
an opportunity.
The determinant ease of use of the Internet brings to mind that for the Internet
to become widely employed in a country it must be sufficiently easy to use so that not
only a small community of technicians and computer specialists are able to utilize it.
One the one hand, the widespread employment of certain tools such as web browsers
or other graphic user interfaces (GUI) might help to reduce the level of difficulty
when using the Internet. On the other hand, factors inherent to the country (e.g.
literacy rate, level of general technical education of the population, and knowledge
of foreign languages if there is no significant amount of web pages in the country’s
native language) might have a substantial impact on the easiness of the use of the
Internet.
Another factor that is material for the widespread use of the Internet is its accessibility at affordable and reasonable costs. These costs are a function of a number
of upstream costs and the level of competition in the ISP market in a country. The
costs have to be seen in relation to the average income level in a country in order
to determine if access to the Internet is reasonably affordable by a majority of the
population.
1.2.2.2
Factors Impacting the Technology Cluster
Determinants in this category are “access to constituent technologies and demand
for capacity”. Access to the underlying technologies of the Internet is fundamental
for its utilization. These technologies include general Internet services, computers,
19
Introduction
The Global Diffusion of the Internet Framework
modems, and dial-up lines or networks. In addition, the ISPs have to have access to
the appropriate national and international backbones and circuits in order to be able
to connect to the Internet.
The demand for capacity determinant has a direct effect on the technology level of
the infrastructure. Disregarding other factors, a high existing and forecasted demand
will lead to investments and enhance the design of the Internet infrastructure.
1.2.2.3
External/Surrounding Factors
External factors influencing the diffusion of technology and innovations are “adequacy of resources, ability to execute, geography, culture of entrepreneurship, regulatory framework, forces for change, and enablers of change”. When determining if a
country’s resources are adequate for the Internet to prosper, one has to distinguish
between financial, human, technological, informational, and material resources. Financial resources are essential to all investments in and enhancements of the Internet
infrastructure of a country. They can be channelled through the government, private
organizations, or individuals. Often they can substitute a lack of another resource,
by purchasing the missing resource outside the country and importing it. The term
human resources refers to the degree of existing know-now, necessary to install, operate, and maintain the Internet infrastructure. Technological resources, the hardware
and software elements that the infrastructure consists of, are obviously an absolute necessity. Informational resources are considered to be the existing quality and
quantity of documentation regarding the tasks necessary to operate the technology.
Material resources, such as raw materials, energy, etc. are usually not an important
issue in terms of Internet development, although the consistent provision of energy
without repeated blackouts might be an issue in some countries. In addition to the
existence of these essential resources, special attention has to be paid to the flow of
the resources. How easy resources can be allocated and flow to the places where they
are needed is crucial for the speedy development of the Internet.
The ability to execute is important for the actual implementation of strategies and
the application of resources. Execution can be inhibited by factors such as corruption,
legal regulations, red tape, political instability, and lack of expertise.
Even though the Internet is considered to be virtual and independent from geographic and national restrictions, the necessary infrastructure and the people who
use and maintain it are bounded to earth. Therefore, large countries with considerable amounts of hostile terrain and a high degree of dispersion of its population may
find it more difficult to install and maintain the indispensable infrastructure than a
small country whose terrain is easily accessible.
20
Introduction
The Global Diffusion of the Internet Framework
The existence of some sort of legal or regulatory framework that allows for the
formation of ISPs and their somewhat smooth operation is a prerequisite for successful Internet implementation. For instance, IP addresses and domain names must
be assigned systematically and the rights, pretensions, and obligations of the different stakeholder of the Infrastructure must be regulated because many pieces have
to function as a whole for the Internet to be implemented and operated. Other issues such as taxation, cyber crime, copyrights, and credit card fraud are likely to be
addressed by a regulatory framework, too.
The determinant forces for change reflects factors that might be helpful in overcoming barriers to change. The process of Internet development creates a tremendous amount of change and how high the barriers to it are depends on a multitude
of factors, such as cultural values, what kind of regime governs the country, and the
demographic structure of the country. However, the originator of this change is independent from the barrier and can come from different sectors such as competitive
forces, customer demand, change agents, or a cultural predisposition to change.
Enablers of change refers to the factors that facilitate change initiated by the
forces of change. These factors may be inherent in the nation’s landscape, the legal
framework, the national innovation system, and so forth.
1.2.2.4
Relation between Determinants and Dimensions
Table 1.10 describes the relationships between the dimensions and the determinants.
A check mark in the matrix denotes that a particular determinant has a considerable
influence on the respective dimension. The matrix can be used to understand how
Internet development in a certain dimension can be fostered or how it might be
impeded. The matrix is not exhaustive and there might be other factors or impacts
not shown in the table that have an effect on the dimensions.
21
Introduction
The Global Diffusion of the Internet Framework
Sectoral Absorption
✓
✓
Ease of Use of the Internet
✓
✓
Cost of Internet Access
✓
✓
Access to Constituent Technologies
✓
✓
Sophistication of Use
Geographic Dispersion
✓
Organizational Infrastructure
Pervasiveness
Perceived Value
Connectivity Infrastructure
Dimensions
Determinants
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Demand for Capacity
Adequacy of Resources
✓
Ability to Execute
✓
Geography
✓
✓
✓
✓
✓
Culture of Entrepreneurship
Regulatory/Legal Framework
Forces for Change
✓
Enablers of Change
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Table 1.10: Relation between determinants and dimensions
Source: [Wol00, p.17]
22
Chapter 2
General Background and Country
Information
Perú is the third largest country in South America and located in the western part
of the continent, bounded on the North by Ecuador and Columbia, on the East by
Brazil and Bolivia, and on its Southern tip by Chile, with a long coast line on the
Pacific Ocean in the West. It is divided into three climatic and topographic natural
zones; “Costa, Sierra, and Selva”1 , which run roughly in a North-South direction2 .
The Costa region is a narrow stripe of plain land along the coastline consisting of
large tracts of desert, occasionally interrupted by fertile basins. The majority of the
population and of the manufacturing industry is concentrated in this region, mainly
clustered around the capital Lima. The Sierra features the Andes with peaks of over
20,000 ft and contains most of Perú’s ample natural resources such as copper, silver,
lead, zinc, and gold. The Selva, or Amazonian jungle region, is because of the lack
of communication and transportation infrastructure for the most part undeveloped
and unexplored. Approximately half of Perú’s oil fields and natural gas reserves are
located in this region [Tra02, p.1].
Perú has a very rich and varied cultural and architectural heritage that reaches
back many centuries. The ancient Perú was the habitat for several prominent Andean civilizations, most notably that of the Incas whose empire stretched out several
thousand miles from the Southern parts of Columbia to northern regions of Chile.
The empire was conquered by the Spanish Conquistadores in 1533. Peruvian independence was declared in 1821 and remaining Spanish forces were finally defeated
in 1824. After a dozen years of military dictatorship in the 1960s and 1970s, Perú
returned to a democratic leadership in 1980 [CIA02, p.2]. During the 1980s, Perú
1
Coast, Highlands, and Rain Forest
2
See appendix B.1.1 for a topographic map of Perú
23
General Background and Country Information
Figure 2.1: Map of Perú
Source: Weatherhub <http://www.weatherhub.com/global/pe_map.htm>
experienced the biggest economic crisis in its history that culminated in an inflation
rate of 3,400% in 1989 [Lib92, p.2]. The crisis affected especially the poor groups of
the population so dramatically that it eventually led to violent insurgencies [Fer01,
p.3]. President Alberto Fujimori’s election in 1990 ushered in a decade that saw
drastic turnarounds in the economic sector and in curtailing guerilla activity that
had troubled the country during the 1980s significantly. Economic reforms were implemented that helped to bring the inflation rate back to only 10%. Eventually,
corruption scandals led to Fujimori’s ouster by congress in November 2000 and the
following new elections resulted into the appointment of Alejandro Toledo as the new
head of government [BBC02, p3].
Perú is a very diverse country in terms of ethnic backgrounds and cultural composition. 45% of the population are of Amerindian background, 37% are Mestizos3 ,
15% are Caucasian, and the remaining 3% of the population are of African, Japanese,
or Chinese lineage. The majority of the population (90%) is roman catholic and official languages are Spanish, Quechua, and Aymara [CIA02, p.4]. As shown in table
2.1, Perú has a relatively high degree of urban population with an extremely high
3
People of Amerindian as well as Caucasian ethnic background
24
General Background and Country Information
'
Metric
Value
Remarks
Population
27,950,000
July, 2002 estimate [CIA02, p.3]
26,100,000
July, 2001 estimate [Wor02, p.1]
1.66%
January, 2002 estimate [CIA02, p.4]
1.7%
July 2001 estimate [Wor02, p.1]
50.0%
January, 2002 estimate [CIA02, p.8]
54.0%
2001 estimate [Deu02, p.13]
73.1%
July, 2001 estimate [Wor02, p.1]
79.2 %
2001 estimate [Deu02, p.13]
Literacy rate
88.7%
2001 estimate [Lex01, p.2]
GDP
$54.0 billion
2001 estimate [Wor02, p.1]
GDP per capita
$2,085
2001 estimate [ECP02, p.1]
Inflation rate
1.5%
January, 2002 estimate [CIA02, p.8]
1.3%
2001 estimate [Wor02, p.1]
2,028,104
June, 2002 estimate [OSI02a, p.1]
1,509,000
1998 estimate [CIA02, p.10]
Teledensity (fixed)
6.02%
June, 2002 estimate [OSI02a, p.1]
Telephones (mobile)
2,049,357
June, 2002 estimate [OSI02b, p.1]
Teledensity (mobile)
7.66%
June, 2002 estimate [OSI02b, p.1]
162,950
June, 2001 estimate [OSI02c, p.1]
Population growth rate
Population below poverty line
Percentage of urban population
Telephones (fixed)
Internet subscriptions
&
Table 2.1: Perú in statistics
$
%
concentration in Lima, which is with a population of roughly 8 million people the
fifth largest Latin American city and the home to ca. one third of Perú’s people. In
consequence of this high degree of concentration in the Lima area, a system of distinct political and economical centralism prevails in Perú, leading to a concentration
of 50% of all national economic activity in Lima.
Perú shows deep economic and political divisions among its population groups. A
small elite of mostly Spanish descendence controls most of Perú’s wealth and political
power, while the indigenous people are largely excluded from both and make up most
of the estimated 50%4 of Peruvians that live below the poverty line [BBC02, p.1].
However, the current President Alejandro Toledo is the country’s first self-identified
indigenous politician in a high-profile position. One of Toledo’s main objective at his
inauguration speech was to achieve greater national reconciliation and integration,
which yet remains to be accomplished [Gar02]. The blend of economic and political
inequality, widely-spread corruption, and a high degree of urbanization has led to
the flourishing of the informal sector. For instance, only 22% of all household heads
in Lima are registered with the tax office. Moreover, the public transportation sector
4
See table 2.1
25
General Background and Country Information
is predominantly provided by private persons. On the one hand, the informal sector
creates chaotic circumstances and unordered developments. On the other hand, it
provides Peruvians with indispensable services at prices that the majority of the
population can afford [Fer01, p.2].
The economic and political divisions, Perú’s relatively unstable political environment, the reinforcement of terrorist activities during the 1980s, and Perú’s endemic
corruption throughout all parts of society all resulted in a very low amount of foreign
capital that was invested in Perú until 1990 [BBC02, p.1].
Items
Dec 1994
June 2001
4,450.67
10,027.49
145.00
5,155.17
Foreign investments in stock exchange6
1,484.91
2,343.35
Total
6,080.58
17,526.01
Total stocks registered
Investments with pending
registration5
Table 2.2: Foreign investments in Perú [in million US$], , 1994-2001
Source: [CON01, p.1]
Table 2.2 shows that during the last decade the rate of foreign investments in
Perú increased tremendously due to a harsh macroeconomic stabilization program,
which started in August 1991 with the launch of a comprehensive set of structural
reforms. This program initiated one of the fastest trade liberalization processes and
one of the deepest labor market reforms in Latin America. These reforms included a
radical privatization process, the abolition of all state-owned monopolies, the downsizing of the public sector, and an incisive tax reform. In addition, restrictions to
capital account transactions were eliminated while the financial sector was deregulated [Deu02, p.13]. The state-owned monopolies that were privatized include the
national telecommunications operators, large mining cooperations, oil producers, and
utility companies.
Figure 2.2 breaks down the foreign investments by economic sector. The figure
shows that the telecommunications sector is the area that foreign investors focussed
most heavily on, with 26.29% of all foreign capital flowing into this sector.
Within the telecommunication sector, the by far most important investor is
Telefónica de España7 [Emb99, p.4]. Over 76% of all foreign capital that was in5
Investments carried out but pending of registration with the “National Commission for Foreign
Investments in Technology” (CONITE). Estimated amounts.
6
Value of holdings of foreign investors registered with the security depository
7
The Spanish Telefónica is one of the largest telecommunications operators in the world
26
General Background and Country Information
Figure 2.2: Foreign investments by economic sector (June 2001)
Source: [CON01, p.2]
vested in the Peruvian telecommunications market comes from Telefónica de España
[CON01, p.3]. The company started its investments in Perú in 1994 with the purchase8 of the two main, formerly state-owned national telecommunications operators,
Compañı́a Peruana de Teléfonos (CPT) and Empresa Nacional de Telecomunicaciones (ENTEL) [Deu02, p.14]. At that point in time, total market privatization
of the Peruvian telecommunications sector was achieved [Jaf99, p.24]. Along with
the privatization process, the government created the “Organismo Supervisior de
Inversión Privada en Telecomunicaciones”9 (OSIPTEL).
8
Telefónica de España paid $2,004 million for that investment, an amount by far larger than the
second highest bid ($800 million), which was actually close to the base price set by the government
9
Supervisory Agency for Private Investment in Telecommunications
27
Chapter 3
Network and Internet development
28
Network and Internet development
3.1
Basic Telecommunications Services
Basic Telecommunications Services
The first networking efforts in Perú took place in 1985. At the same time, the
national telecommunications market as in most other countries in Latin America
was perceived as a natural monopoly. The two main telecommunications companies,
Compañı́a Peruana de Teléfonos (CPT)1 and Empresa Nacional de Telecomunicaciones (ENTEL)2 , were state owned and enjoyed a competition-free market environment. As a result of these circumstances, Perú’s national telecommunications network
was one of the most underdeveloped systems in South America by the mid 1980s.
The average waiting time for the installation of a telephone line averaged out to a
period of five years [Mon99b, p.225]. Other problems included inadequate coverage,
low penetration, low service quality, shortage of public telephones, and high prices
for the services.
As mentioned in chapter 2, the Fujimori government departed from the old policies that were established by previous governments and adopted a line of market
liberalization, which had the purpose to nurture an environment that would allow for
competitive market behavior and eventually result in an influx of capital via foreign
investments. Mr. Luis Maravi, a member of Fujimori’s government and vice-minister
for telecommunications stated in 1991:
We want to modernize and to keep state participation small but strong
[Jaf99, p.106].
As a result of the change of the government’s objectives, it was determined that
the existing regulatory instruments in the telecommunications sector were to restrictive and outdated, and eventually a law was passed in 1991 that aimed to abolish
restrictive regulations and facilitate a free flow of market powers (see chapter 4.1.2
for more information).
In 1994, the intent of the telecommunications legislature was finally realized and
the telephone industry was privatized. In February of 1994, Telefónica de España, one
of the largest and simultaneously most aggressively expanding telecommunications
companies in the world, bought large parts of ENTEL and CPT and merged them
in order to create a new subsidiary, namely Telefónica del Perú S.A. (TdP) [Fer00a,
p.6]. The remaining shares of the government (the Peruvian government continued
to be a minority shareholder of TdP) were scheduled to be phased out over the
1
CPT was the local telephony provider for Lima
2
ENTEL was the local telephony provider outside of Lima and carrier for national and international
long distance services for the whole country
29
Network and Internet development
Basic Telecommunications Services
next five years by selling these shares successively to private investors. While market
privatization was preponderantly achieved in 1994, market liberalization was not.
TdP was granted exclusivity for a period of five years in many markets by OSIPTEL
as well as a 20-year licence, renewable for consecutive 5-year periods, for national and
international long-distance services and local services. The period was scheduled to
expire on June 27, 1999 [Jaf99, p.76]. However, it is important to note that the period
of restricted concurrence was limited to fixed telephony, national carrier services,
and international carrier services. Thus, TdP was not shielded from competition in
the ISP market and the wireless market [Vir01, p.1]. The purpose of the period of
exclusivity was to make the investment more attractive for Telefónica de Espańa
and to give TdP time to thoroughly modernize the system. It was agreed on that
TdP would have to install telephone services in a series of towns that never before
had a telephone link and that the quality of the telecommunications infrastructure
would have to be rectified (e.g. at least 90% of all lines had to be digitized within
five years). The minimum amount that had to be invested in the telecommunications
infrastructure over the 5-year period by TdP was set to $1 billion [ITU01, p.3]. Figure
3.1 documents that geographic dispersion of the installation of new lines has shifted
during the 1990s. For more detailed information on the transition and the current
state of the regulatory framework of the telecommunications market and government
policies refer to chapter 4.
Figure 3.1: Installation of new phone lines in Perú and Lima between 1995 and 1998
[tsd]
Source: [Min02c, p.4]
30
Network and Internet development
Basic Telecommunications Services
In 1996, the number of installed new lines in Lima was for the first time lower than
in the rest of the country. That shows that the efforts on parts of OSIPTEL and TdP
to increase telephone line penetration in Perú’s rural areas has availed; however, there
are still large areas of the country that don’t have any communications infrastructure
whatsoever. Figure 3.2 provides a good overview about the telephone access situation
in Perú. It shows that only about one quarter of all 1,827 districts in Perú had
telephone access in 2001. The geographic divide of the country becomes noticeable,
with the coast being the most developed region with more denser telephone access
and the mountains and the rain forest with only sporadic access.
Figure 3.2: Telephone access in Perú in 2001
Source: [OSI02f, p.24]
A direct result of the changes in policies and regulations is that the technological
capacity Perú’s in the telecommunications sector has risen dramatically during the
1990s. Table 3.1 depicts that remarkable change between the years 1993 to 1999.
It can be derived from the table that not only the capacity of fixed lines but
also the capacity of the wireless telecommunications infrastructure increased tremendously. The user growth rate of the wireless telecommunications network exceeded
the growth rate of the fixed lines roughly twentyfivefold. This indicates that the mobile phone market shows the greater potential for the future than the market of fixed
telephones lines. This is due to the underdeveloped state of Perú’s telecommunications system in the early 1990s. It is easier, cheaper, and faster to set up a wireless
31
Network and Internet development
Basic Telecommunications Services
telecommunications systems when developing a new market; especially in the case of
Perú because large sections of the underdeveloped regions of the country are remote
and due to their hostile terrain (mountains, rain forest, etc.) not easily accessible.
32
Telecommunication
Indicators
Installed
capacity
of
1993
1994
1995
1996
1997
1998
1999
Source
754
871
1,310
1,765
1,920
2,012
2,001
[Jaf99, p.19],
fixed lines [thou.]
Total lines in service
[TdP99, p.1]
673
772
1,109
1,435
1,645
1,555
1,689
[thou.]
[Jaf99, p.19],
[TdP99, p.1]
Fixed lines in service
2.9
3.4
4.7
5.9
6.7
6.3
6.7
per 100 people
Avg.
$
month
[Jaf99, p.19],
[TdP99, p.1]
waiting
70
33
5
2
2
2
2
time for fixed line
[Jaf99, p.19],
[TdP99, p.1]
37
52
74
202
436
736
1,046
[OSI02b, p.1]
8
14
24
34
38
47
61
[OSI02d, p.1],
[thou.]
Public phones installed
[thou.]
Cable TV subscribers
[thou.]
[TdP99, p.1]
1
6
19
101
252
305
327
[OSI02e, p.1],
[TdP99, p.1]
%
Basic Telecommunications Services
Mobile phones in use
&
Network and Internet development
33
Table 3.1: Telecommunication indicators in Perú, 1993-1999
'
Network and Internet development
3.2
First Steps towards the Internet
First Steps towards the Internet
First steps to the development of Internet infrastructure in Perú can be traced back to
1985. Several projects emerged that aspired to create networking capabilities. Some
networks that resulted from these early efforts include the medical network of the
Cayetano Heredia University, the education network of the Ministry of Education 3 ,
and the librarian networks [Sor96a, p.2]. In general, efforts to develop networking
infrastructure and Internet access usually originate either from the commercial, the
non-government, or the academic sector and can be with or without government
support. Similar to most countries, the first attempts to connect Perú to the Internet were initiated by the academic community, which was estimated to encompass a
maximum potential of 40,000 users in Perú. Many researchers and scientists saw the
prospective benefit for their work and the rest of the country that a networking infrastructure would bring [Pim92, p.1]. In the Summer of 1985, the National University of
Engineering Computing Center (UNI-CC)4 induced the Academic and Scientific Network (PERNET), which was designed to be a network that would connect UNI-CC
with the Catholic University5 , the National University of Engineering (UNI)6 , the
University of Lima, and Federico Villareal National University through modems and
telephone cables [Afe98, p.1]. In 1986, The National University of Engineering and
the Catholic University established the first connection and thus, created the first
link of the Peruvian University Network. The connection was made possible through
several modems, two computers (IBM 4341) and a communication controller (IBM
3705) donated by IBM Perú [Jau98, p.36]. Over the next years, the other universities
joined the network and electronic information was exchanged on a regular basis. In
June 1991, UNI was registered as the main Peruvian site for the BITNET networks.
Eventually, the PERNET project was discontinued because the connections between
these five state universities were made amongst administrative units, which was not
useful to other universities or organizations [Sor96a, p.2].
Another major project that tried to create networking capabilities in Perú was
also started in 1985 under the leadership of DESCO7 (Center of Studying and Promotion of Development), a Peruvian non-government organization (NGO). DESCO
was part of over 50 non-for-profit organizations around the world that formed a net3
Ministerio de Educación
4
Centro de Cómputo de Universidad Nacional de Ingenierı́a
5
Universidad Católica
6
Universidad Nacional de Ingenierı́a
7
Centro de Estudio y Promoción del Desarrollo
34
Network and Internet development
Characteristics of Perú’s Internet Development
work called GEONET. This network offered bulletin board systems and electronic
mail boxes. DESCO used a X.258 packet-switched network technology to connect
with its counterparts. Similar to the PERNET project, DESCO had to cease its
GEONET activities due to the lack of sufficient financial support [Afe98, p.1]. Other
projects that emerged during the late 1980s and the early 1990s include the Catholic
University’s attempt to interconnect two computers from different facilities and the
ESAN9 project. The ESAN project refers to the Graduate Business School’s (ESAN)
proposal to build a network in Perú, which would be dependent on the University of
Chile’s network. Through this network, ESAN expected to be able to connect to the
BITNET network. The reasons for the lack of persistence of all these projects are
multifarious. Perú is traditionally a country that is not well integrated and therefore,
excludes large sectors from participating in developing and benefiting from policies.
This has led to an ingrained distrust between the various sectors and aggravated
the competition for the generally scarce financial resources. The financial resource
situation was even worsened by the perpetual terrorist activities during the 1980s
and early 1990s, which reduced public and private investment in national infrastructure even more [Sor96a, p.2 et seq.]. However, all of the above mentioned projects
were part of a dynamic process and the expression of a strengthened desire of an increasing group of organizations and individuals to participate in the Internet, which
eventually led to the creation of “Red Cientı́fica Peruana” (RCP)10 [Jau98, p.36].
3.3
Characteristics of Perú’s Internet Development
In the following, the Internet development of Perú will be described in further detail.
By doing so, this paper will pay close attention to characteristics that distinguish
the Internet development in Perú from the developmental processes that took place
in other countries.
The development of the Internet in Perú is closely knitted with the Peruvian
Scientific Network (RCP) and for many Peruvian users the terms RCP and Internet are synonymous. Nowadays, most lobbies and organizations in Perú (even the
government) recognize that RCP played a vital role and was the decisive factor in
8
X.25 is a protocol for packet-switched networks that uses the first three layers of the OSI-model.
The technology is widely known, runs stable, and can be installed at relatively low costs. However,
its store-and-forward mechanism can cause turn-around delays of up to 0.6 seconds.
9
10
Escuela de Administración de Negocios para Graduados
Peruvian Scientific Network
35
Network and Internet development
Characteristics of Perú’s Internet Development
the spread of access to international networks throughout the country. What makes
RCP so special is that it is not born out of profit motivation but out of the idealistic idea to provide the majority of the citizens of the country with network-based
computer services. These were presumed to help the population (especially the lower
income sections) to cope with their day to day problems and hence, ultimately help
to expedite the economic and social development of Perú [Her00, p.3]. Another noteworthy point is that RCP operated without any government support right from the
beginning. Therefore, the development and structure of RCP and their deployed infrastructure will be scrutinized in more detail. Furthermore, the time period between
1995 and 1998 will be further analyzed because the major players of Perú’s Internet
market besides RCP emerged during this period and each competitor’s methods of
Internet provision are examined. Finally, the phenomenon of the rapid proliferation
of cabinas públicas throughout Perú, which is characteristic of the Peruvian Internet
diffusion, will be more particularized.
3.3.1
The Peruvian Scientific Network (RCP)
During the 1980s, several Peruvian individuals and organizations from the research
and other sectors recognized the great advantages that the instant information sharing capabilities of the Internet would bring them and their country. Also, many of
them felt that if Perú could be electronically connected to the rest of the world, it
would help the country as a whole to come out of its informational isolation and
would substantially aid and facilitate the economic development of Perú. The emergence of this spirit throughout Perú’s scientific and intellectual community was no
isolated case but rather a general atmosphere that seized researchers and thinkers
in all Latin America and worldwide. This dynamic was supported by several international agencies who sought to interconnect already existing networks of private or
public organizations throughout Latin America (mainly through thematic networks
such as human rights, environment, sustainable resources, etc.). The first result of
these efforts was the project of the UNDP and the Brazilian research community,
which was supported by the Brazilian Ministry of Science and Technology and in
1989 ultimately gave birth to the Latin American Alternet network, also known as
Association for Progressive Communications (APC) network. This constituted the
first connection to the Internet in Latin America [Jau98, p.35]. Within this trend,
the Latin American and Caribbean Networks (REDALC)11 project emerged as a
joint-effort product of the European Community and the Latin Union. Along with
11
Red de Fondos Ambientales de Latinoamérica y el Caribe
36
Network and Internet development
Characteristics of Perú’s Internet Development
financial and technical support of OAS and UNESCO, REDALC boosted the startup
of several Latin American Networks [Sor96a, p.1].
In the beginning of 1991, José Soriano, a representative of the Latin Union and
former agronomist and journalist, started to get in contact with various Peruvian
Universities, NGOs, and private and public research centers to involve them in the
REDALC project and try to interconnect the individual networks of these organizations. Together with 43 of these institutions, Soriano founded the Peruvian Scientific Network (RCP). It was registered in the public registrations national office
as a NGO on December 02, 1991 [Esp00, p.73]. RCP was designed as a non-forprofit organization with the goal to provide Perú with the tools to adequately and
fairly use the Internet to the country’s advantage. In addition, it seeks to facilitate
the information technology capabilities of individuals and organizations throughout the whole country and hence, strengthen the general national development12 .
In contrast to the previous unsuccessful initiatives that also attempted to achieve
the interconnection of networks in Perú and on a global level, the founders of RCP
understood the importance of politics and lobbyism for the success of such an integrated project that involves so many different parties with diverse interests. They
not only recruited member organizations from different areas (public, private, commercial, non-for-profit, etc.) but also managed to acquire financial donations and
technical support from various organizations. The Peruvian government was not one
of the supporters because it did not want to participate and assign funds to a consortium that is not directly controlled by a governmental agency. In particular, the
then state-owned telephone company ENTEL refused to cooperate because it saw
RCP as a potential competitive threat.
In December 1991 when the RCP project finally took off, its resources consisted
of a $3000 donation of UNDP, a 386 PC UNIX server, three telephone lines, a X.25
connection, and some office space donated by ESAN [Afe98, p.1]. In addition, as
response to a request of RCP, the NSRC (Network Startup Resource Center), a nonfor-profit organization that works in close affiliation with the University of Oregon
and which focusses on the deployment and integration of appropriate networking
technologies in developing countries, sent two experienced technicians from the U.S.
to Perú, who stayed for 3 month and trained the local Peruvian engineers of RCP in
installing, using, and maintaining the networking equipment [Bus02, p.1]. Finally, on
December 01, 1991, the first message originating from Perú was sent to the world13 .
Initially, the RCP computer was set up as a store and forward Unix to Unix Copy
12
For the original wording of RCP’s mission and general philosophy see appendices A.2.1 and A.2.2
13
See appendix A.2.3 for the original message
37
Network and Internet development
Characteristics of Perú’s Internet Development
Protocol (UUCP)14 node, that connected via a dial-up line to a node of the private
network of one the two U.S. technicians in Oregon, USA [Mon99b, p.15]. The initial
connection speed was 300 Bps and was later upgraded to 19,200 Bps. The total
number of nodes in Perú was 40 and each node had between 1 and 3 users [Sor92,
p.1]. In this start-up phase of RCP, the whole process of sending and receiving e-mail
from and to Perú functioned according to the following procedure:
• Users connect to ESAN (where the entire mail is stored)
• From ESAN, RCP connected to the network in the U.S. several times a day
via telephone lines.
• From there the mail was distributed over the Internet
Until 1994, the number of institutions that were affiliated with RCP swell to more
than 300 and the number of total users to more than 10,000. Along with the increase
in members came an increase in local networks connected to RCP via dedicated lines.
Due to RCP’s organizational mission to provide networking capabilities and Internet
access throughout the whole country and especially to remote locations, RCP started
to establish UUCP connections with institutions outside of Lima in cites such as
Arequipa, Cuzco, Piura, Huarez, and Tumbes [Sor92, p.2]. Due to the increase in
members, the amount of data that had to be transferred increased consequently to
approximately 3 MB per week, which resulted in high telephone costs [Jau98, p.37].
Hence, leaders of RCP recognized that they had to acquire new equipment and a
direct and dedicated connection to the Internet instead of connecting through a
dial-up line in order to cope with the steadily increasing traffic.
On February 19, 1994, RCP embarked upon using a 64 Kbps satellite link connection to NSF’s node in Homestead, Florida. Because of the installation of the satellite
equipment, it was easily feasible now for RCP to operate as an Internet TCP/IP
network. The equipment itself, including a groundstation for satellite communication and radio-frequency equipment, was donated by RedHUCyT. A year later, RedHUCyT provided additional funds for the purchase of a CISCO 7000 router, further
facilitating the national expansion of RCP [Red00, p.2]. In the same year a second
dedicated international connection circuit was leased. The teleport of TdP was used
to connect to JVNCnet15 in Philadelphia, USA with a connection speed of 256 Kbps
14
UUCP enables one computer to send files to another computer over a direct serial connection or via
modems and the telephone system. For most file transfer applications, UUCP has been superseded
by other protocols, such as FTP, SMTP and NNTP.
15
John von Neuman Computer Center Network
38
Network and Internet development
Characteristics of Perú’s Internet Development
[Sor95, p.2]. At the same time the satellite connection to Homestead, Florida was upgraded to 256 Kbps. In addition to the above described upgrades of its technological
capabilities, RCP initiated a plan that would disseminate knowledge about the network and its services beyond the research and educational communities. This effort
included training the staff at member institutions, developing Internet tool manuals to assist users (in Spanish), propagate information about the Internet, creating
directories of existing Internet resources (primarily resources that were available in
Spanish), and holding conferences on technical topics [Mon99b, p.15]. In addition,
two more far-reaching projects were commenced in 1995. The first was an effort to
establish a national backbone by connecting each of the 24 departments of the country with a dedicated 64 Kbps line to Lima. It was expected that such a backbone
system would significantly decrease the cost of communication for the national research system, proliferate the amount of users, and meliorate the cooperation among
member institutions. This project did not prove successful and RCP was only able
to connect a few departments to the main computing center in Lima. According to
RCP’s general manager José Soriano,
the execution of the national backbone project was hindered by two factors: The lack of an appropriate telephone network in the country, and
the lack of capital to construct the departmental nodes, acquire the infrastructure, and buy the telephone services [Mon99b, p.16].
However, RCP did not stop to continue its provincial outreach efforts and several
other projects that helped to connect rural areas of Perú have been brought on their
way. The second project that was started in 1995 was called “La Cabina Pública” and
proved to be more successful and would revolutionize the provision of the Internet
in Perú. A public Internet access site was opened in Miraflores (a central district of
Lima), where the general public could access the Internet for three hours per week
at a rate of $15 per month. This fee included a training program in addition to the
three hours weekly. The concept of these “cabinas públicas de Internet” started to
spread all over the country and since then has provided Internet access for thousands
of Peruvians. The model was so successful because it matched the realities of most
Peruvians, who have neither a telephone line nor a personal computer [Jaf99, p.67].
For more information on the cabinas públicas refer to chapter 3.3.3.
In 1997, RCP had expanded its operations to two international channels with
a capacity of 2 Mbps each. In addition, it was managing a total of 160 dedicated
lines and 400 telephone lines for the dial-up nodes and the total number of members
exceeded 8,000. By then, the member base included organizational users as well as
39
Network and Internet development
Characteristics of Perú’s Internet Development
the first individual users. In order to be able to handle the steadily increasing traffic
on their servers, RCP installed two mirror sites in Texas, USA [Esp00, p.74]. The
location was chosen due to the fact that a considerable amount of RCP’s users are
Peruvians who live in the U.S.
Overall, it can be noted that the growth and accomplishments of RCP are a success story. What differentiates the start of the Internet in Perú from the start-up
in other countries is that the endeavor was undertaken solely by a consortium of
organizations and a few individuals without any support from the government or
a governmental agency. Although this consortium did not and does not strive for
profits, it was self-sustainable right from the beginning (with the help of a few but
crucial donations in the start-up phase by other non-for-profit organizations). Hence,
the goal of the consortium is not to earn profits but to provide educational institutions, companies, governmental and non-governmental institutions, and individuals
with Internet access at a net cost price. This is intended to positively influence the
economic development of the country and to provide Perú’s citizens with more opportunities to gather information at affordable costs, which in turn is expected to
strengthen the democratic foundations of the country. José Soriano explained the intentions of RCP in an interview with the U.S. magazine Newsweek in January 1995
as follows:
Nowadays, the worldwide networks are used by elites. Only one who already possesses information gets more [Afe98, p.1].
The self-sufficiency of RCP helps the organization to operate mostly independent
of the government. This is especially important in Perú, because due to many government changes and political instability, the country has a historical distrust towards
its own government and thus, RCP achieved a high degree of acceptance and cooperation from organizations and individuals throughout the country [Ber00a, p.2].
Another reason for RCP’s success is its ability to repeatedly come up with new and
inventive ideas that help to constantly increase its users base. Examples for these
inventive concepts include the cabinas públicas, the training sessions for end users,
and RCP’s comprehensive webportal, which features reports on current Peruvian
affairs [Bus99, p.1].
3.3.2
Market Development after the End of RCP’s Monopoly
Until 1995, RCP practically held a monopoly on the Peruvian Internet market due to
a lack of competitors. The first competitor entered the Peruvian market in 1995 and
many followed in the next three years. In fact, in 1998, OSIPTEL had already issued
40
Network and Internet development
Characteristics of Perú’s Internet Development
close to 30 licenses for Internet service provision to different companies [Ber00b, p.3].
This tremendous change within a few years from a de facto monopoly to a market
of competition and a multitude of ISPs who offer an even greater variety of services
happened within an environment that showed a great demand for more services
and more variety. More and more Peruvians outside the narrow research community
started to utilize the Internet and its capabilities. An indicator for this coherence is
table 3.2, which shows that between 1995 and 1998, concurrent with the increase in
ISPs, the number of Internet hosts as well as the number of PCs in Perú proliferated
significantly.
1995
1996
1997
1998
Total number of hosts
813
5,192
3,415
4,794
Total number of PCs
150,000
200,000
300,000
450,000
Table 3.2: Growth of PCs and Internet hosts from 1995-1998
Source: [Ber00b, p.2]
In 1995, International Business Machine (IBM) was the first ISP to enter the Peruvian Internet market besides RCP. It started offering Internet services to companies
in Lima through its IBM Global Network service. The emergence of a competitor on
the market made the Internet fees fall for the first time in Perú [Vir01, p.1]. Compared with other Internet services around the world, IBM’s Global Network service
stands out as a historical curiosity. IBM started to launch this service already in 1981
with the purpose to provide international companies with global data links. It did
so by leasing data lines from telephone companies throughout the world in order to
be able to interconnect their affiliated customers. This was a very progressive concept, considering that at that time most telephone companies’ services did not cross
national borders. Until 1998, IBM’s Global Network services were used by roughly
35,000 corporate customers in more than 100 countries. In the same year, IBM sold
its entire network to AT&T16 , which continued to serve the Peruvian market.
As a basic principle, ISPs can provide their customers with Internet access either
by the means of a dial-up connection (a modem plugged into an ordinary telephone
line) or through dedicated links (dedicated circuits). RCP as well as IBM employed
both of these methods depending on their customers’ needs. However, due to the
legal monopoly that was initially awarded to TdP until 199917 , it was interdicted
16
17
American Telephone and Telegraph company
The monopoly was nullified one year earlier due to negotiations between OSIPTEL, other ISPs,
and TdP. See chapter 4.1.2 for more detailed information
41
Network and Internet development
Characteristics of Perú’s Internet Development
to anybody to deploy their own transmission links or local loops in the country, so
that all these media had to be rented from TdP [Bri98, p.4]. Because of this causal
connection, TdP had a significant competitive edge over its competitors when it
entered the ISP market in July 1996. The only noteworthy competitive safeguards
imposed on TdP were the legal restrictions on licensing agreements with other ISPs,
which by law had to be fair and non-discriminatory.
TdP’s market entry plan rested upon the simultaneous unveiling of the two different yet interrelated services, Unired and InfoVı́a. Unired is a dedicated Internet
access service that is directly offered by TdP. This service features solely Internet
access via dedicated lines and a long-distance international connection or gateway
to the Internet [Bri01a, p.7]. TdP initially sought to offer this service directly to the
public, but the outcome of a legal dispute between RCP and TdP forced TdP to offer
the dedicated access of Unired only to companies and ISPs [Vir01, p.1]. TdP did not
enter the dial-up market directly right away but rather encouraged and potentiated
the entry of a large number of ISPs, by launching its InfoVı́a service, through which
ISPs are provided with the infrastructure necessary in order to be operational. InfoVı́a is a nationwide Intranet based on frame relay technology. It is interconnected
by a series of points of presence (POPs), which allows users the exchange of information with one another. The main feature of InfoVı́a is that it allows any person
with access to a telephone line, a modem, and a free of charge software given out
by TdP to connect to the Intranet from any where in the country by dialing the
abbreviated code 155. This call is always charged as a local call, independently from
where the call originated [USD99, p.2]. Thus, it is not necessary to subscribe to any
ISP in order to solely connect to InfoVı́a [Bri01a, p.7]. However, in order to access
the Internet through InfoVı́a, users need to subscribe to an ISP that solely uses InfoVı́a as a backbone and is licensed by TdP (these ISPs are called “Centro Proveedor
de Información” (CPIs)18 ). CPIs have to lease a frame relay circuit from TdP. This
circuit links the firm with an InfoVı́a POP through which they have access to the
entire nationwide network. The offering of this service had a significant impact on
the Peruvian ISP market because it enabled small firms without substantial financial
resources to offer Internet services nationwide without establishing a cost intensive
network. Just within two years of operation, InfoVı́a had 281 registered CPIs that
were offering various services to its customers [Web99, p.1]. Figure 3.3 depicts the
18
Besides ISPs that are using TdP’s services, this category also comprises companies that use InfoVı́a
to make information available or offer services to their customers for just the cost of a local call but
do not offer general Internet provision services (e.g. automatic re-stocking, telebanking, financial
transactions, or software online sales [Jau98, p.38])
42
Network and Internet development
Characteristics of Perú’s Internet Development
Internet
Link 2:
Dedicated local
circuit
Dial-up user A
Lima
Unired Node
SD
STP
1
RC V E
UTP
C OM
3
C OM
4
C OM
5
NS R T
W TL T
To k e n Ri n g 2
2
TX
1 0 BASET
RX
AUI
P W A
P ar
S mi
R ps
F a il
F ai l
ER R
A d a p te r
E th e r n e t
1
OC I O
C 1
B a y N e tw or k s
A d a p te r 2 P CM C IA
Ba ySta ck Ad v a nc e d R em o te N od e
E th e r n e t 1
CPI's Information center
Infovia Node
Dial-up user B
Town outside
Lima
Link 1:
Frame Relay
Local calls
TdP’s
Backbone
(Infovia and
Unired)
PSTN owned
by TdP
CPI
Figure 3.3: Dial-up service for CPIs
technical process of CPIs using the InfoVı́a network.
In contrast to the dial-up process through a CPI, a dial-up user of an independent
ISP that does not use InfoVı́a has to place a telephone call to the closest node of
the ISP. That means that a user in a province where his or her ISP has no physical
presence has to place a national long distance call to the closest out-of-province
node of the particular ISP. In addition, the independent ISP will need commercial
telephone lines in each node, modems in each of these lines, and terminal servers
and transmission links to ensure interconnection of the nodes. Moreover, the firm
has to bear the costs of the lease of an international long distance circuit to connect
to an international network and the costs of routing its traffic into this international
network19 [Bri98, p.7]. The entire process is illustrated in figure 3.4.
The emergence of many CPIs within a short period of time forced the retail
prices of Internet access to drop considerably20 and hence, increased the competitive
19
In the case of independent Peruvian ISPs that meant almost always a circuit that would route their
traffic to a network in the U.S.
20
CPIs’ rates were on average $13 per month, whereas RCP’s rates were on average $35 per month
43
Network and Internet development
Characteristics of Perú’s Internet Development
Link 2:
International long
distance call
Internet
Local call
Dial-up user A
Modem
Lima
Modem
Terminal server
Lima Node
Business
telephone line
Dial-up user B
Lima
PSTN
PSTN
Link 1: National
long distance call
Modem
Out of Lima Node
Dial-up user C Town outside
Lima
National long
distance call
Independent ISP's
Backbone
PSTN owned by TdP
Figure 3.4: Dial-up service for independent ISPs
pressure on RCP. Confronted with this new competitive environment and unable to
reduce its rates any further with the current structure, RCP felt impelled to also
offer access to the Internet as a CPI, using both, the InfoVı́a as well as the Unired
network. Through this strategic move, RCP was able to offer competitive rates and
continue to offer the services that it previously provided [Bri01a, p.7]. Table 3.3
illustrates the change of the competitive environment in Perú’s Internet market that
occurred between 1996 and 1998.
Just within two years, Cosapidata, a CPI that provided dial-up Internet access
through InfoVı́a and previously was a specialist provider of hardware, software, and
networking solutions, evolved into the second largest ISP of the country with a
customer base of approximately 10,000 and over $48 million in sales in 1999. Hence,
it drew off a considerable share of the market from RCP [USD99b, p.3]. One reason
for Cosapidata’s success was that it was able to offer access rates as low as $5 per
month for one-year contracts. Another reason was that it offered a wide variety
of integrated telecommunications solutions to companies, including the design and
implementation of company’s networks for voice and data transmissions.
As previously stated, TdP’s licensing agreement with OSIPTEL gave it a pe-
44
Network and Internet development
Characteristics of Perú’s Internet Development
1996
1998
Dial-up (users)
RCP
2,071
7,800
0
5,700
625
2,500
TdP’s CPIs
IBM
Dedicated (number of circuits)
RCP
78
190
TdP
0
320
IBM
24
50
Table 3.3: Perú’s Internet market between 1996 and 1998
Source: [Bri98, p.5]
riod of exclusivity for deploying and installing a physical backbone of networks in
the country. Upon the end of the period exclusivity, the liberalization of the market drew a multitude of companies to invest in Perú and some of these companies
started to deploy their own infrastructure. The largest competitor that entered the
Internet market in 1998 was Firstcom, a company founded by U.S. as well as Chilean
investors. Firstcom had operations in several other South American countries and
concentrated its business mostly on providing commercial customers with telecommunications services. In Perú, it offered Internet access, long-distance services, fixed
telephony, and wireless services to its customers. Within two years of entering the
market, Firstcom invested more than $70 million in installing a fiber optic network
ring throughout Lima and Callao21 (ca. 760 km), 22 ATM nodes, and one international teleport. In June 1999, Firstcom provided dedicated Internet services for 147
clients [Bri01a, p.11]. In 2000, large parts of Firstcom were purchased by AT&T,
which constituted the core for the new created company AT&T Latin America (ATTLA). ATTLA continued to operate the fiber optic network in Lima and took over
Firstcom’s entire client base in Perú [Hoo03, p.1].
Figure 3.5 summarizes the situation of Perú’s Internet market in 1998 as described
above and depicts who the main players were and what methods of Internet access
provision they used.
21
Callao is the port of Lima and part of the metropolitan area; however, Callao is self-administered
and has the status of a constitutional province
45
Network and Internet development
Characteristics of Perú’s Internet Development
Internet
AT&T Latin
America
TdP
CPIs
Leased
lines
Own lines
RCP
Leased
lines
Unired
IBM Global
Services
Cosapidata
Leased
lines
InfoVia
InfoVia
InfoVia
Final users
Figure 3.5: Main Players of the Internet market in 1998
3.3.3
Cabinas Públicas
At first sight, RCP seems to have been successful in terms of providing users Internet
services at affordable prices. In 1996, RCP became the network in Latin America
that charged the lowest fees to its customers. This was achieved despite the fact that
relative costs of operating a network are higher in Perú than the average operating
costs in Latin American [Sor96b, p.2]. Table 3.4 depicts the prices of RCP’s services
in 1996.
Compared with prices that were charged at the same time in the U.S. these
fees might seem very reasonable; however, the economic circumstances in Perú are
quite different than in the U.S. The GDP per capita averages to $400 per month
and more than 50% of the population is estimated to live in poverty, ca. 15% live
in extreme poverty [CIA02, p.3]. Computer density in Perú in 1995 amounted to
5.4 PCs per 1,000 inhabitants and only 44% of all Peruvian housing facilities have
access to electricity, in rural areas the rate comes to only 12%. The nationwide
telephone penetration came to 6.8% in the same year, while some rural departments
had rates as low as 0.27%22 [Afe98, p.2]. Whilst the prices for a telephone connection
22
Department of Huancavelica
46
Network and Internet development
Characteristics of Perú’s Internet Development
Dial-up connections
UUCP
Dedicated lines
Inter-
UUCP
9.6
19.2
64
128
256
active
+
Kbps
Kbps
Kbps
Kbps
Kbps
SLIP23
Basic fees
$20.99
$21.99
$48.00
$330
$390
$600
$980
$1300
Discounted
$18.99
$18.99
$43.00
$300
$360
$550
$900
$1200
fees24
$15.00
Fees for Cabinas Públicas
Table 3.4: Monthly fees of RCP’s services in 1996
Source: [RCP96, p.1]
and Internet access have steadily been decreasing and telephone penetration has
been improving since the liberalization of the market, there are still tremendous
economic and infrastructural barriers to the propagation of the Internet through
the conventional way; dial-up or dedicated access to single households who have
telephone lines and have the means to buy computers and are interested in browsing
the Internet for goods, services, and information [Sme00a, p.121]. In summary, the
main barriers to the proliferation of the Internet in 1994 (the startup year of the
cabinas públicas) were [VanK00, p.7 et seq.]:
• An inadequate basic infrastructure
• An extreme low penetration of telephone lines and computers
• High costs and limited availability of equipment (e.g. computers, terminals,
modems)
• High computer illiteracy
• Desiderative subventions and support on the part of the government in favor
of the access to network technology for the general population
• The lack of appropriate local content of the national networks and the Internet
23
Short for “Serial Line Internet Protocol”, a protocol for connections to the Internet via a dial-up
line. Developed in the 1980s when modem communications typically were limited to 2,400 Bps, it
was designed for simple communication over serial lines.
24
RCP offered discounted fees for institutions or individuals without profit ambitions (NGOs, public
universities, etc.)
47
Network and Internet development
Characteristics of Perú’s Internet Development
Recognizing these barriers, RCP conducted a study in 1993, which examined for
how many Peruvians an access model that is based on the private ownership of PCs,
telephone lines, and modems constitutes a realistic Internet access opportunity. The
result of the study was that at the utmost five percent of the population would be
able to benefit from such a model [Her00, p.4]. Based on this study, RCP’s strategic
planers came up with a concept, which would bypass the barriers to Internet access
and apply to a majority of the population of the country, the model of the “Cabinas
Públicas”. These cabinas or public Internet cabins typically consist of a room with
15 to 30 PCs, which are connected to a local area network (LAN), which in turn is
connected to the Internet through a server and a dedicated line (a few of the smaller
cabinas also use dial-up lines) [Ebe00, p.26]. Table 3.5 provides detailed information
about the bandwidth of the dedicated lines that are utilized by cabinas públicas.
Bandwidth (BW) [Kbps]
Percentage of lines in use
BW ≤ 64
62.36%
64 < BW ≤ 128
26.78%
128 < BW ≤ 256
5.34%
256 < BW ≤ 512
2.87%
512 < BW ≤ 1,024
1.49%
1,024 < BW ≤ 2,048
1.03%
BW > 2,048
0.11%
Table 3.5: Bandwidth distribution of cabinas públicas as of June 2001
Source: [OSI02c, p.2]
Most of the cabinas have relatively new computers with high processing power
that allow in many cases not only for fast and convenient surfing of the Internet
but also for voice-over-IP and video conferencing. The normal modus operandi of
most cabinas allows users to become members for a fee of ca. $15 per month. The
membership fee includes the assignment of an e-mail account, up to 20 computer
education classes per month, and some gratis hours of Internet access (usually 35 hours per month). Every additional hour is charged separately (typically 50c to
$1.00 per hour) [Her99a, p.111]. However, one does not necessarily have to be a
member to use the services of the cabinas. Non-members just pay a fixed hourly rate
for their usage, which can be slightly higher than the rate for members, depending
on the individual cabina’s policy. Also, the general proceedings and the equipment
might differ significantly in some cases from the above described. What differentiates
48
Network and Internet development
Characteristics of Perú’s Internet Development
cabinas from “Internet cafes”, which emerged in most western countries during the
1990s is that most of them are not cafe-like but are fairly functional spaces and can
be located in all sorts of environments25 (good urban neighborhoods, slums of Lima
or other big cities, and small towns in the highlands or the rain forest). In addition,
they charge comparably low rates for the usage and therefore make Internet access
affordable for a big majority of the population.
The first cabina pública was opened by RCP in Lima in May 1995 in the district
of Miraflores26 and access was granted for a monthly fee of $15. Over the next two
years, RCP opened 6 more cabinas in Lima and other big cities of the country. At
the same time, several other more informal computer access facilities run by private
investors started to flourish in Lima, which, for a fee, grant access to computers
without Internet connection. With Internet access and especially dedicated lines
getting significantly cheaper between 1998 and 2000, these locally run businesses
started little by little to take up provision of Internet access and thus, converted
to partly very informal cabinas públicas [Fer00b, p.4]. Even though a few of these
businesses were converted to cabinas very early, it was not before 1998 that the
rapid growth of cabinas públicas in Perú started. Interestingly, the beginning of this
evolution coincides with a drawback in fixed telephony (10% of all users cancelled
their lines). The reasons for this circumstance are twofold. On the one hand, Perú
was shaken up by an economic crisis resulting from “El Niño”-related natural disaster
damages and as a result, the average household income was reduced by 23% within
two years [Fer01, p.3]. On the other hand, after the introduction of pre-paid cards,
mobile phones became increasingly popular and people started to substitute them for
fixed lines [Fer00b, p.2]. Today there are more than 1,740 cabinas in Perú, distributed
all over the country. Cabinas penetrated even small towns and villages in remote areas
and they are the only gateway to the Internet for most of Perú’s steadily growing
Internet user community. For more information on this subject refer to chapter 5.2
[OSI02c, p2].
Although RCP was the first to recognize and to respond to the high demand for
Internet services, it became blatant very soon that due to limited financial means and
a lack of support on the part of the government, the organization would not be able
to set up and operate a large number of cabinas all over the country just by itself.
That is why by the end of 1999 only nine cabinas existed, which were solely operated
and owned by RCP. A large share of the other cabinas that had spread all over the
big cities of the country since 1998 are “cabinas franquiciadas” (franchised cabins).
25
For pictures of cabinas públicas in Perú see appendix B.1.2
26
Miraflores is an upper class neighborhood in Lima
49
Network and Internet development
Characteristics of Perú’s Internet Development
This concept was invented by RCP in response to their financial inability to operate
a multitude of cabinas by themselves. The basic idee of the cabinas franquiciadas
is to create a situation, which allows rentability for all involved parties (RCP, the
entrepreneurs, and the customers). The standard agreement between RCP and the
entrepreneurs includes the following main points [Her00, p.6 et seq.]:
• The franchisee rents (or owns) the place for the cabina and pays for utilities.
• RCP is responsible for buying the equipment (hardware, software, furniture)
and providing the dedicated line. The franchisee finances the equipment with
a 36 month credit, vouched for by RCP.
• RCP is responsible for technical support and maintenance during the term
of the contract. In addition, the contract includes a relatively extensive free
training in all essential areas for up to five members of the cabina (owner and
staff).
• RCP is obliged to offer its complete training program and to offer all its products and online services to the customers of the cabina.
Towards the end of 1998, RCP implemented another public Internet access model,
the so-called “monocabina”. Figure 3.6 shows a monocabina in the countryside of
Perú. This form of cabina pública includes only one computer, printer, phone, and
modem and offers customers the possibility of IP-telephony and Internet access
through a self-developed software, which includes portal functions. Because they
only serve one customer at a time and they are frequently used for voice-over-IP,
many people refer to them as “public Internet phone boothes”. Monocabinas target
low populated rural areas with little telephone line penetration rates [Her99b, p.3].
According to RCP reports, there are currently more than 250 of these monocabinas
installed in rural areas of the country [AYF02, p.3].
Besides cabinas and monocabinas that are owned by RCP and the cabinas franquiciadas, there are some cabinas that are independently operated by entrepreneurs
who acquire the equipment and the Internet connection on their own. These independent cabinas are partially very functional and rustic and can have as few as 1-3
computers.
To understand why cabinas públicas where so successfully implemented in Perú,
it is crucial to take a closer look at the economic and social structure of Perú. Perú’s
society is deeply divided into different social classes. Who belongs to which class
depends on racial background, financial situation, and place of origin (within the
50
Network and Internet development
Characteristics of Perú’s Internet Development
Figure 3.6: A monocabina in the countryside of Perú
country). It is extremely difficult for individuals to leave their socioeconomic sector
and move upwards. For analytical purposes, Fernández-Maldano [Fer01, p.3] suggests
to divide the Peruvian society into four separate sectors, with sector A representing
the high-income sector, sector B for the middle-income sector, sector C for the lowincome sector, and finally sector D for the very low-income sector. Table 3.6 shows
the distribution of income levels across the population of Lima with regard to the
4-sector model from Fernández-Maldano.
High
in-
Middle
in-
come sector
come sector
(A)
(B)
3.3%
13.4%
Low income
Very low in-
sector (C)
come sector
(D)
34%
49.3%
Table 3.6: Distribution of socioeconomic levels across Lima’s population as of 2000
According to table 3.6, only about 17% of Lima’s inhabitants belong to income
classes A or B. From these 17%, about half posses an Internet connection in their
home (mostly through dial-up services). Virtually no one from sectors C or D has
access to the Internet at their homes [OSI02f, p.5]. It is important to note that this
social division is even more distinct outside of Lima. It can be referred from these
numbers that about 90% of Lima’s inhabitants (countrywide more than 95%) have
no possibility of accessing the Internet other than using a cabina pública. At the same
time, Perú’s population has a relative high literacy rate and a good education level
compared with other developing countries, which is a reason for the high demand of
51
Network and Internet development
Characteristics of Perú’s Internet Development
Internet access. In addition, RCP was highly successful in extending the user base by
providing its comprehensive training sessions. Another reason for the high demand is
that about two million Peruvians live abroad (one million in the U.S. alone) [Fer00b,
p.4]. Considering the relative high international long-distance charges, many relatives
and friends of Peruvian emigrants use either IP-telephony27 , e-mail, or chat services
to communicate with them.
The sustained success of the cabinas model has proven that this and similar concepts can not only help to facilitate Internet access for underprivileged sections of
the population of a country but can also be financially sound and achieve a reasonable return on investment (ROI) [Nor01, p.2]. However, due to increased competition through steadily increasing numbers of cabinas and the Peruvian tendency to
“bartearse”28 , the prices that are charged for the usage of the cabinas have levelled
off to such low amounts that providing Internet access just by itself is no means
of existence anymore for some cabina owners. Therefore, many cabinas offer non
computer or Internet related services such as selling coffee, beverages, pastries and
general snacks [Fer00b, p.3]. In some cases, one can find even more obscure appearing
combinations, such as dentist practice and cabina or hairdresser’s shop and cabina
[Her00, p.8]. Other methods that owners of cabinas employ in order to stay competitive are the employment of family members instead of trained personnel, the use
of pirated software, or avoiding to pay rent by taking advantage of space in family
owned premises [Hol01, p.15].
In general, the most discernable difference of the Peruvian cabina model in comparison with other Internet cabin models is the concept of providing Internet access
to the underprivileged low-income parts of the population29 that fundamentally underlies the model. The success of the model proofed that targeting this particular
part of the market did not impair profitability. By implementing this model, RCP
created a new market in Perú and helped to democratize the Internet in the country.
27
According to OSIPTEL, IP-telephony is the second most used service offered by cabinas públicas
[OSI02f, p.11]
28
To find the cheapest possible way of doing something and thereby almost undercut oneself
29
Particulary young people with higher than average eduction of the low-income sector [Fer01, p.9]
52
Chapter 4
Government Policies
As discussed in chapter 1.2.2 and depicted in figure 1.6, past research has shown that
government policies very often have a tremendous impact on the Internet development in a country and are one of the main shaping forces. In most cases, the accruement of Internet infrastructure is initiated by either government policies, government
action, the action of a government-owned telecommunications company, or a blend
of these incidents. As outlined in the previous chapter, the Internet development
in Perú was quite different and somewhat unique because its initiation took place
without any direct governmental initiative. However, government action still had a
significant influence on the economic, legal, and general environmental conditions in
which the Internet development took place. In addition, an unprecedented amount of
IT-related policy changes and restructuring of government agencies responsible for IT
development and regulation occurred during the 1990s in Perú. Hence, this chapter
will delineate the most important policies, regulations, and shifts in the governmental structure with regards to the Internet development in Perú. It will distinguish to
phases of government policies. The first phase comprises changes that occurred during the process that lead to privatization and eventually liberalization of the market.
The second phase is made up of policies and IT-related regulatory changes that fall
into the time period after the liberlization. Figure 4.1 offers a chronological overview
of the development of the telecommunications sector. It also also depicts the two
above mentioned phases.
53
Government Policies
The Liberalization Process of the Telecommunications Market
Privatization
Still state Monopoly.
Liberlization process
beginns with the adoption
of Telecommunications Act
702
State Monopoly
Former state-owned
companies are privatized.
Phase of limited competition
begins
Liberlization of the market is achieved.
Unlimited competition
Liberlization Process
89
90
91
92
93
94
95
Competition
Opening
Opening of the Market
96
97
98
99
00
01
02
03
Figure 4.1: Timeline of the development of the IT sector
4.1
The Liberalization Process of the Telecommunications Market
4.1.1
Situation prior to the Privatization of the Market
During the 1970s, 1980s, and early 1990s, the two state owned companies CPT and
Entel were the only telecommunications companies in Perú. The tendency to monopolize large economic endeavors in Perú roots back to the military rule of General
Juan Velasco Alvarado who overthrew democratic elected president Fernando Belaunde in 1968. His military government, which was in power until 1980, followed
a socialistic course and nationalized amongst other things the telecommunications
industry, the fish meal industry, some petroleum companies, several banks, and some
mining firms [Wor99, p.2]. They also issued laws that were intended to protect the
monopoly status of the large state-owned enterprizes and hindered any emergence
of competitive behavior in these affected markets. Among these laws was the 1970
Telecommunications Act (Law 19020)1 , which was the main legal foundation and
the basis for the structuring of the telecommunications sector. Article 1 of this law
considered the telecommunications sector to be of “national strategic importance”
and, for that reason, prohibited any kind of private investment in the sector, local
as well as foreign [Cou97, p.2]. In order to make sure that the telecommunications
law will be abided by and that the telecommunications market is properly regulated,
the military government created the “Ministerio de Transportes y Comunicaciones”
1
“Ley General de Telecomunicaciones”,
<http://www.leyes.congreso.gob.pe/Imagenes/Leyes/19020.pdf>
54
Government Policies
The Liberalization Process of the Telecommunications Market
(MTC)2 and gave it sufficient authorization to carry out its objectives [OSI01a, p.3].
The most significant characteristics of Perú’s telecommunications sector during
the monopolization of the sector were the unmet demand for access to basic telephone
services, the lack of investments in the infrastructure, and restrictive and inflexible
policies and regulations. Given the country’s level of development at this time, the
telephone density should have been as high as 11 phone lines per 100 households,
when comparing with other countries around the world. Instead, the density was
as low as 2% in 1993 [Tor01, p.10]. Another result of the regulated market was
the strong centralistic character of the telephone network, which resulted in the
highest concentration of lines being located in Lima and the lowest penetration in
rural areas. In addition, the rate schemes were highly distorted. While the charges
for the installation of a line were quite excessive3 , the fixed monthly rate for basic
connection was relatively low4 . In addition, the charge for national and international
long distance calls was relatively high [Tor00a, p.3]. In general, the main problem of
the Peruvian telecommunications sector until the early 1990s was its extremely low
coverage. The quality of the services provided was also low and operations suffered
from the inefficiencies inherent in public administrations.
4.1.2
Regulations and Administrative Changes related to
Market Privatization
As part of the political and economic change ushered in by the Fujimori government since 1990, the state-owned telecommunications monopolists were included in
a countrywide privatization strategy of state-owned enterprises that encompassed
various other sectors. Following this approach, the Peruvian government joined in
with a growing number of other administrations in the region by determining that
the traditional policy of financing universal access by internal cross-subsidies was no
longer desirable [McC00, p.33].
The first step towards the implementation of the government’s new agenda was
the issuing of legislative decree 7025 , which was issued on November 08, 1991. The
purpose of this decree was to:
2
Ministry of Transport and Communications
<http://www.mtc.gob.pe>
3
Approximately $1,000 for the installation of one residential line in 1993
4
Approximately $1 per month
5
Decreto Legislativo 702,
http://www.leyes.congreso.gob.pe/Imagenes/DecretosLegislativos/00702.pdf>
55
Government Policies
The Liberalization Process of the Telecommunications Market
• Attract foreign investments
• Allow for a transition from a restrictive to a liberalized market
• Phase out the state-run monopolies ENTEL and CPT
• Create a new specialist regulatory agency (OSIPTEL)
In order to achieve the goal of attracting foreign investments, the Fujimori government created a relatively robust legal framework for the protection of private
property. This was traditionally one of the major concerns of foreign investors that
contemplated about transferring capital to Latin America. The first step towards
achieving an intellectual property protection system was the modification of Perú’s
constitution in 1993. Henceforth, intellectual, artistic, scientific, and technical innovations and creations have been recognized as the property of their creators, who
alone have the right to establish property claims [Ber00c, p.1]. Three years later, in
May 1996, legislative decrees 8226 and 8237 were issued to eliminate loopholes in the
existing legal framework, enhance regulations, and define registration procedures. In
addition, the laws further elaborate on the rights of creators of intellectual property
to obtain economic profit from it. The enactment of the two laws were part of a campaign of the government to ensure Peru’s admission to the World Trade Organization
(WTO). It also was part of the Andean Pact’s efforts to create a free trade area. The
Andean Pact (also known as the Cartagena Agreement) established the Andean
Community, which is a subregional organization made up of Perú, Ecuador, Bolivia,
Venezuela, and several regional organizations [Tra03, p.2]. The Andean Community
set up a regulatory framework, which required its members to create preferential
customs regulations for trade among members as well as set standards for trademark
registration and protection in member countries. However, despite the Peruvian government’s considerable efforts to create legal frameworks for an adequate intellectual
property protection, Jaffe et al. suggests that the actual enforcement of these rights
is rather lacking [Jaf99, p.100]. This hypothesis is supported by a recent estimation,
which showed that approximately 60% of all Peruvian businesses use pirated software
and the fact that Perú still remains on the U.S. trade representative’s “Special 301”
watch list for having intellectual property rights protection deficiencies [UST03, p.2
et seq.].
6
Decreto Legislativo 822,
<http://www.indecopi.gob.pe/legislacionyjurisprudencia/oda/d_leg822.asp>
7
Decreto Legislativo 823,
<http://www.indecopi.gob.pe/legislacionyjurisprudencia/oint/d_leg823.asp>
56
Government Policies
The Liberalization Process of the Telecommunications Market
Another milestone towards market liberalization was the introduction of the
“Comités Especiales de Privatización” (CEPRI)8 , which had the responsibility to
administer and conduct the privatization processes of large state-owned endeavors.
CEPRI is a multi-sectoral commission, which is vested full powers to dispose, transfer,
and sell of state holdings and assets [ITU01, p.3]. In 1993, it issued the international
call for bids for the national telecommunications providers and set the base price at
$546 million. The following three consortia responded and handed in bids:
1.
Telefónica de España, Graña y Montero, Backus,
$2,002 million
and Banco Wiese
2.
Southwestern Bell, Korea Telecom, Daewoo Tele-
$857 million
com, Condumex-Carso, and Banco de Credito
3.
GTE, Compañia Portuguesa, and Empresa
$803 million
Brasileira de Telecomunicaciones
As already mentioned in earlier chapters, the consortium spearheaded by Telefónica
accepted the bid with a final price that was almost four times as high as the base
price of $546 million originally set by CEPRI. The contract that was established between the consortium and the government called for a merger of CPT and ENTEL.
It was contractually arranged that the government would at first keep a significant
amount of the shares (ca. 40%) of the new formed company (Telefónica del Perú).
Three years later, in 1996, the government was required to sell all their remaining
shares through the market. In addition, the agreement arranged for a five-year period of limited competition, during which competitors were not allowed to provide
basic telecommunications services (however, Internet provision, mobile telephony,
data transmission, e-mail, and cable television was not limited by the arrangement).
Granting this special privilege put the government in a position to enforce some of
their own demands that would help to achieve the goals of enhanced coverage and
an incremental reduction of the existing distortion of rates [Tor01, p.12]. Table 4.1
depicts the minimum amounts of lines and public phones that Telefónica was contractually obliged to install. In addition, it was agreed on that the entire network
would have to have a digitization rate of at least 95% by 1998.
To ensure the gradual reduction of the rate distortion, Telefónica was required to
abide by the rate plan illustrated in table 4.2. The main goal of this rate re-balancing
8
Special Privatization Committee
57
Government Policies
The Liberalization Process of the Telecommunications Market
1 994
1 995
1 996
1 997
1 998
New lines to install
65
84
105
126
126
Old lines to replace
15
20
30
30
30
Public telephones to install
1.4
1.4
1.4
1.4
1.4
New lines to install
39
56
111
133.3
133.3
Old lines to replace
5
10
20
20
20
0.7
2.1
3
3.1
3.1
Lima Metropolitan Area
Rest of Peru
Public telephones to install
Table 4.1: Plan for expansion and modernization of the telephone network
[in thousands of lines]
Source: [Tor00a, p.6]
plan was to significantly reduce the barriers to access of telephone services and make
them more widely available and at the same time provide for a price structure that is
more market oriented and does not have to rely on state subsidies. Hence, installation
and calling-time charges were considerably decreased, while monthly service fees were
gradually increased.
Services
1 994
1 995
1 996
1 997
1 998
Basic residential rate
6.86
8.79
11.65
15.81
19.96
Basic commercial rate
13.63
16.24
18.39
18.91
19.96
Local call (3 min)
0.09
0.088
0.084
0.08
0.075
Domestic long distance (1 min)
0.359
0.324
0.286
0.26
0.232
International long distance (1min)
2.208
2.003
1.771
1.499
1.272
Residential installation fee
578
499
420
341
263
Commercial installation fee
1155
893
683
473
263
Table 4.2: Re-balancing plan for maximum rates
[in US$ as of 1994]
Source: [Tor00a, p.6]
As stated above, the period of exclusivity was originally granted until July 1999
and the objectives of the expansion and the re-balancing plans were scheduled to be
achieved by the same time. However, under the terms of an agreement between the
government and TdP, market liberalization came into effect 11 month earlier than
58
Government Policies
The Liberalization Process of the Telecommunications Market
originally planned, on August 1998. The main reason for accomplishing this ahead of
schedule was that the goals of the two plans had already been achieved by then. Since
then, there have been no limitations on acquiring licences in the telecommunications
sector [ITU01, p.5].
Another noteworthy landmark of the market liberalization process, was the creation of the regulative agency OSIPTEL, which was established by the power of
legislative decree 702 in 1991 and started operations in July 1993. Its main objectives are to promote the development of telecommunications services throughout the
whole country, to ensure that qualitative improvements of these services are undertaken, and to guarantee a free market environment [Tor01, p.12]. OSIPTEL has the
status of a public organization and enjoys administrative, functional, technical, and
financial independence [ITU01, p.7]. Some of its main privileges include the authority
to issue norms and regulations and the power to take measures (e.g. sanctions, fiscal measures) to ensure the implementation of these norms [OSI03a, p.1]. OSIPTEL
replaced the old regulatory agency “La Comisión Reguladora de Tarifas de Telecomunicaciones”9 . Rather than being the overseeing and controlling agency of a monopoly
operator, OSIPTEL assumes a role as a promoter and regulator of the development
of the telecommunications market [Sot01, p.26]. Some of its main regulatory responsibilities include tariff setting, monitoring of quality of service and expansion goals,
ensuring compliance with fair competition policies, arbitrating between disputing
parties, and customer protection [Cou97, p.4]. This scope of duties distinguishes OSIPTEL from MTC, which is the second public entity in Perú that is responsible for
the development of telecommunications. MTC’s responsibilities include representing
Perú in international organizations, granting commissions, approving the national
telecommunications plan, regulating equipment standards, and providing certification services [Her97, p.3]. A very important subdivision of OSIPTEL is the “Fondo
de Inversión en Telecomunicaciones” (FITEL)10 , which was created at the same time
that OSIPTEL started operations, in July 1993. The mission of FITEL is to foster
the development of the telecommunications infrastructure in the rural areas of Perú
and in areas that the government considers to be of special social interest. FITEL is
not only involved in the planning and financing of such development projects but in
their implementation as well [FIT02, p.1].
The following table 4.3 depicts a summary of the main events of the liberalization
process.
9
10
Regulative Commission for Tariffs in Telecommunications
Investment Fund in Telecomunicaciones; <http://www.fitel.gob.pe/index.php>
59
Government Policies
The Liberalization Process of the Telecommunications Market
1991
N ovember
Promulgation of the new Telecommunications Act (legislative decree
702). The act allowed for private investments and free competition.
1992
J une
Creation of the Special Privatization Committee (CEPRI), which started
the process of successive alienation of state-owned firms and properties.
N ovember
Restructuring of the Ministry of Transport and Communications (MTC)
on the basis of decree law 2586211 . The objective was to avoid authority
conflicts between MTC and OSIPTEL.
1993
April
Passing of supreme decree 013-93-TCC12 , which is based on the legislative decree 702 from 1991 and concretizes many of its demands and
objectives. The layout of the plan for the modernization of the telecommunications sector was far more detailed than in decree 702.
J uly
OSIPTEL starts operations.
1994
J anuary
Adoption of the Act on Gradual Demonopolization of Public Telecommunications Services13 ; this act suggests detailed steps for the successive
introduction of competition in the sector. Also, the period of exclusivity for TdP is granted in the sectors fixed telephony, and national and
international long distance.
F ebruary
Beginning of the rate-rebalancing plan.
M ay
The bid of the Telefónica consortium is accepted and ENTEL and CPT
are sold. The transaction is formalized by supreme decree 011-94-TC 14 .
1995
J anuary
Completion of the ENTEL-CPT merger. Both companies are now integrated in Telefónica del Perú (TdP)
11
Decreto Ley 25862; <http://www.leyes.congreso.gob.pe/Imagenes/Leyes/25862.pdf>
12
Decreto Supremo 013-93-TCC,
<http://www.osiptel.gob.pe/Index.ASP?T=T\&IDBase=3262\&P=\%2FOsiptelDocs\
%2FFITEL\%2FMARCO\%5FLEGAL\%2F\%2E\%2E\%2F\%2E\%2E\%2FGL\%2FEL\%5FSECTOR\
%2FMARCO\%5FLEGAL\%2FLEGISLACI\%D3N\%5FTELECOMUNICACIONES\%2Fost\%5F01\%5F15\
%2Ehtm>
13
Ley 26285; <http://www.leyes.congreso.gob.pe/Imagenes/Leyes/26285.pdf>
14
Decreto Supremo 011-94-TC;
<http://www.leyes.congreso.gob.pe/Imagenes/DecretosDeUrgencia/1994011.pdf>
60
Government Policies
IT-related Policies after the Liberalization
1996
M ay
Legislative decrees 822 and 823 are passed, which establish progressive
intellectual property guidelines.
Sale of the state’s remaining TdP-shares through the market to ca.
260,000 different shareholders.
1998
August
End of period of limited competition for TdP and full market liberalization. Policy guidelines for the market opening is supreme decree
020-98-MTC.
Table 4.3: Summary of main events during the liberalization
process
4.2
IT-related Policies after the Liberalization
In general, it can be stated that although the administration initiated many drastic
changes in Perú’s economic and political environment in the previous decade and
followed through with their privatization and market liberalization program, the
country is still lacking a clearly structured master plan for the development of the
IT sector. Bernstein suggests, that the
Peruvian IT development is primarily intended to improve existing Peruvian industries, rather than to create a new IT-focused sector. Thus,
IT development is heavily biased toward encouraging IT development for
the sake of helping industry,... [Ber00d, p.1]
Supporting this hypothesis is the existence of the Centers for Technical Innovation
(CITE) program, which is based on law No. 2726715 . This law, passed on May 25,
2000, envisages the creation of centers of innovation in traditional industrial sectors.
These centers are based on public-private partnerships and are intended to strengthen
their respective sector through the implementation of more well-directed IT research
and development with the overall goal to promote industrial development.
Although the CITE programs are not the creation of an IT-focussed sector or
part of a strategy to develop and foster the IT sector, it is still an indicator that
the Peruvian government recognizes the potential of IT investments. This is also
15
Ley 27267; <http://www.leyes.congreso.gob.pe/Imagenes/Leyes/27267.pdf>
61
Government Policies
IT-related Policies after the Liberalization
supported by the fact that since 1998, there have been various other attempts to
better regulate the telecommunications sector [Her02, p.100]. One of these efforts
was the introduction of a new price scheme through a mutual decision of OSIPTEL
and MTC, which ended the rate re-balancing system that was in effect from 1994
to August 1998. The main purpose of the new price scheme was to significantly
reduce tariffs across all services. Within one year, the average price reduction of all
services of all competitors was approximately 20% [OSI01c, p.15 et seqq.]. Three years
later, in August 2001, a price-cap regulation system was implemented that is still in
place today. A price-cap system establishes a maximum rate for every service that
all competitors have to abide by. The price-cap is calculated based on a multitude
of different variables, some of which include capital costs of the companies in the
market, expected future investment programs, expected changes in productivity, and
expected changes in distribution. The fixed cap is intended to give companies an
incentive to reduce their costs, enhance productivity, and optimize the capital basis
[Ene00, p.16 et seqq.].
Another effort to enhance the regulations of the telecommunications sector was
the creation of the “Comisión Técnica de Telecomunicaciones” (CTT)16 in late 1997.
The purpose of the establishment of this commission was that members of the Peruvian government, MTC, and OSIPTEL acknowledged the importance of creating
adequate legal and regulatory conditions for the opening of the market in 1998 in
order to create free and effective competition for the benefit of the country and
the consumers. Therefore, it was decided to set up a committee, which consisted
of experts from various backgrounds, who worked on an integrative concept, which
was supposed to provide for a smooth and efficient transition from a one provider
market to open competition. The actual creation of CTT was ushered by supreme
decree17 on October 30, 1997, which at the same time was the day CTT started operations. CTT members were composed of representatives of the Counsel of Ministers,
of MTC, of OSIPTEL, and of the Ministry of Economy and Finance. In addition,
the committee invited representatives of companies operating in the market to join
in the deliberations. Approximatively half a year after its foundation (in Summer
1998), the committee came up with a list of objectives that were considered crucial
for the telecommunications development of Perú. The main objectives are listed in
the following:
• Achieve a density of 20 telephone lines per 100 citizens in 2003. This includes
16
Technical Commission of Telecommunications
17
Decree Supremo 564-97-PCM
62
Government Policies
IT-related Policies after the Liberalization
fixed as well as wireless telephone connections.
• Incorporate at least 5,000 new population centers or towns, which do not have
telephone access, in the telecommunications infrastructure until 2003.
• Substantially increase Internet access in Perú.
• Make available technologies and services necessary for the development and
modernization of the region.
• Complete the digitization of the national network.
• Decrease the waiting period for new lines in urban centers to a maximum of 5
days.
The committee suggested to the government to base future law and policy making
on the achievement of these objectives [OSI01b, p.3 et seqq.].
One area in which the telecommunications sector of Perú is especially lacking is
research and development (R&D). Considering the total spending in R&D across all
sectors, this seems to be a general developmental problem in Perú. An estimation
from 1996 shows that only ca. 0.22% of Perú’s entire GDP are spent on R&D [Urr99,
p.1]. This amount is only marginal compared with industrialized countries, which
spend typically more than 2.5% of their GDP on R&D [Eur93, p.1]. Although these
facts indicate that Perú urgently needs to employ policies that would allow for improvement in this area, the notion of enhancing R&D and attracting more capital to
be invested in the telecommunications sector by granting tax benefits or subsidies is
very controversial in the Peruvian congress. Prior to the market reforms of the Fujimori government, these tools were often misemployed in a corruptive way in order to
favor certain industries or groups over others. Thus, the Fujimori government, which
promoted free markets and relied on the regulatory powers of competition rather
than on state regulation, was very reluctant to support any laws that would give
advantages to certain industrial sectors. This aversion for tax benefits and subsidies
is evident from the failure to pass into law the law project to “Promote Investments
in Technological Developments”18 in September 1999. This bill sought to grant substantial tax benefits for R&D projects in the IT-sector [Jaf99, p.15]. In detail, the
proposed law intended to concede the following tax benefits and incentives to private
parties investing their capital in relevant R&D areas [Urr99, p.14]:
18
Proyecto de Ley de Promoción de la Inversión en Desarrollo Tecnólogico;
law project No. 4516, see [Urr99, p.17 seqq.] for an original draft of this law project
63
Government Policies
IT-related Policies after the Liberalization
• Reduced income tax rate for companies, whose principal business activity is
R&D.
• Tax credit in the total amount of 10% of the capital that was invested in R&D.
• Exoneration of taxes and fees on trademarks and patents related to the R&D
program.
• The investor can choose to use a special accelerated rate for the depreciation
of investments.
The benefits and incentives of this law proposal were meant to apply to the
whole IT-sector and therefore, would have been relevant for Internet-related projects
as well. Hence, the falling through of this law project constitutes a severe setback
for the Internet development in Perú. However, another project for the “Promotion
of Science and Technology”19 that was previously started (in April 1997), was realized in August 1999. This law is a more general framework than law project 4516
and does not provide many detailed measures on how to improve the technological
development in Perú. However, article 7 stresses that the Peruvian state promotes
and guarantees private, national, or foreign investments of any kind that contributes
to the development of science, technology, innovation, and the transfer of technology. This could be a basis for state-subsidized financing that would attract investors.
These possibilities are underlined in articles 33 through 35. In addition, article 29
reemphasizes that the state protects innovations in all fields of technology through
the authorization of industrial property titles in concordance with the legal devices
in force and with international treaties signed by Perú [Urr97, p.12 et seqq.].
An area that seems to be completely lacking governmental attention in terms of
policies is the promotion of cabinas públicas as pointed out by Fernández-Maldonado
[Fer01, p.14]. This highly successful business model was developed and implemented
without any regulatory guidelines or promotional efforts on the part of the government. So far, there are no policies that would promote the growth or sustainability
of cabinas públicas, be it on a national or local level.
While the Fujimori government in its last three years of governance (1998-2000)
displayed some efforts to implement a more effective regulative framework in the
IT-sector, the new government under Alejandro Toledo, has, since its assumption
of office in 2001, focussed most heavily on the implementation of its “El Programa
Huascarán”20 . This plan played a key role in President Toledo’s election campaign
19
Proyecto de ley marco para la promoción de la ciencia y la tecnologı́a, ley No. 3261
20
Plan Huascarán
64
Government Policies
IT-related Policies after the Liberalization
to fight poverty and vanquish unemployment. The plan seeks to connect as many
as 5,000 rural schools by the end of 2006 with high-end Internet access. In May
2002, 100 schools in Perú’s countryside had been connected and provided brand-new
and state-of-the-art computer equipment21 [Rya02, p.1]. Whilst concentrating most
of its attention and resources on the implementation of this plan, the government
has somewhat neglected to develop and improve on the existing overall national
IT strategy [Deu02, p.18]. Overall, it can be stated that the Peruvian government
(especially the previous one) has taken several steps to encourage IT development
in Perú, but the country is still lacking a truly IT-focused overarching policy that
would coordinate all of these separate efforts and direct them towards a single goal.
21
See chapter 5.3.1 for more information on Plan Huascaran
65
Chapter 5
Applying the GDI Analytic
Framework
The previous two chapters illustrated and described Perú’s Internet development during the 1990s. The purpose of this chapter is to analyze the Internet’s growth in Perú
and to assess its current level of Internet development and diffusion. The assessment
will be conducted by applying the Global Diffusion of the Internet Framework. The
framework provides six dimensions, each representing different aspects of the state
of Internet diffusion of a country. Each dimension’s state will be captured by assigning it one of five possible levels (0-4). The details of the analysis of the dimensions
and the assignment of the levels are provided in the discussion below. Because this
assessment of Perú’s Internet diffusion is based on the GDI Analytical Framework
it is possible for further studies to compare the Internet development of Perú with
other countries around the world.
5.1
Pervasiveness
Pervasiveness, the fraction of the population that uses the Internet, is very frequently
used as the only measure of one-dimensional approaches to assess Internet diffusion
in a particular country. As described in chapter 1.2.1, this paper will use this measure of pervasiveness according to the Global Diffusion of the Internet Framework
in a qualitative way, rather than as an absolute number, by assigning it one of five
possible levels. In general, the correct ascertainment of the number of Internet users
is problematic. A basic difficulty is the distinction between Internet users and Internet subscribers. The latter includes all individuals or organizations that actively
subscribe to an Internet connection service and have an account with an ISP, whereas
the former represents all persons that actually use the Internet. Therefore, the cat66
Applying the GDI Analytic Framework
Pervasiveness
egory Internet users includes subscribers as well as persons that do not have an
account but access the Internet through a cabina pública, at the university, at work,
at a friend’s or family member’s home, at a public library, or at other places. This
multitude of access possibilities in combination with a lack of clear tracking records
(such as registered accounts in the case of Internet subscriptions) make it in most
cases necessary to use estimations for the determination of the quantity of Internet
users. Although these numbers might partly be not absolute accurate, tracking them
over time provides usually a relatively good indication of trends and tendencies,
which in turn can be assessed with a qualitative rating in the framework.
Table 5.1 gives an overview of the development of Internet usage in Perú between
the years 1994 and 2002. Values of Internet usage are given as total amount of Internet users in a particular year as well as in per capita percentages. These values are
estimations and are partly determined by calculating the arithmetic mean of values
from multiple sources. A main problem by ascertaining the appropriate values for the
respective years are the different definitions of “Internet users” that the estimations
are based on. Within the scope of the Global Diffusion of the Internet Framework,
Internet users are defined as individuals that access and utilize the Internet at least
once within a certain period (a yearly basis is used for the assessment on hand).
Although this definition is not used by all cited sources, OSIPTEL’s and the International Telecommunication Union’s (ITU) estimations are based on it. These two
organizations can be considered relatively reliable sources for the determination of
Internet usage. Therefore, it can be assumed that the in table 5.1 documented values
for Internet usage in Perú are sound estimations, which are adequate for a qualitative
evaluation scheme as it is employed in this study.
Even though this paper does not claim that the data of table 5.1 is entirely accurate (as mentioned above), it still unquestionably establishes that Internet usage in
Perú has constantly grown at a very high rate since its beginnings in the early 1990s.
In fact, the growth rate has never been below 50% until 2002, when it dropped to
36%, which is still considerable. Also, with more than 10% of its population using
the Internet in 2002, Perú ranks far above average in South America with only Chile
and Uruguay having higher rates [ITU03, p.2], [OSI02g, p.11]. That Perú outranked
economically more advanced countries such as Brazil or Venezuela in this category
can be attributed to the country’s special circumstances in terms of Internet development, namely the success of the cabinas públicas. OSIPTEL determined during a
study in 2002, that about 87% of all users access the Internet solely through cabinas públicas [OSI02f, p.8] and only 13% have alternative access opportunities. This
coincides with another study that recorded 162,950 Internet subscriptions (154,633
67
Applying the GDI Analytic Framework
'
Population
1
Pervasiveness
Internet
users2
Internet
users as
percentage
of
population
Change in
Internet
usage over
prior year
in percent
1994
23,331,000
2,000
0.01%
N/A
1995
23,531,000
8,000
0.03%
300%
1996
23,947,000
60,000
0.25%
650%
1997
24,371,000
150,000
0.62%
150%
1998
25,801,000
400,000
1.61%
167%
1999
25,230,000
800,000
3.17%
100%
2000
27,012,000
1,200,000
4.44%
50%
2001
27,540,000
2,200,000
7.99%
83%
27,950,000
3,000,000
10.73%
36%
&
2002
Table 5.1: Estimated number of Internet users in Perú
of which were dial-up subscriptions) in June 2001 on a national level [OSI02c, p.1].
This corresponds to roughly 7.5% of all Internet users in 2001 and is somewhat lower
than the 13% of users with alternative Internet access opportunities, determined in
OSIPTEL’s study of 2002. However, while the 7.5% account only for such users that
actually have subscribed to an ISP, there are likely to be a multitude of other users
(such as family members and friends) that use the subscription for Internet access
and that are unaccounted for. Thus, OSIPTEL’s estimation that approximately 87%
of all users use only cabinas públicas seems to be a reasonable assessment. How
unusual and preeminent the Peruvian case is elucidates figure 5.1. The graphic illustrates the relation of Internet users and subscribers for a sample of Latin American
countries. The ratios featured in the graphic are calculated by dividing the number of
a country’s total Internet users with its total Internet subscribers. The figure depicts
that Perú has a ratio of 12 (12 Internet users for each subscribsion) while Chile, the
second highest ranked country, has a ratio of 4.6.
According to the data from table 5.1, Perú made the transition from a level 2
(nascent) to a level 3 country (established ) during 1998. Since breaking through that
barrier, Internet usage has constantly grown with an average rate of approximately
1
Source: Library of the University of Utrecht, Netherlands;
<http://www.library.uu.nl/wesp/populstat/Americas/peruc.htm>
2
Sources: [OSI02c, p.1], [ITU03, p.2], [CIA02, p.10], [USD02, p.1], [ICC02, p.2]
68
$
%
Applying the GDI Analytic Framework
Pervasiveness
Figure 5.1: Relation between Internet users and subscribers in Latin America (2001)
Source: [Min01d, p.11]
100% per year and has reached the 10% rate for Internet users as a percentage of
the total population in 2002. Therefore, if the measures for assessing pervasiveness,
as displayed in table 5.2, would be applied literally, Perú would have reached level
4 status in that year. However, there are several reasons not to rate Perú at a level
4 yet. First, the 10% mark was just reached very recently (in 2002) and the status
is therefore not very established yet. Second, with a calculated 10.73% of the population using the Internet, the margin by which the 10% barrier was exceeded is
relatively slim. Considering the fact that there is uncertainty as to the accuracy of
the estimations of Internet usage, it seems difficult to establish with sureness that
Perú is already a level 4 country. Finally, there are indications that the cabina market
in Lima is close to, if not actually at, the saturation point [Hol01, p.15]. Since the
majority of cabinas in Perú is situated in Lima and, as stated above, the cabinas
are the driving force behind the growth of Internet usage in Perú, it is doubtful that
Internet usage will continue to grow at the same staggering rates that it used to
during the last ten years. Hence, this paper rates Perú as a solid level 3 country
for the dimension of pervasiveness at the time of this writing. However, considering
69
Applying the GDI Analytic Framework
Pervasiveness
the fact that Internet usage still has double digit growth rates and several month
have passed since the last available assessment of Internet usage employed in this
study was conducted, it can be stated that Perú is on the brink of becoming a level
4 country in the near future as indicated in table 5.2.
Level 0
Nonexistent: The Internet does not exist in a viable form in
this country. No computers with international IP connections
are located within the country. There may be some Internet
users in the country; however, they obtain a connection via an
international telephone call to a foreign ISP
Level 1
Embryonic: The ratio of users per capita is on the order of
magnitude of less than 0.1%
Level 2
Nascent: The ratio of Internet users per capita is on the order
of magnitude of at least 0.1%
Level 3
Established : The ratio of Internet users per capita
is on the order of magnitude of at least 1%
Level 4
Common: The ratio of Internet users per capita is on the order
of magnitude of at least 10%
Table 5.2: Pervasiveness rating for Perú
In order to explain the growth of the Internet in Perú, it is crucial to look at the
general requirements for Internet usage. Essentially, the number of Internet users
in a given country is a function of individuals’ decision to use or not to use the
Internet. For an individual to decide to use the Internet, four basic conditions must
be satisfied.
1. The individual must have the opportunity to access the Internet, which implies
the existence of basic telecommunications and Internet services and equipment.
2. The cost of accessing the Internet must be perceived as being reasonable and
acceptable by the individual.
3. The individual has to feel that the value of accessing the Internet outweighs or
at least equals the cost.
4. The skills that are needed to use the Internet must be sufficiently easy acquirable by the individual.
70
Applying the GDI Analytic Framework
Pervasiveness
If any of these conditions from the perspective of a particular individual is unsatisfied, this individual will not use the Internet. However, if the conditions cease
to lack, the individual is likely to take up using the Internet. Consequently, improvements in any of these areas are likely to result in growth of Internet usage. In the
following, the situations of these four conditions as they apply to Perú are further
examined.
5.1.1
Access Opportunities
The most basic requirement for Internet usage is sufficient access to the Internet. Access is a function depending on the existence of several variables, including end-user
devices such as PCs and appropriate software to operate them, Internet service, and
basic dial-up or leased telecommunications services. Perú has experienced tremendous growth in each of these areas during the last decade.
According to a study by ITU, there were an estimated 1.25 million PCs in Perú
in 2002, which commensurates to a ratio of 4.47 PCs per 100 inhabitants. Only five
years prior to that, in 1997, there were only ca. 300,000 PCs or 1.23 PCs per 100
inhabitants in Perú [ITU03, p.2]. While this constitutes a considerable increase in PC
penetration, Perú still ranks only average in comparison with other South American
countries as illustrated in figure 5.2. Considering that Perú ranks third in Internet
usage among South American countries, despite its relatively low ranking in PC
penetration, underscores the importance of the cabinas públicas for general Internet
usage in Perú.
The ISP market in Perú experienced enormous expansion, growing from a one
provider market in 1995 to a highly competitive market with a multitude of ISPs
(more than 50) just within three years3 [Deu02, p.16]. However, most of these ISPs
offer their services exclusively in the Lima metropolitan area or a few other major
cities. Only RCP and TdP offer more extended services.
A main reason for the existing limited rural access is Perú’s patchy telecommunications network, which still has not reached tens of thousands of towns and villages
and is especially lacking coverage in the highlands and in the area of the rain forest
in the Eastern parts of Perú. In addition, in comparison with other countries in the
region, Perú’s rural telephony remains only mediocre [Gal00, p.1]. Despite these existing deficiencies, there have been significant improvements since the privatization
3
In the beginning of 1998, the entire market encompassed more than 200 companies. However,
many of these companies were not fully operational or even remotely competitive and therefore, a
consolidation process took place in the market during that year, so that at the end of the year little
more than 50 ISPs were left.
71
Applying the GDI Analytic Framework
Pervasiveness
12
11.01
10
8.39
8
6.26
6
5.34
5.28
4.47
4.21
4
2.33
2
0
Uruguay
Chile
Brazil
Argentina
Venezuela
Perú
Colombia
Ecuador
Figure 5.2: A South American country comparison: Total PCs per 100 inhabitants
Source: [OSI02c, p.4]
of the market in 1994. According to OSIPTEL, telephone density4 almost doubled
between 1994 and 1999, increasing from 3.21% in 1994 to 6.26% in 1999 [OSI02a, p.1].
However, growth has slowed down significantly since 1999 and today’s penetration
rate is almost identical to the one from 1999. Another indicator for the high degree
of centralism of the Peruvian telephone network is the fact that approximately two
thirds of all installed lines are located in the Lima metropolitan area [OSI02a, p.2].
5.1.2
Cost of Access
Until TdP entered the dial-up market in 1996 with its InfoVı́a network, RCP and IBM
were the only dial-up providers. However, IBM almost exclusively offered its services
to a small selected group of business customers and no reliable data is available about
the exact amount of fees that IBM charged. RCP on the other hand targeted business
as well as private customers. The average monthly connection fee for a regular UUCP
dial-up connection amounted to $37.50 [Bri01a, p.7].
In addition, customers had to pay regular local call telephone fees5 (or national
4
Telephone lines per capita in percent
5
A local call in 1996 cost ca. 5.8c during the day and 2.9c at night. Since then the fees fell to ca. 2.4c
during the day and 1.2c at night [OSI03b, p.1 et seqq.]
72
Applying the GDI Analytic Framework
Pervasiveness
long distance call fees6 for persons residing outside Lima or a few other urban centers)
for the time that they were online. When TdP introduced its InfoVı́a service in 1996,
multiple CPIs who used InfoVı́a to offer Internet services emerged. The competition
let prices fall for the first time. The new average monthly connection fee of the CPIs
was ca. $13, with some companies offering services as low as $10. Because of the
competition, RCP decreased their prices and now offered services for an average of
$20 per month [RCP96, p.1]. By 1999, Cosapidata, a CPI that exclusively used TdP’s
InfoVı́a and Unired networks, captured a large amount of the ISP market share and
became the second largest Internet provider in Perú, by offering monthly connection
fees for dial-up service as low as $5 per month under a one year contract. Since then,
the prices for regular dial-up service remained relatively stable and, depending on the
ISP and contractual terms, vary between ca. $5 and $20 per month [Bri01a, p.15].
A 64 Kbps ISDN dial-up line starts at $20 per month [Tor99, p.21]. However, the
dial-up market still remained relatively small with only ca. 162,000 subscribers in the
beginning of 2002 , representing less than 10% of all Internet users in Perú [OSI02c,
p.1]. Table 5.3 depicts socio-economic characteristics of income groups in Lima.
Highest
Medium
Lowest
income group
income group
income group
18%
33%
49%
$1,317
$885
$173
Fixed telephone
96%
62%
18%
PCs
55%
8%
5%
Internet access at home
28%
0%
0%
Households7
Average monthly income
Table 5.3: Socio-economic characteristics of income groups in Lima as of July 2000
Source: [Bri01a, p.16]
The data shows that only a very small percentage of households of the lowest
income group have the necessary hardware requirements (i.e. fixed telephone line,
PC, modem) for dial-up Internet service. While a considerable amount of households
of the medium income group has fixed telephone connections, only 8% have PCs. As
a result, dial-up Internet access is virtually non existent among the medium or lowest
income groups and only about a quarter of the households of the highest income group
6
A national long distance call in 1996 cost on average 18.2c during the day and 9.1c at night. These
prices have not changed considerably since then and remained relatively stable [OSI03c, p.1 et seqq.]
7
In percentage of total households
73
Applying the GDI Analytic Framework
Pervasiveness
have Internet access. However, Lima is the economic and infrastructural center of the
country and therefore, it can be assumed that the barriers for Internet dial-up access
for most households outside Lima would be even more difficult to overcome.
Due to the above stated reasons, the instrument that enables most users to access the Internet in Perú are the cabinas públicas. As mentioned in chapter 3.3.3,
when RCP started the cabinas project, they charged users a monthly member fee
of $15, which included some free hours of usage and up to 20 hours of computer
education classes per month [Her99a, p.111]. This tariff model was based on RCP’s
philanthropical objective to educate Peruvians in computer skills and enable them
to take advantage of the benefits of the Internet, ultimately enhancing their living
situations. However, as a result of increased computer literacy, easier software tools,
and distinctly increased competition among cabinas públicas (especially in Lima),
prices dropped significantly and nowadays most users pay for their usage on a per
hour basis. Today, the cost for a one hour connection in a cabina varies, depending
on location and state of the facility and equipment, between 58c and $1.16 per hour
[OSI02f, p.10], [Sot01, p.28]. These relatively low rates make Internet access at least
once in a while affordable for a considerable percentage of the population.
An important element of the growth of the ISP as well as the cabina market
was a significant reduction in leased circuit tariffs. The first noteworthy reduction
occurred in December 1996 on the initiative of OSIPTEL, when tariffs were reduced
on average by 26% [Bri01a, p.9]. Since then, tariffs have fallen steadily until 2000
due to increased market competition. A consolidation of the market and a general
downturn of the economy after 2000, forced tariffs to remain relatively stable until
today [Bri01a, p.8], [OSI03d, p.1].
5.1.3
Perceived Value
The rapid growth of the ISP market and the proliferation of cabinas públicas all over
the country were important elements in the development and tremendous growth of
the Peruvian Internet market, making Perú one of the leading countries in South and
Latin America in this regard. However, they were not the main cause of the growth
but rather a basic presupposition for fulfilling the existing unsatisfied demand for
information sharing and acquiring and entertainment among many Peruvians. According to Briceño, the motivation for 52% of all users to utilize the Internet is
information searching and surfing (which includes using e-mail and mailing lists).
Entertainment, games, and music are the second most prevalent objectives for Internet usage (28%) [Bri01a, p.18]. Another important objective for many Internet users
74
Applying the GDI Analytic Framework
Pervasiveness
is to use IP-telephony for national and international long distance calls. With more
than 1 million Peruvians residing in the U.S. alone, IP-telephony becomes a feasible
alternative for many people who want to communicate with their family members
and friends living abroad.
The typical Internet user in Perú is between 15 and 35 years old and has at least
some level of education, either primary, secondary, university, or technical. Also,
there are slightly more men using the Internet than women (55%) [Bri01a, p.18 et
seq.]. The majority of Internet users in most developing countries belongs usually
to the middle and upper classes of a country [Wol02, p.89]. However, according to
Fernández-Maldonado,
from the approximately 787,000 Internet users measured in July 2000,
420,500 belonged to low- and very low-income sectors [Fer01, p.2].
This shows that more than half of all users are from the lower income sections of
society, which is atypical for developing countries. There are several reasons for this
special development in Perú. One reason is the relatively high literacy level in Perú
(almost 90%) [CIA02, p.5], which can be attributed to the fact that due to the high
degree of urbanization most children attend at least primary education. In addition,
young people seem to have a great thirst for being part of the ongoing globalization
and keeping up with the latest trends worldwide. The Internet provides them with
the means to do so [Gar03a]. In general, low-income users have a great affinity for
new technologies (especially in Lima), which is supported by the fact that the average
low-income user in Lima spends between 5% and 5.5% of their respective household
income on Internet access in cabinas públicas [Fer01, p.10].
In general, it can be stated that Perú shows a high demand for Internet services
across the different income sections of the population. Especially the young people
of the urban centers show a great demand for new technologies in general.
5.1.4
Ease of Use
In general, the less time it takes an average user to learn how to use a technology and
the more user-friendly it is designed, the more it is accessible to users and the faster
will its proliferation come to pass. For example, the invention of the web browser
in the early 1990s and the worldwide rapid implementation of that concept greatly
simplified the use of the Internet and allowed users easy access to information linked
throughout the globe [Lei00, p.17].
Besides being able to use a web browser, one generally has to be literate in order
to use the Internet. In addition, the language that one is literate in should have a
75
Applying the GDI Analytic Framework
Pervasiveness
reasonable presence on the Internet and among the online community in order to
offer enough relevant contents. The literacy rate among the Peruvian population is
with 88.3% relatively high as compared to other developing countries [CIA02, p.5].
However, among other South American countries this rate is at best average. An estimate of January 2003 assessed that there were ca. 72% native Spanish speakers in
Perú [Eth03, p.10]. The rest of the population speaks various other languages (there
are a total of 92 living languages in existence in Perú). Some of the more frequently
spoken languages other than Spanish include Quechua, Aymara, Japanese, and Chinese. However, many of the people whose first language is not Spanish understand
and are able to communicate in Spanish. According to a study of Global Reach
from September 2002, Spanish is spoken by 8.1% of the online community, ranking
fourth among all online-languages and only being exceeded by English, Chinese, and
Japanese [Glo02, p.1 et seqq.]. Although Spanish is one of the dominant languages in
the Internet and plenty of Spanish web pages exist worldwide, web pages with local
Peruvian content is what many Peruvian users are most interested in. The number of
Peruvian web pages and portals is constantly increasing and also many governmental
agencies have a presence in the Internet. That includes not only federal agencies but
also some local district and municipal administrations [Ins02, p.167]. The notion of
the growth of web pages with local content coincides with a significant growth in
the number of hosts. From 1995 to 2002 the number of hosts in Perú increased from
367 to 13,504 [Til02, p.2]. RCP started to translate many of its web pages including
its main web portal to Quechua and begun to offer bilingual service during the late
1990s. In addition, many of the Peruvian governmental web pages feature an interface in Quechua. Other Internet services and sites in Quechua include mailing lists,
message boards, and homepages of some native tribes, through which some of the
latter sell crafts and other products. However, web sites in Quechua are still relatively
rare and Spanish remains the main Internet language for most Peruvian users.
Despite a steadily growing Spanish Internet community, the majority of web
content worldwide remains in English. However, English is not widely understood
by the majority of the population, and typically only younger members of the urban
middle and upper classes can read English and are able to understand some amount
of English. Therefore, web pages in English can not considered to be a substitute
for certain content that is not available in the local language, as is the case in many
countries where English is not the native language but is understood by a majority
of the population.
76
Applying the GDI Analytic Framework
5.2
Geographic Dispersion
Geographic Dispersion
Geographic dispersion reflects the extend to which the opportunities to access services of ISPs and the telecommunications infrastructure that goes along with it
are distributed throughout the country. Obviously, there are tremendous benefits to
having numerous Internet POPs, multiple International access points, and several
transmission paths. Geographic dispersion assesses whether people all over the country can equally benefit from the existing infrastructure, regardless of their locality or
if a “digital divide” exists between the rich and the poor, between different ethnical
groups, or between urban and rural areas. The scope of these divisions has oftentimes
a direct relation with the degree of economical division of the regions of a country.
Level 0
Nonexistent: The Internet does not exist in a viable form in
this country. No computer with international IP connections
are located within the country.
Level 1
Single Location: Internet points of presence are confined to one
major populated center
Level 2
Moderately Dispersed : Internet points of presence
are located in multiple first-tier political subdivisions of the country
Level 3
Highly Dispersed : Internet points of presence are located in at
least 50% of the first-tier political subdivisions of the country
Level 4
Nationwide: Internet points of presence are located in essentially all first-tier political subdivisions of the country. Rural
access is publicly and commonly available
Table 5.4: Geographic dispersion rating for Perú
Perú is divided into 24 departments and 1 constitutional province. For a country
with a population of less than 30 million to have 25 first-tier political subdivisions
can be considered above average. Because Perú is a very centralistic stamped country
with a majority of the population living in Lima and a few other urban centers, many
departments have a small population8 and only few or no major urban centers. Hence,
more than 50% of the country’s economic activity is centered around Lima, which
has led in the past to an extremely uneven distribution of infrastructure, including
telecommunications infrastructure. Figure 5.3 underscores this context and depicts
8
Only 8 of the 25 first-tier divisions have a population exceeding 1 million
77
Applying the GDI Analytic Framework
Geographic Dispersion
the gap that traditionally exists in Perú in the distribution of access to basic fixed
telephone service. Even in 1997, the connection percentage of people who live in rural
locations and are not considered to be poor was still marginal (ca. 0.5%).
Figure 5.3: Comparison of penetration of fixed telephone service in urban and in rural
areas
Source: [Tor00b, p.10]
During the late 1990s, the government considerably increased its efforts to countervail the existing disequilibrium of distribution of telecommunications infrastructure. Most of these efforts emanated from FITEL, a subdivision of OSIPTEL, that is
responsible for the strategic planning, developing, financing, and implementation of
rural telecommunications infrastructure in Perú. Under the current law, OSIPTEL
collects 1% of gross revenues from the entire telecommunications sector to finance
FITEL and its endeavors. The collections started in 1994 at about the same time as
the phase of profound changes in telecommunications started and therefore, it took
FITEL until 1998 to come up with enough money for first small pilot projects. In the
same year, the government established guidelines for FITEL on how the development
process of the rural areas was to be conducted. The guidelines established criteria
that determine which localities will have high priority in receiving funds for service
expansion. Such localities with high priority include [McC00, p.33]:
• Rural towns with a population of more than 400 and less than 3,000 inhabitants
• District capitals
• Towns in high social interest areas (as defined by the government)
78
Applying the GDI Analytic Framework
Geographic Dispersion
The guidelines also established a least subsidy bidding scheme for development
projects that allowed for public and international competition. However, the maximum subsidy that is set by FITEL is the net present value (NPV) of the respective
project [Her97, p.8]. In 1998, FITEL was by law only allowed to provide the subsidies
for the installation of the infrastructure as specified by the bid of the lowest bidder.
They were not allowed to provide funding for the operation and maintenance of the
designated services. The incumbent operators of the respective regions had to come
up with the financial outlay for these tasks solely by themselves. In September 2000,
a law was passed that changed these limitations and allowed FITEL to take more influence on the development projects. It also permitted FITEL to provide funding for
areas that, while having limited telecommunications access, are not expected to fully
benefit from competition. That was a requirement of the old guidelines for selecting
appropriate locations [McC00, p.36].
The pilot project that started out in 1998 was called the “Proyecto Frontera
Norte”9 . This project was considered to be a test case for the overall program. The
agenda of the project was to install one new public telephone in each of ca. 200
selected localities in the northern departments of Tumbes, Amazonas, Cajamarca,
and Piura. All in all, the project can be considered to have been successful. The
average distance to the nearest pay phone for people in the region was reduced to
less than a tenth and the winner of the bid installed the infrastructure for 40%
less than FITEL’s estimate [Can00, p.18]. Even though the contract obliged the
service providers only to install one public telephone per location, in some cases the
incumbent operator installed a dedicated Internet connection in congruence with a
public Internet telecenter. One year later, a new guideline was issued that would
require the winner of future bids to install and maintain a public Internet center in
addition to a public phone in all district capitals in the area covered by the projects
[McC00, p.35].
After the implementation process of the pilot project had been started and the
first results were satisfactory, FITEL came up with a strategic plan to expand rural
telecommunications infrastructure in Perú. This plan was build on some elements of
the pilot project (e.g. least subsidy bidding, maximum telephone density of targeted
areas, etc.) and encompassed the following three distinct phases [OSI02h, p.3]:
• First phase
– Install at least one public telephone in 5,000 rural towns with less than
3,000 inhabitants until 2003
9
Northern frontier project
79
Applying the GDI Analytic Framework
Geographic Dispersion
– Installation of public Internet centers in ca. 500 rural district capitals until
2003
• Second phase
– Increase the density of public telephone service in rural locations with
insufficient service (ca. 1,600 villages with approximately 1.8 million inhabitants)
• Third phase
– Provide public Internet access in the rest of the district capitals that have
not been covered by any of the two previous phases or the pilot project
(ca. 1,000 towns with 1.5 million inhabitants)
– In general, increase the density of telecommunications services in rural
Perú
In 2001, the development project that was intended to implement phase one was
broken down into several tenders in order to foster competition. Each tender had at
least four different bidders (national as well as foreign) [Can00, p.18]. At the present
time, these projects are still being implemented.
According to Herzog, the introduction of state-financed investment funds for unrentable rural areas is a viable possibility to equalize the deficits of the sole private
provision of telecommunications services [Her02, p.101]. While this might be true for
the general telecommunications infrastructure, the geographic dispersion of Internet services according to the definition of the framework has so far only somewhat
been improved. While the installation of ca. 500 new cabinas públicas in some of
the district capitals will further increase the spread of the Internet in Perú, no new
POPs have been installed in the course of the development projects. According to
the information currently available to the author, only in six departments 10 and the
province of Callao are currently POPs installed [Tor99, p.20]. The primary reason
for the relatively low amount of POPs is the low telephone penetration rate in rural
areas. Even though the development projects helped to provide many rural locations
with public telephone access, the number of rural households with telephone connections, which is a prerequisite to dial into a local POP, is still very low. At the
time of this writing, ca. 1,400 of a total of 1,828 district capitals in Perú are not
offered telephone service for private households [OSI02h, p.9]. The telecommunica10
Lima, Trujillo, Piura, Chiclayo, Cuzco, Arequipa
80
Applying the GDI Analytic Framework
Geographic Dispersion
tions companies usually concentrate their services on more lucrative urban markets
with a higher population density and greater average household income.
Because currently only 7 of the 25 total first-tier political subdivisions have at
least one operational POP and public Internet access can not fully subsidize Internet provision of private households, Perú receives a rating of level 2 (moderately
dispersed ) for the geographic dispersion dimension. One could argue that because
through the InfoVı́a network every household with a phone line is theoretically able
to access the Internet via dial-up service for the cost of a local telephone call, the
geographic dispersion of the Internet is in fact more advanced than a level 2 rating,
despite the relatively low amount of POPs. However, this argument neglects the fact
that the penetration rate for fixed telephony in private households in rural Perú is
extremely low (0.5%) and hence, dial-up Internet access is not an expedient alternative for most people of rural Perú. The low amount of departments with POPs
reflects this fact. All telecommunications companies in Perú are private and profitoriented. Therefore, the only investments that have been made so far during the last
and the current decade in rural Perú are the above described projects, which were
all subsidized by the government.
Perú can be considered a highly divided country with respect to economic, geographic, and ethnic issues. The majority of its political and economic activity is
funnelled in the capital, Lima. This notion is reflected by the only moderate geographic dispersion of the Internet. In order for Perú to achieve a higher rating in
geographic dispersion, POPs have to be installed in at least 6 more departments.
However, this is only likely to happen if the national telecommunications system
will be expanded considerably to the rural areas. The FITEL method seems to be a
practicable approach to start the expansion process; however, it will take efforts on
a larger scale to bring telephone access to rural households and is not likely to be
achieved in the near future. However, when assessing Perú’s geographic dispersion in
the future, one should consider the special role that cabinas públicas play in the Peruvian Internet landscape. Although rural cabinas can not completely replace POPs
in rural departments, they can still be considered to be supplemental and depending
on the development of cabinas in the rural parts of Perú, the 50% requirement11 may
not necessarily have to be completely fulfilled in order for Perú to achieve a level 3
(highly dispersed ) rating.
In addition, further research should examined if RCP installed new POPs in rural
Perú, because RCP announced several times in the past that they plan to extend their
11
According to the Global Diffusion Framework, a country is considered to be highly dispersed (level
3) if POPs are located in at least 50% of its first-tier political subdivisions
81
Applying the GDI Analytic Framework
Sectoral Absorption
Internet presence even further in the underdeveloped parts of the country [Tor99,
p.18 et seq.]. RCP’s motivation in pursuing this project is not profit based, but
rather grounded in its mission to foster Internet development throughout the whole
country and make the Internet accessible to as many people as possible. However, so
far the author has not found any evidence for the actual implementation of any such
projects.
5.3
Sectoral Absorption
The dimension of sectoral absorption assesses the degree to which the academic, the
commercial, the health, and the public (government) sectors have taken up Internet
technologies. As established in chapter 1.2.1, these sectors sufficiently describe the
main economic and social divisions within society and thus, other sectors will be
omitted in this study. Personal use is also not considered in this metric. For a tabular
overview of the four sectors refer to table 1.6.
The final determination of the level of sectoral absorption is achieved by first
individually evaluating the absorption of the Internet of each sector and assigning
either a rare (1 point), moderate (2 points) or common (3 points) rating. These
points are then aggregated to determine the overall rating of sectoral absorption.
How each individual sector in Perú was rated is depicted in table 5.5. Based on the
data presented in the following, Perú has been assigned a final sectoral absorption
rating of level 2 (moderate), as illustrated in table 5.6.
5.3.1
Academic Sector
Not surprisingly, the Internet access of academic institutions in Perú varies significantly between regions and types of academic institutions. The “Ministerio de Educación”12 published a list in December 2002, in which the total of 63,510 educational
institutions in Perú is broken down by type of institution. The content of the list is
depicted in table 5.7.
As is the case in most countries, the leading universities are the best connected
among all educational institutions. Virtually all of them have leased line connections
to the Internet and maintain their own homepages [Ope01, p.1]. Doubtlessly, a main
reason for the traditionally good Internet connection of Peruvian universities is the
fact that RCP’s first steps towards the establishment of the Internet were basically a
substantial collaborative effort on part of the main Peruvian universities. Therefore,
12
Ministry of Education
82
Applying the GDI Analytic Framework
Sectoral Absorption
Sector
Rare
Moderate
Common
Academic
<10% have
leased-line
Internet
connectivity
10-90% have leased-
>90% have leased-
line Internet con-
line Internet con-
nectivity
nectivity
<10% have Internet
10-90% have
Internet servers
>90% have Internet
<10% have
leased-line
Internet
connectivity
10-90% have leased-
>90% have leased-
line Internet con-
line Internet con-
nectivity
nectivity
<10% have Internet
10-90% have
Internet servers
>90% have Internet
Commercial
servers
Health
Public
servers
servers
servers
Table 5.5: Assessment of sectoral absorption per sector in Perú
Sectoral point total
Sectoral absorption dimension rating
0
Level 0
Nonexistent
1-4
Level 1
Rare
5-7
Level 2
Moderate
8-9
Level 3
Common
10-12
Level 4
Widely used
Table 5.6: Sectoral absorption rating of Perú
Peruvian universities have always been on the leading edge of the Peruvian Internet
development. However, the state of Internet connectivity of Perú’s universities is
unlike from the rest of Perú’s academic institutions. According to OSIPTEL, in June
2001, only 378 academic institutions other than universities were connected to the
Internet; however, more than 3,400 institutions were equipped with PCs. Another
result of OSIPTEL’s study was that only ca. 3,400 institutions had both electricity
and a phone line installed, which are both necessities for Internet connection13 . In
addition, in 53.4% of all institutions, the primary dwellings in which the respective
institutions are located are lacking one of the two services (telephone or electricity)
13
Although a telephone line would not absolutely be necessary for an Internet connection (dedicated
circuits), in praxis, it is almost never the case that a location is connected to the Internet while not
having a phone line
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Applying the GDI Analytic Framework
Sectoral Absorption
Type of institutions
Number of institutions
Pre-primary schools
15,860
Primary schools
34,334
Secondary schools
9,925
Special schools
405
Occupational schools
1,871
Specialized Colleges (e.g. Technical, Fine Arts, etc.)
1,062
Universities
53
Total
63,510
Table 5.7: Types and number of educational institutions in Perú (Dec. 2002)
Sources: [Min02a, p.1], [Ope01, p.1]
entirely. Most of these institutions are located in rural areas14 , which host more than
half of all educational institutions in Perú (53.2%) [Min02a, p.1], [Min02b, p.1].
A positive development in the Internet situation of Perú’s educational institutions
that needs to be mentioned is the “Plan Huascarán” that was initiated by the current
government of President Toledo and is currently being implemented. As mentioned
in chapter 4.2, the plan seeks to connect as many as 5,000 rural schools by the end of
2006 with high-end Internet access. Initially, at least 680 connections were supposed
to be connected during the first year of the plan (2002). The plan further seeks to
connect more than 1,200 schools in each following year until 2006 [Com02, p.8]. It
is estimated that the fulfillment of the plan will require the investment of at least
$200 million on part of the Peruvian state [Car01, p.2]. So far, Microsoft and TdP
have announced their support for the plan and indicated that they were going to
contribute to the project [Per02, p.1].
Presently, there seem to be considerable obstacles in the way of a successful
implementation of the plan. By Fall 2002, less than 200 schools had been connected,
thus the government was significantly behind schedule, which calls for connecting at
least 680 schools in that year. One obstacle seems to be a somewhat shaky financial
plan on part of the government. The government stated that they will need a total
of $200 million but they never specified how exactly this money is going to be spent.
Thus, it is not clarified if there will be sufficient funds not only to buy and set
up computers and to install Internet connections, but also to train teachers and
children how to use the computers and the Internet and also to maintain the stability
14
More than 90% of all rural schools do not have electricity and 95% are not connected to sewer
systems [Car01, p.1]
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Applying the GDI Analytic Framework
Sectoral Absorption
of the 5,000 networks that are supposed to be set up by 2006 [Car01, p.3 et seqq.].
Another potential problem becomes apparent when considering the case of EDURED,
a similar project on a smaller scale that was started in 1999 and sought to connect
345 rural schools by 2000. The previous government chose to install a satellite system
(PanamSat) with a main hub in Lima to which all local stations at the schools would
connect via satellite. The main reason for choosing this setup was that the schools
would not have to pay monthly fees to ISPs for basic Internet services. However,
the technical execution of the project was so deficient that only 85 schools, which
had raised money for monthly ISP services on their own, had reliable Internet access
[Car01, p.2].
Although, data about the exact number of academic institutions that are currently connected to the Internet in Perú was presently not accessible to the author,
based on an abundance of articles about the progress of Plan Huascarán, it seems
reasonable to estimate that at the time of this writing there are a maximum of 1,500 15
academic institutions connected to the Internet in Perú16 . Thus, Perú is presently
far away from breaking through the 10% barrier of the analytic framework. Therefore, the sectoral absorption of the academic sector in Perú is currently rated rare.
However, not later than 2006 should this rating be reevaluated, because a successful
completion of Plan Huascarán according to schedule would bring Perú very close to
breaking into the 10-90% bracket and achieving the next level.
5.3.2
Commercial Sector
As elucidated in chapter 1.2.1, the sectoral absorption ranking of a country’s commercial sector depends on the fraction of companies with 100 or more employees that
maintain Internet servers. The key question hereby is whether the percentage is more
or less than 10%. If the first instance is in hand, a second determination has to be
made as to whether the percentage is more or less than 90%.
In 2001, the “Instituto Nacional de Estadı́stica e Informática”(INEI)17 conducted
a survey among 6,769 Peruvian companies from the production and the service sectors on a nationwide basis and published the results in a comprehensive report (see
[INEI01]). One of the objectives of this survey was to determine whether the companies were connected to the Internet and if so in which way they utilized its capabilities. 64.2% of the questioned companies stated that they are connected to the
15
Most likely, the actual number is slightly lower than that
16
This estimate includes the 378 schools and 53 universities that were already connected to the
Internet before Plan Huascarán’s implementation started in 2002
17
The National Institute of Statistics and Informatics
85
Applying the GDI Analytic Framework
Sectoral Absorption
Internet. From these companies, 60.9% stated that they use e-mail, while only 22.9%
have own web sites and maintain Internet servers. These and other types of Internet
services used by the questioned companies with Internet access are depicted in table
5.8.
Types of Internet services
Percentage of companies
E-mail
60.9%
Establishing company web pages
22.9%
Search for information
15.6%
Running FTP-servers
6.5%
Video conferences
0.8%
Table 5.8: Services employed by companies with Internet connection
Source: [INEI01, p.38]
Since 22.9% of the 64.2% of companies with Internet access run their own Internet servers, it can be concluded that 955 of all 6,769 questioned companies, or 14.7%
have their own Internet server. Therefore, in spite of some methodological uncertainty, the survey seems to indicate that the commercial sector in Perú falls between
the 10-90% bracket and accordingly, Perú would be rated moderate. The survey does
not state exactly based on what methodology the companies were chosen, however
it was stated that only 11.89% of the questioned companies employ 100 or more
employees. All other companies of the survey have between 5 and 100 employees,
whereby the majority of companies (44.51%) have between 50 and 100 employees
[INEI01, p.72]. Therefore, since the majority of the respondents are smaller enterprises with fewer than 100 employees, and since the probability of an organization
using the Internet increases with size, the fraction of enterprises with 100 or more
employees who have Internet servers is likely to be higher than 14.7%. In addition,
the investigation the author conducted for the analysis of the sophistication of use
of Peruvian organizations (refer to chapter 5.6.1 for more detailed information) also
suggests that Perú’s commercial sector should be rated moderate. 68% of the with
no exception all publicly traded and therefore, all medium to big sized companies,
had and maintained web pages. Since in none of the two studies the percentage of
companies with web pages is close to the 90% range, the commercial sector of Perú
will be rated moderate.
86
Applying the GDI Analytic Framework
5.3.3
Sectoral Absorption
Health Sector
Only a very small fraction of institutes and organizations in the Peruvian health
care sector utilize the Internet and only a very small and elite percentage of the
population in Perú can afford services by these “exclusive” health care facilities.
Yahoo Perú (PERUhoo) contains links to only three hospitals and clinics and to one
medical institute18 . The “Ministerio de Salud”19 lists four hospitals and five medical
institutes with web pages on their own web site20 . However, all these web sites are
hosted by the ministry. Based on these circumstances, it can be stated that the
Internet is in a rare state within the health sector as indicated in table 5.5.
5.3.4
Public Sector
The framework used in this study specifies that the sectoral absorption rating of the
public sector of a country depends on how many governmental entities21 and public companies have Internet servers. According to a study from 2002 by INEI, the
Peruvian public administration consists of 2,155 institutions, which are distributed
in 15 ministries, 69 decentralized public organizations, 3 autonomous public organizations, 9 dependent public organizations, 15 state-owned companies, 23 temporary
committees of regional administrations, 193 municipal institutions on a provincial
level, and 1,828 municipal institutions on a a district level [Ins02, p.3].
INEI conducted a survey in October 2000 in which they questioned 134 governmental institutions as to their utilization of the Internet. One of the results was that
71% of all institutions stated that they have a web site [Ins02, p.6]. However, the
methodology of the survey was not further specified and it is not apparent whether
the institutions operate their own web page or if their web page is hosted by a
superior institution. A study by OSIPTEL from May 2002 states that 87% of the
governmental institutions with Internet access have dedicated lines [OSI02i, p.35].
Since this is a prerequisite for the functional operation of a web page and the majority of institutions have dedicated Internet access, it seems very likely that at least
10% of governmental institutions run their own Internet servers. In addition, there
are several other indications for governmental Internet activity. In the late 1990s,
the previous government started to create online content, including a national web
portal, web pages for all ministries, online customs payments, and a national current
18
See <http://www.peruhoo.com/Economia_y_Negocios/Salud/Clinicas_y_Hospitales>
19
Ministry of Health
20
See <http://www.minsa.gob.pe/hospitales.htm>
21
Central, regional, and local government entities
87
Applying the GDI Analytic Framework
Connectivity Infrastructure
accounts database [Mac02, p.262]. Moreover, the current Prime Minister of Perú,
Roberto Dañino, stated in an interview from April 2002, that the Peruvian government intends to put more administrative steps online within in the next few years,
such as getting birth certificates, passports, or driver’s licenses or filing tax returns
[Dro02, p.3].
Based on the above described data, the public sector in Perú is rated moderate.
However, the gap to a common rating still seems considerable, as indicated by an INEI
study of 2001, which established that more than half of all public web pages are not
operated by the respective institutions, but by a superior agency. This “outsourcing”
process is especially prevalent among governmental institutions in rural areas, which
lack sufficient financial substance and technical know-how to run Internet servers on
their own [INEI02b, p.12].
Adding the points assigned to the four sectors together, Perú achieves a total of 6
points, which corresponds with an overall rating of level 2 (moderate) as illustrated
in table 5.6. In order to advance to level three, Perú has to improve in two of the
four sectors. It seems that yet many obstacles have to be overcome and some major
infrastructural issues have to be solved in order for Perú to make that next leap.
5.4
Connectivity Infrastructure
The dimension connectivity infrastructure describes the status of the physical structure of the networks of a given country and comprises the following four main elements: The aggregate bandwidth of the domestic backbone(s), the aggregate bandwidth of the international IP links, the number and type of interconnection exchanges, and the type and sophistication of local access methods employed. Table
5.9 depicts how the evaluation of these four factors relates to the overall assessment
of the connectivity infrastructure in Perú. It also shows that Perú is assigned one
sub-rating of level 2, two sub-ratings of level 3 and one level 4 sub-rating, which
translates into an overall rating of broad (level 3) for the connectivity infrastructure dimension. The data presented below is the basis for the formulation of this
assessment.
5.4.1
Domestic Backbone
As many previously conducted case studies have shown, the national backbone of a
country very often falls into one of two categories [Wol02, p.63]:
(i) A single network to which all ISPs connect, often established or managed by
88
Applying the GDI Analytic Framework
Level
Connectivity Infrastructure
Domestic
International
Internet
Access
Backbone
Links
Exchanges
Methods
0: Nonexistent
None
None
None
None
1: Thin
< 2 Mbps
< 128 Kbps
None
Modem
2: Expanded
2 Mbps – 200
128 Kbps – 45
1
Modem; 64
Mbps
Mbps
Kbps leased
lines
3: Broad
4: Extensive
200 Mbps –
100 Gbps
≥ 100 Gbps
45 Mbps –
10 Gbps
≥ 10 Gbps
More than 1;
Modem; > 64
Bilateral or
Kbps leased
Open
lines
Many; Both
< 90%
Modem; >
64 Kbps
leased lines
Bilateral and
Open
Table 5.9: Connectivity infrastructure rating of Perú
the incumbent national telecommunications carrier
(ii) A conglomerate out of multiple single-owner networks that may or may not
have Internet exchange points
In the case of Perú, the Lima metropolitan area resembles category (ii), while in the
rest of the country the situation described by category (i) is predominant.
Before the market opening in August 1998, the entire backbone consisted of
networks owned and operated by TdP, due to the company’s legally granted period of
exclusivity from 1994 until then. Since the establishment of TdP in 1994, the company
has extended and modernized the old networks from ENTEL and CPT in order to
comply with its contractual obligations to increase the scope and the quality of Perú’s
telecommunications infrastructure and to prepare itself for the wave of competitors
that entered the market in 1998. During the course of these restructuring measures,
TdP deployed five different types of networks in Perú [New99, p.1]:
DigiRed:
A time division multiplexing network
InfoVia:
A network for LAN interconnection
MegaNet:
A network for X.25 protocols
InterLan:
A network for frame relay services
Unired:
A network for Internet services
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Applying the GDI Analytic Framework
Connectivity Infrastructure
However, as a direct result of the liberalization efforts of the Peruvian government
during the early and mid 1990s, corporate and private demand for many of the
above mentioned services rose tremendously22 and began to outstrip TdP’s ability
to provide acceptable network performance. TdP’s reaction to this deficiency was
to start implementing a Lima-wide ATM23 backbone in 1999. The architecture of
this backbone allowed TdP to migrate its existing InterLan, InfoVı́a, and Unired
broadband traffic onto a single backbone, thereby reducing congestion and latency24 .
In the following years, TdP interconnected its ATM backbone in Lima with its ATM
networks in other metropolitan areas in Argentina, Chile, and Brazil [New99, p.2].
On a national level, TdP operates a fiber optic network and it constitutes Perú’s
only fiber optic backbone outside of Lima. This backbone runs most of the time along
the coast from Tumbes in the North through Lima to Tacna in the very South of Perú
and totals to over 8,000 km of fiber optic cable [OSI02a, p.1]. Only in the Southern
part of Perú is the fiber optic backbone partly interrupted and runs through parts of
the Andes in order to connect the Metropolitan areas of Arequipa and Cuzco. The
backbone is depicted in figure 5.4. Besides its fiber optic network, TdP also operates
networks via satellite transmissions as well as fixed wireless broadband networks
[Min01b, p.10].
After the market opened up to competition in 1998, several companies started
to deploy their own networks. The most important competitors that emerged on
the market and deployed their own infrastructure are BellSouth, ATTLA (formerly
Firstcom), Digital Way, RCP, Comsat Perú, and Diveo [Per01, p.2]. All of these organizations have in common that they all began their initial infrastructure deployment
in Lima and Callao, since this is by far the most important, sizeable, and lucrative
Peruvian market. ATTLA for instance, is the only company that utilizes exclusively
fiber optic public network technology, which has the capacity to transmit voice and
data with speeds of up to 155 Mbps. ATTLA’s fiber optic backbone extends on more
than 1,300 km and includes more than 20 nodes throughout Lima and Callao as
depicted in figure 5.5. Currently, ATTLA is deploying fiber optic networks into other
selected Peruvian urban centers (e.g Arequipa, Tacna).
22
Especially in Lima and Callao
23
Asynchronous Transfer Mode
24
ATM network technology transfers data in cells of a fixed size. The cell used with ATM is relatively
small compared with older technologies. The small, constant cell size allows ATM equipment to
transmit video, audio, and computer data over the same network, and assure that no single type of
data hogs the line
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Applying the GDI Analytic Framework
Connectivity Infrastructure
Figure 5.4: TdP’s fiber optic backbone in Perú as of 2002
Source: [Min01a, p.5]
RCP is the only other ISP that provided dedicated Internet access25 outside of
Lima before the market opening in August 1998. In 1999, it operated five POPs
outside of Lima (in Trujillo, Chiclayo, Piura, Cuzco, and Arequipa) that were all
connected via dedicated lines with its backbone in Lima at speeds between (64 Kbps
and 256Kbps). Since then, RCP has begun to lease more dedicated lines and simultaneously deploy their own infrastructure; however, RCP does not disclose exact
information about the general state and technical specifications of their backbone.
Besides RCP and TdP is Comsat presently the only other company that has considerable infrastructure deployments outside Lima and Callao in operation. Comsat’s
coverage extends to the metropolitan areas of Tumbes, Arequipa, Cuzco, and Tacna
[Com02, p.1]. In order to provide broadband access to their customers, Comsat deployed fixed ATM wireless broadband networks26 in the above mentioned cities and
25
Via leased-dedicated lines
26
This technology allows for transmission speeds of up to 2 Mbps
91
Applying the GDI Analytic Framework
Connectivity Infrastructure
Figure 5.5: ATTLA’s fiber optic backbone in Lima and Callao
Source: <http://www.attla.com/images/peru.gif>
in Lima. These networks are connected with each other via SCPC (Simple channel
per carrier) satellite links.
Figure 5.6: Schematic diagram of wireless broadband technology
Figure 5.6 depicts a schematic diagram of the wireless broadband technology. It
shows that the customer’s building is connected to Comsat’s local network via a
dedicated, 2-way, point-to-point radio link with an antenna and a receiver on either
end27 . Most of the above mentioned companies that have backbones installed in Perú
employ some variants of this technology; however, all systems are compliant with the
27
For illustrations of microwave receivers that are installed at customers’ sites refer to appendices B.4
and B.5
92
Applying the GDI Analytic Framework
Connectivity Infrastructure
IEEE 802.11 standard, which allows for compatibility among them [Ins00, p.105 et
seqq.]. This technology was favored by most companies because the financial outlay
for the deployment of the infrastructure is comparatively low and the systems can
be installed in a relatively short amount of time. The latter was especially important
right after the market opening in 1998. At that point in time, it was crucial for
companies to enter the market fast in order to build up market share before the bulk
of competitors would enter the market.
Because the telecommunications sector has been completely and consequently
privatized by the Peruvian government during the early 1990s, there is no government run national Internet backbone in Perú. In many other countries where the
government still controls at least parts of the national telecommunications market,
these kind of governmentally controlled backbones have been implemented (e.g. national Internet backbone in India, see [Wol02, p.66 et seqq.]). However, there have
been efforts on part of the Peruvian ministry of transportation and communications
(MTC), to coordinate and direct endeavors of public as well as private organizations
and investors towards the creation of a true national telecommunications backbone,
namely “El Proyecto Red Nacional de Telecomunicaciones de Banda Ancha”28 . The
objective of the project is to use the existing electric, gas, and road infrastructure
to deploy additional fiber optic cable to form a national broadband network that
would help to converge the existing single-carrier networks [Min01b, p.15]. In 2001,
MTC spent $85,000 in order to finance a study that assayed if the electric infrastructure is suited to be used for telecommunications services. This study concluded that
it would cost approximately $75 million in construction costs to prepare 3,000 km
of conventional electric infrastructure for the use as a telecommunications network
[Min01c, p.22]. So far, MTC did not indicate that any concrete measures towards
the implementation of a national broadband backbone have been undertaken.
Summarizing the above presented data, it can be stated that Perú’s domestic
backbone is an aggregation of many independently run networks. TdP and RCP are
the only carriers that operate on a true national level, although, as stated in chapter
5.2, a significant part of rural Perú is not connected to any telecommunications
backbone. By far the highest concentration of network infrastructure can be found in
Lima and Callao, which is not surprising and in unison with the general centralistic
structure of Perú. In February 2000, Torres Montes from the University of Lima
assessed the capacity of Perú’s aggregated domestic backbone to be ca. 71 Mbps,
whereof 58 Mbps were controlled by TdP [Tor00c, p.1]. However, this assessment was
made just one and a half years after the market opening. At the same time, many
28
The national broadband telecommunications network project
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new market entrants were still setting up their own telecommunications networks.
Since then capacity has increased considerably, which is confirmed by a study from
RCP from the beginning of 2002. This study examined the Internet structure in
Perú. One of the findings of the study was that Perú’s conglomerate of domestic
backbones has a total capacity of at least 293 Mbps [RCP02, p.4]. During the last
year, the capacity of the backbone has been extended even further as companies such
as ATTLA or DIVEO continue to deploy infrastructure29 . Therefore, at the present
time, Perú is a firmly settled level 3 (broad ) in the domestic backbone segment of
the connectivity infrastructure dimension. Nonetheless, it seems very unlikely that
Perú will come close to advance to level 4 anytime soon, because the country would
have to increase its current domestic backbone capacity by at least 200 times.
5.4.2
International Connectivity
Until the market opening in 1998, only TdP and RCP operated international gateways and provided for Perú’s international connectivity. One year after the opening,
by the end of 1999, there was already a total of 5 companies that operated international gateways. All five of these gateways were operated out of Lima. Table 5.10
lists the companies and the bandwidth of their respective international IP link.
Company name
Bandwidth [in Mbps]
RCP
13.5
TdP
16.0
Global One
2.0
Firstcom
2.0
IBM
Not disclosed
Table 5.10: International connectivity of Perú in September 1999
Source: [Tor99, p.19]
These gateways were almost exclusively connected to backbones in the U.S. This
is not surprising, since most of the Latin American Internet traffic is routed through
the U.S. In 2000, Recinto estimated the total traffic between Latin America and
North America to be 949 Mbps [Rec00, p.2]. Thus, Perú’s International connectivity
constituted ca. 0.5% of the total traffic between Latin America and the U.S. Figure
5.7 shows the approximate distribution of International IP links throughout South
America as of 2000.
29
See homepages of ATTLA and Diveo
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Figure 5.7: International IP links in South America as of 2000
Source: [Pre00, p.5]
By the end of the 1990s, the global phenomenon of the “Internet hype” also hit
Latin America and demand for Internet access (especially dedicated access) increased
dramatically during 2000, so that the demand eventually exceeded the supply [Spa00,
p.1]. This was not an isolated case, but occurred throughout Latin America. Many
companies and other organizations of the telecommunications sector forecasted the
demand for data services to explode in Latin America from 2000 to 2005. Hence,
the region became the main focal point for planned investments in submarine fiber
optic cables during the above mentioned period. It was predicted that the undersea
cable network in Latin America will be 15 times bigger in 2005 than it was in 2000
[Mou00, p.1].
International data traffic from South America to the U.S. is not distributed evenly
between the Atlantic and the Pacific side of the continent. The Atlantic side with
Argentina, Uruguay, and Brazil produces by far more data traffic than Perú, Chile,
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Bolivia and Ecuador. Thus, most of the main projects for the deployment of submarine fiber optic cable in Latin America and the Caribbean that were undertaken
since 2000 focussed on the Atlantic side of South America [Mou00, p.1 et seq.]. However, Perú was among the connected countries in two out of a total of nine major
projects. The first one was the 23,000 km subsea fiber ring around most of South
and Central America of Emergia Holding NV. Its 4-fiber-pair ring with a capacity
of 40 Gbps connects Latin America with major cities in the U.S. and commenced
operations in Perú in May 2001. Emergia is a subsidiary of Telefónica de España and
its network serves as a backbone for Telefónica’s and Terra’s30 operations in Latin
America. Emergia’s submarine fiber optic ring connects to TdP’s terrestrial network
in Lima. The second subsea network that provides international connectivity to Perú
was deployed by Global Crossing31 . On August 22, 2001, Perú was added to the 40
Gbps submarine fiber optic network. The landing station for the network in Perú
is in Lurin32 and from there it connects to a POP in Lima. Global Crossing’s fiber
optic ring around South America is depicted in figure 5.8.
Besides international links to fiber optic subsea networks, there have been some
other efforts to expand Perú’s international connectivity. One example is the “Proyecto
Andina Sistema Internet”33 of the “Asociación de Empresas de Telecomunicaciones
de la Comunidad Andina”34 . This project intends to create an Internet backbone
between the Andean countries Venezuela, Colombia, Ecuador, Perú, and Bolivia. It
is still in the planning stage and technical details are not yet published, but it is
scheduled to be implemented in 2005 [Aso01, p.3 et seqq.]. This Andean backbone
would help to enhance connection and data transmission speeds, because some of
the internal South American traffic could be routed directly between the respective
countries without passing through U.S. backbones.
According to table 5.10 the aggregated bandwidth of Perú’s international IP links
in 1999 amounted to at least 33.5 Mbps. Considering that since then Perú has been
added to two major global fiber optic networks and several other smaller projects
have provided additional bandwidth, it seems save to ascertain that Perú’s aggregated
bandwidth of international IP links lies within the 45 Mbps and 10 Gbps bracket
30
Terra is Telefónica’s Internet service provider
31
Global Crossing filed for bankruptcy on January 28, 2002. Hutchinson Whampoa and Singapore
Technologies jointly took control of the company and continued to operate its fiber optic network,
which accounts for 20% of all subsea data traffic worldwide [Chi02, p.1], [Tel02, p.1]
32
Lurin is ca. 200 km South of Lima
33
Andean Internet project
34
Association of telecommunications companies of the Andean community
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Figure 5.8: Fiber optic ring around South America from Global Crossing
Source: <http://www.globalcrossing.com>
and hence, Perú will be rated broad (level 3) in this category.
5.4.3
Internet Exchanges
If no domestic Internet exchange points exist in a country, then all traffic from one
ISP to another within that country must first travel outside the country to a global
connection point. Domestic Internet exchanges presumably reduce costs and increase
speeds and thus, the presence of these exchange points indicates a certain level of
maturity of the development of the Internet backbone in a country. Open exchanges
allow any qualified backbone provider to join, while bilateral connections may be
private.
At the present time, there is one Internet exchange point in operation in Perú.
On August 25, 2000, the five companies ATTLA, RCP, TdP, Comsat, and BellSouth,
decided to establish a Network Access Point (NAP) in Perú under the supervision
of the “Insituto Nacional de Investigación y Capacitación de Telecomunicaciones”
(INICTEL)35 . The involvement of the latter was supposed to guarantee a fair and
equal treatment of all participants and help to decrease the conflict potential between
35
National institution for investigation and quality in telecommunications
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the parties involved [Lae00a, p.1]. After the agreement was established, the parties
started to deploy the necessary equipment and hardware in a facility in Lima and
finally, the “NAP Perú” commenced operations on May 10, 2001. The NAP is open
to any organization that comes up with the minimum annual fees, operates its own
network, and is willing to abide by the rules established by INICTEL, and can
therefore be characterized as “open”. Since its beginning, Impsat and Diveo have
joined the NAP and increased the total number of members to seven. Telegeography
Inc. estimates that approximately 95% of Perú’s domestic traffic is routed through
the NAP and does not have to travel outside the country anymore before reaching its
destination [Tel03, p.1]. OSPIPTEL specified in a recent publication that the NAP
Perú operates at a symmetric36 bandwidth of 42 Mbps [OSI02i, p.23].
The author did not find any indications that a second Internet exchange point is
in the planning in Perú. This is not surprising, since 95% of all local traffic is already
handled by the existing exchange point. This is possible because of the centralistic
structure of the telecommunications networks in Perú. Almost all existing backbones
intersect at some point in Lima and therefore, there is presently no need for the
telecommunications companies to set up a second Internet exchange point somewhere
outside of Lima.
Based on the above presented data, Perú will be ranked level 2 (expanded ) in
accordance with the evaluation scheme of the Global Diffusion of the Internet Framework as illustrated in column four of table 5.9.
5.4.4
Access Methods
When assessing the degree of sophistication of access methods employed in a particular country, the framework used in this study tracks two different forms of access.
One is the “last mile” connection, mainly into homes that traditionally use modems
but may now be adopting cable, xDSL37 , or even other forms of access (e.g., fixed
wireless or satellite). These newer forms of access appear in the framework at level 4,
where the rating of <90% using modems assumes that at least 10% of all subscribers
are using one or more of these methods. The second form of access is via a leased
line, and here the framework differentiates between those that are greater than 64
Kbps, and those that are not (older ISDN technologies).
According to OSIPTEL, in June 2001, there were 162,950 Internet subscribers
nationwide in Perú. Table 5.11 depicts how many of the total number of subscribers
36
Upload and download speeds are equal
37
Any variant of DSL (Digital Subscriber Line)
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are residential subscribers, companies, cabinas públicas, and subscribers from the
public sector.
Residential subscribers
150,390
Companies
3,872
Cabinas públicas
1,740
Public sector subscribers
6,948
Total
162,950
Table 5.11: Types of Internet subscribers in Perú (June, 2001)
Source: [OSI02c, p.1 et seq.]
From the group of residential users, only 4,205 or 2.8% accessed the Internet
by other means than modems. Not surprisingly, the percentage of companies with
Internet subscription not using a modem lies higher by 45.5%. Cabinas públicas
commonly use dedicated access and thus, will not be considered in the assessment of
the first element of access sophistication of Perú. The most common access methods
of the subscribers of the public sector is dial-up (91.2%). As mentioned in chapter
5.3.4, ca. 87% of all governmental agencies that have Internet access have dedicated
access. However, they only account for a small fraction of all organizations with
Internet access from the public sector and hence, the overall rate of public sector
subscribers with new access technologies (e.g Cable modem, DSL, fixed wireless
access, etc.) is less than 9%.
Adding all modem subscribers in the relevant three sectors together and putting
that number in perspective with the total of subscribers of all three sectors leads
to a modem subscription rate of 95.9% as of June 2001. This percentage would
impede that Perú can be rated level 4 in the sophistication of access evaluation
scheme. However, recently published numbers by OSIPTEL state that there was a
significant increase in subscription to broadband Internet access. Subscriptions to
TdP’s broadband services (xDSL and cable modem) rose from 3,442 in June 2001 to
as many as 43,500 by the end of the first quarter of 2003 (March 31, 2003) [Poi03a,
p.1], [Poi03b, p.1]. Because TdP has a market share of ca. 90% in cable TV in
Perú [OSI03e, p.2] and provides almost all telephone lines, TdP’s current amount of
broadband subscribers is for reasons of simplicity assumed to be the total amount of
broadband subscribers in Perú for the purposes of this study. Presently, there was
no data available to the author as to the current amount of Internet subscribers in
Perú, however, with an amount of 43,500 broadband subscribers, the total amount
of subscribers could have been risen to as much as 435,000 from 162,950 in June
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2001 for the percentage of broadband subscribers still to exceed 10%. That such an
explosion in total subscribers has indeed occurred seems very unlikely because PC
penetration has not significantly increased in the relevant period of time. It appears
more plausible that there has been a shift from dial-up towards broadband technology
due to a decrease in price of broadband equipment (e.g cable modem, DSL modem,
etc.) and of monthly subscription fees [Gar03b]. Therefore, the first criterium for
the assessment of the level of sophistication of access methods (last-mile connection)
would allow in Perú’s case for a level 4 rating.
Dedicated access to the Internet in Perú is primarily present in the sector of
cabinas públicas. In addition, many businesses with Internet access have dedicated
lines employed (44.4%) [OSI02c, p.2]. In June 2001, more than 60% of all 1,740
cabinas were connected to the Internet with dedicated lines that had connection
rates of lower than 64 Kbps, as illustrated in table 3.5. The following table 5.12
lists the connection speeds of all 4,872 dedicated lines (both, regular dedicated lines
and fixed wireless) that were employed in Perú in June 2001. The table shows that
47.17% of all dedicated lines had connection speeds of less than 64 Kbps. It is possible
that this percentage might have improved since June 2001, however, the author
found no indications that the access speed of the relevant infrastructure in Perú has
significantly progressed since then, nor did the prices of dedicated access decrease
substantially. Therefore, it seems unlikely that the connection speeds of dedicated
Internet access rose considerably during the last two years and the above mentioned
percentage will be used to reach a final assessment.
Bandwidth (BW)
[Kbps]
Number of
Percentage of
dedicated
lines in use
Lines
BW ≤ 64
2,298
47.17%
64 < BW ≤ 128
1,948
39.98%
128 < BW ≤ 256
411
8.44%
256 < BW ≤ 512
129
2.64%
512 < BW ≤ 1,024
47
0.97%
1,024 < BW ≤ 2,048
39
0.80%
4,872
100.00%
Total
Table 5.12: Bandwidth of dedicated lines in Perú as of June 2001
Source: [OSI02i, p.18]
In order to be ranked level 4 in sophistication of access methods, the global
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diffusion of the Internet framework demands that at least some of the dedicated
lines in a particular country are higher than 64 Kbps. However, it is not necessary
that all existing lines have higher speeds. The purpose of the framework is to show
general trends of the Internet development of a given country and a trend towards
high-speed dedicated Internet access is demonstrated when a significant percentage
of all lines operate beyond the critical speed. The framework lacks a precise definition
for the value of the percentage, so that it is up to the respective author’s judgement
to decide if the amount of installed high-speed dedicated lines is indeed significant
or not. At the present time, this question can be positively affirmed in the case of
Perú. More than 50% of all dedicated lines are faster than 64 Kbps, which beyond
any doubt can be attributed significant. Therefore, this paper ranks Perú as level 4
(extensive) in the sophistication of access methods category.
5.5
Organizational Infrastructure
The dimension of organizational infrastructure refers to the competitive strength
and the general vitality of the ISP market. It tracks the quantitative development
of companies offering Internet service provision and assesses their general competitive environment. A high level in organizational infrastructure indicates low barriers
to market entry, a non-restricted and very competitive market environment with a
multitude of ISPs and a low degree of monopolization. The results of many other
country studies have shown that there tends to be an especially great impact of
government policies and regulations on this variable and hence, they need to be examined relatively close [Wol02, p.41]. Because of the close relation of government
policies and organizational infrastructure, changes in government policies are most
likely to be first reflected in changes in this dimension. Because of the profound impact of government policies on the level of Internet diffusion in general, changes in the
organizational infrastructure dimension are often quickly accompanied by changes in
other dimensions and are therefore a good indicator for the general direction of the
Internet diffusion maturity of a country.
In order to simplify the evaluation process and to keep the scope of this study in
reasonable proportions, the dimension of organizational infrastructure will be reduced
to a function based on the following three variables:
1. The general structure of the Internet service market, including competitive
environment, number of ISPs, barriers to market entry, etc.
2. The structure of the market for basic domestic and international communica101
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tions services, based on the same principles as the above described variable
3. The quantity and nature of collaborative organizations and interorganizational
arrangements that work to promote the health of the industry.
Table 5.13 shows that Perú has a very competitive and open organizational infrastructure with low barriers to entry and is therefore rated as a level 4 country in this
category. In the following, further elaboration on the background and the reasoning
of this assessment is provided based on the above mentioned three variables.
Level 0
None: The Internet is not present in this country.
Level 1
Single: A single ISP has a monopoly in the Internet service provision
market. This ISP is generally owned or significantly controlled by the
government.
Level 2
Controlled : There are only few ISPs and the market is closely controlled
through high barriers to entry. All ISPs connect to the international
Internet through a monopoly telecommunications service provider. The
provision of domestic infrastructure is also a monopoly.
Level 3
Competitive: The Internet market is competitive. There are many ISPs
and low barriers to market entry. The provision of international links
is a monopoly, but the provision of domestic infrastructure is open to
competition, or vice versa.
Level 4
Robust: There is a rich service provision infrastructure.
There are many ISPs and low barriers to market entry.
International links and domestic infrastructure are open
to competition. There are collaborative organizations and
arrangements such as public exchanges, industry associations, and emergency response teams.
Table 5.13: Organizational infrastructure rating for Perú
Source: [Goo98a, p.9]
5.5.1
The Structure of the Internet Service Market
In general, if a company wants to operate on the Peruvian Internet service provision
market, it has to register as a “value added service” firm with MTC. The value added
service category includes a total of thirteen services such as data packet transfer via
IP, electronic commerce, fax, electronic mail, Internet related consulting, etc. On
average, Internet service companies account for approximately one third of all firms
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registered for value added services. At the end of 1999, a one-year license was granted
after a period of ca. two weeks and cost $78 [USD99b, p.3].
As described in chapter 3.3.2, the number of ISPs increased dramatically in Perú
between 1995 and 1998 due to the privatization of the market in 1994 and the business
model of the incumbent infrastructure provider TdP, which did not enter the dial-up
market directly but encouraged companies to enter the market via the utilization of
their InfoVı́a network. The preliminary peak of the ISP market was reached by the
middle of 1998, when a total of 54 companies offered services in the market [Bri01a,
p.15]. Just two years prior to that, in July 1996, the Peruvian ISP market had been a
duopoly38 . In the second half of 1998 began an ISP shake-out due to an overcrowded
market, which caused the number of companies providing Internet services to drop
to just over 30 within less than one year. In addition, Telefónica de España started a
campaign to strengthen its presence on Internet markets throughout South America
by buying other ISPs and consolidating them into one big company network with
subsidiaries in each country. This ISP network is called Terra Networks [Bri01a, p.9].
In the case of Perú, the consolidation process was preluded by acquisitions of more
than 58,000 users of various ISPs on the part of Telefónica Servicios Internet (TSI), a
subsidiary of TdP, which just had been formed shortly before. In the middle of 1999,
TSI became the largest Internet dial-up access provider in Perú, with a customer
base of ca. 120,000 dial-up users. On October 29, 1999, TdP bought 0.83% of the
shares of Terra Networks and at the same time, transferred the customer base of TSI
to Terra. This transaction was accompanied by an exclusivity agreement, which gave
Terra the operating rights and the rights to develop the Internet domestic customer
segment. However, the agreement also stated that Terra Networks can only use TdP
telecommunications infrastructure in Perú and is not permitted to deploy its own
circuits.
As illustrated in figure 4.1, Perú’s telecommunications market was completely
liberalized in 1998 and TdP’s period of exclusivity ended. While companies were
already free to enter the ISP market since 1994, they couldn’t deploy their own
circuits and had to rely on leasing circuits from TdP. Thus, the cessation of TdP’s
monopoly for telecommunications infrastructure had a profound impact on the ISP
market. Now that companies were allowed to install their own circuits in Perú, some
other major players emerged on the Peruvian market and about two years later the
number of ISPs exceeded 50 again39 [Ber00b, p.3]. Not only were some companies now
38
Only RCP and IBM offered Internet services at that juncture
39
At the same time, the number of companies holding a value added services license had increased to
160 from just little over 70 in 1997 [Bri01a, p.15]
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using their own dedicated circuits and POPs and not relying on TdP’s infrastructure
anymore, but these companies were now also offering other ISPs without own circuits
to lease lines from them and hence, creating competition for TdP in this section of
the market as well.
After the opening, the telecommunications infrastructure that was installed by
several companies included a wide variety of systems, such as optical fiber networks,
networks based on wireless broadband technology, and digital video broadcasting
via satellite links [DCI00, p.2], [Spa00, p.2]. However, following the best opportunity
to create profit in the foreseeable future, all new market entrants installed their
circuits and networks in the metropolitan area of Lima and Callao and they primarily
focussed their efforts on the lucrative business of providing companies with dedicated
Internet access [OSI01b, p.21]. In the following, the business activities of some of the
main players entering the Peruvian ISP market after its liberalization are briefly
described [Bri01a, p.10 seqq.], [OSI01b, p.22], [OSI01d, p.12], [DCI00, p.1 et seq.],
[Div03, p.1], [Ins00, p.105 et seq.]:
• AT&T Latin America (formerly Firstcom):
Firstcom begun commercial operations in Perú in 1999. After a strategic merger
with AT&T in 2000, AT&T Latin America (ATTLA) was created. The new
company competes in the Peruvian telecommunications market for Internet
access, long-distance, wireless, and fixed telephony services. They mainly focus
on business customers. A considerable amount of ATTLA’s investment in Perú
went into the deployment of an almost 1,000 km long fiber optic ring in Lima
and Callao. The appearance of Firstcom as a provider of dedicated Internet
service in early 1999 had a tremendous impact on the prices in this category.
As illustrated in table 5.14, in March 1999, TdP was forced to drop its prices
by as much as 30%.
Access speed
TdP’s rates
TdP’s rates
Firstcom’s
before
after
rates
Firstcom’s
Firstcom’s
market entry
market entry
128 Kbps
$ 1,040
$ 728
$ 720
512 Kbps
$ 2,665
$ 1,866
$ 1,840
2048 Kbps
$ 6,815
$ 4,771
$ 4,720
Table 5.14: Changes in monthly rates for dedicated access due to competition
Source: [Bri01a, p.11]
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• BellSouth Perú, S.A. (formerly Tele2000):
BellSouth entered the Peruvian telecommunications market through the acquisition of Tele2000, a cable and cellular company in 1998. Subsequently, BellSouth withdrew from the cable TV market and focussed its resources and
attention mainly on the cellular market. As a result, BellSouth is the second
largest provider of cellular services in Perú after TdP. However, during the last
four years, the company build up an optic fiber network in Lima, and accordingly, started to provide Internet access services in January 2001. In addition,
it offers long-distance services to its mobile phone customers.
• Diveo Telecomunicaciones del Perú:
This company started to deploy its networks in Perú during the second half of
1999. It is a subsidiary of the Washington D.C. based company Diveo Broadband Networks Inc. Diveo offers its mainly corporate customers broadband
Internet access via the use of dedicated wireless broadband lines. These lines
consist of dedicated 2-way and point-to-point radio links, with an antenna and
a transceiver at either end.
• Digital Way S.A.:
Digital Way S.A. is a subsidiary of U.S. based World Wide Wireless and offers
dedicated Internet access to the corporate business segment of the market via
a similar wireless technology than Diveo. Digital Way has been operating in
Lima since 2000 and has recently extended its Internet services to some key
provinces outside Lima.
• Comsat Perú:
Comsat offers dedicated access to the Internet and complete implementation of
LAN and WAN solution for commercial customers. Comsat Perú is a subsidiary
of Comsat Corporation, which is a U.S. based company. Comsat commenced
its activities in Perú in 2000.
The increased number of companies that emerged on the ISP market upon the
liberalization of Perú’s telecommunications market resulted in a high level of competition. In fact, the market for dedicated Internet access is, together with the market
for incoming international long distance calls, considered to be the most competitive
segment of the Peruvian telecommunications market [Per01, p.3]. That hypothesis
is supported by a market survey from OSIPTEL from the year 2001, which showed
that in the year 2000 (only a year and a half after the market was liberalized) already
39% of the market share was controlled by firms that just recently had commenced
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operations. Except for the rate of 40% in the incoming international long-distance
segment, this was by far the highest rating among all sections of the telecommunications market [OSI01b, p.21].
As a consequence of the steadily increasing level of competition, the ISP market
has witnessed the introduction of several new Internet-related services since 1998,
some of which are briefly described in the following [Bri01a, p.19 et seqq.]:
• Asymmetric Digital Subscriber Line (ADSL):
This technology was first introduced by TdP in September 2000. As an asymmetric version of the regular Digital Subscriber Line (DSL), ASDL is geared
mainly towards residential users because it allows for higher upstream than
downstream rates40 . ADSL does not interfere with basic voice service and the
technology supports data rates of 1.5 to 9 Mbps when receiving data and of 16
to 640 Kbps when sending data.
• Web TV:
TdP started to experimentally offer this service to some selected customers
through its subsidiary Cable Mágico. This service allows customer to surf the
web without having a computer, just by using a TV. However, no data can
be up or downloaded and this service is only available in conjunction with a
subscription to regular cable TV services.
• Cable Modem:
Cable modem service is in existence since August 2000 and is offered by both
cable providers, Telecable and Cable Mágico. Contrary to most other Internetrelated services, this service is offered on a national level and is everywhere
available, where regular cable TV subscription is existent. Similar to Web TV,
the fees for a cable modem have to be paid in addition to the regular cable TV
subscription fee.
• Innovative features for dedicated Internet access:
In order to be able to compete with TdP and RCP, the new market entrants
in this segment not only undercut the existing prices but also offered new and
innovative features. ATTLA for instance, offered a two-tier rate system. One
tier involves sharing the same circuit with other users and the other guarantees
user exclusivity in the use of the dedicated circuit.
• Free Internet Provision:
In March 2000, “El Comercio”, the leading daily newspaper in Perú, launched
40
Typically, private users of dedicated lines receive by far more data than they send
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a free dial-up Internet access service. As quid pro quo, subscribers of the service
have to permit El Comercio to send them advertising by e-mail. As of April
2000, El Comercio reported around 20,000 subscribers. Another example of a
company that offers free Internet access to Peruvian residents is “Yahoo.com”.
In the same way that the domestic Internet market is open to competition, the
market for international links shows a wide variety of players. Already in 1999, just
one year after market liberalization was achieved, there were already five different
companies41 that were operating international links out of Lima [Tor99, p.19].
In conclusion, it can be stated that the Peruvian ISP market is highly competitive
and diverse and that the barriers to enter this market are extremely low. However,
it should be kept in mind that in accordance with Perú’s exceedingly centralistic
shaped political and economic structure, the ISP market structure in Perú can be
divided into two categories; the market in Lima and the one in the rest of the country.
TdP and RCP are the only companies that operate in parts of rural Perú and only
some others such as Comsat provide services in other cities than Lima.
5.5.2
The Structure of the Basic Domestic and International
Telecommunications Services Market
Since market liberalization took place in August 1998, there have been no limitations
on the issue of licenses for any sector of the telecommunications market except for
services that are subject to natural limitations on grounds of scarce resources 42 .
A set of clear rules43 that accompanied the liberalization process and the strict
enforcement of those rules helped to foster competition in the various segments of the
market [ITU01, p.5]. However, the various segments showed quite different dynamics.
Table 5.15 depicts these dynamics and shows how the segments developed differently
between August 1998 and December 2000.
5.5.2.1
Long Distance Services
The long distance market in Perú can be divided into three segments; incoming
ILD, outgoing ILD, and NLD. The ILD market is by far more competitive than the
NLD as depicted in table 5.15. This is due to two reasons. First, before the market
liberalization in early 1998, making an international long distance call was about 5
41
Namely, TdP, RCP,Global One, IBM, and Firstcom
42
For instance in the case of the radio spectrum
43
As formulated in supreme decree 020-98-MTC
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Organizational Infrastructure
Service
New Entrants
market share (Dec.
2000)
Retail price
reduction from
Aug. 1998 until
Dec. 2000
Incoming ILD
40%
68.6%
Internet leased lines (Lima)
39%
31%
Mobile telephony (Lima)
31%
22%
Local leased circuits (Lima)
16%
N/A
Outgoing ILD (Lima)
9%
42.7%
Outgoing ILD (Rest of Perú)
2%
2.7%
Fixed local telephony
0%
22.7%
NLD
0%
N/A
Table 5.15: Development of the different segments of Perú’s telecommunications market
between Aug. 1998 and Dec. 2000
Source: [Can01, p.6]
times as expensive as a national long distance call, while the average cost per call
for the operator were only slightly different [OSI01b, p.26 et seq.]. This was mainly
due to bilateral monopoly agreements between TdP and foreign operators [Can01,
p.12]. Therefore, the margins that could be realized in the ILD market per call were
by far higher than in the NLD market. Consequently, the number of companies
entering the ILD segment exceeded by far the number of firms operating in NLD.
The second reason is that more than half of all international calls originate from
or are coming into Lima. Hence, it is considerably easier and requires less resources
for companies newly entering the Peruvian market to deploy their infrastructure in
Lima and serve the ILD market than to set up the necessary infrastructure for NLD
services throughout the country.
The gap in level of competition between incoming ILD and outgoing ILD stems
from the more than one million Peruvian expatriates living in countries with highly
competitive telecommunication markets44 , where the ILD rates are drastically lower
than they are in Perú. Therefore, the quantity of incoming calls exceeds the one of
outgoing calls multiple times. As a result, just two years after market liberalization
was achieved, there were more than 51 companies operating in the ILD market and
the prices for incoming calls per minute had dropped by 84% [OSI01b, p.23]. By the
end of 2002, several companies with activities in this segment that all started their
44
The bulk of these expatriates lives in the U.S.
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operations in Lima, have commenced to offer services in other parts of the country.
Figure 5.9 depicts the distribution of operators by department.
Figure 5.9: Number of ILD operators by departments, Nov. 2002
Source: [OSI02g, p.17]
In addition to use ILD services by subscribing to an ILD plan of a certain provider,
there are a few other companies that provide customers with the opportunity to use
prepaid telephone cards for ILD calls. Some of these companies include Global One,
Nortek, Net2Phone, and Infoductos y Telecomunicaciones del Perú45 [OSI01b, p.25].
Most of these companies use IP networks for voice transmissions, which allows them
to offer very competitive rates. However, also some of the traditional providers of long
distance services use Internet telephony for part of their voice transmissions. For example, TdP started already in 1996 to implement an IP network in Perú. Although
TdP does not disclose any official information on this matter, various sources say
that TdP is using this IP network for routing part of its long distance and international traffic to other countries. Other companies that are known to use voice over IP
for part of their ILD calls are ATTLA, BellSouth, and RCP [Pet00, p.15]. The main
motivation on part of these companies to utilize voice over IP is to take advantage
of the cost advantage that voice over IP has compared to traditional switched telephony [Bri00, p.16]. From a legal standpoint, providing Internet telephony service is
45
52% of Infoductos’ equity is controlled by RCP
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classified as a value-adding service and therefore, all companies providing this service
must hold a value-added service license. This is the same license that is necessary
for taking up ISP activities. Therefore, it is relatively easy for ISPs to offer pre-paid
card international long distance services by voice over IP.
A good example for the partly rather intense competition in this area of the
telecommunications market is the move on part of TdP to block the access of prepaid cards from their public pay phones. This gave raise to a legal controversy, of
which the outcome is still pending [Bri01a, p.6]. There have been several of such
disputes in this area since the opening of the market in 1998 with various outcomes.
Typically, vertically integrated companies, such as TdP or ATTLA implemented
anti-competitive practices to the detriment of other more specialized, non-vertically
integrated competitors, such as RCP, Cosapidata, or Net2Phone [Bri01a, p.37].
As illustrated in table 5.15, the NLD market is currently one of the least competitive segments. Besides TdP, there are only three other companies46 that offer NLD
services and these companies concentrate their activities mainly on Lima, so that
outside the capital TdP still holds a factual monopoly on NLD services due to a lack
of competition. The main reasons why the provinces are currently not very attractive for market entrants are the low income level in the provinces, the small market
size, and the expensive NLD leased circuits and NLD interconnection infrastructure
[Can01, p.25]. In addition, OSIPTEL reduced the local call areas from more than
200 to only 24, which reduced the number of NLD calls by ca. 25% and made it even
more unattractive for companies to enter this market segment [OSI01b, p.26].
5.5.2.2
Local Leased Circuits
The leased local circuits market in Perú is very competitive due to a high concentration of providers in the Lima metropolitan area. Some of the more important
providers are TdP, ATTLA, BellSouth, Comsat, IMPSAT, Diveo, and GTH [Can01,
p.11]. One reason for the high level of competitiveness is the high concentration of
potential customers for local leased circuits (mid to large sized corporate organizations) in just a few districts of Lima47 due to the high centralism of the Peruvian
economy. Another reason is that OSIPTEL strictly monitored and enforced the regulations regarding local leased circuits, such as promoting the rapid issuing of concessions and discouraging unfair business practices. As a result of the high level of
competition, several technologies are used by the various firms for the provision of
46
ATTLA, Perusat, and BellSouth
47
San Isidro, Miraflores, Monterrico, and La Molina
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local circuits, including optical fiber lines, satellite connections, wireless dedicated
lines through LMDS (Local Multipoint Distribution Services)48 , and CDPD (Cellular
Digital Packet Data)49 wireless dedicated lines [OSI01b, p.22].
5.5.2.3
Local Telephony
While the mobile telephony market can be considered to be one of the three most
competitive segments of the Peruvian telecommunications market50 , the fixed local
telephony belongs to the least competitive segments. There are currently only three
companies providing services in the latter category, however, the incumbent provider
TdP is de facto the only company operating outside Lima. In addition, the two other
companies, ATTLA and BellSouth, have together only approximately 6,500 (mostly
corporate) customers, which is rather insignificant considering that there are a total
of 1.6 million lines in use [OSI02g, p.15]. However, from a legal standpoint, the
fixed local telephone market is open to competition and it is comparatively easy for
companies to receive a license to operate in this segment. Hence, the reasons for the
low degree of competition are a result of the economic situation and the centralistic
structure of Perú. Due to the low income levels outside Lima’s, the decreasing income
of households since 1996, and the remote location of many Peruvian towns, new
market entrants would need to make considerable investments in infrastructure in
order to provide fixed telephony outside of Lima, without having expectations for
a reasonable return on investment. However, when considering other countries in
South America and all over the world, one finds that fixed telephony markets are
generally dominated by the incumbent provider and Perú is no exception in this
respect [Can01, p.22].
On the one hand, the economic situation and the centralistic structure of Perú are
reasons for the low level of competition in the fixed local telephony market; however,
on the other hand, exactly these circumstances helped the mobile telephone market
to steadily increase its customer base and level of competitiveness. As of June 2002,
there were more than 2 million users and only 10 of the total 24 departments had
only one operator (TdP) offering mobile telephony services. 1 department had 2
48
A fixed wireless technology that operates in the 28 GHz band and offers line-of-sight coverage over
distances up to 3-5 km. It can deliver data and telephony services to 80,000 customers from a single
node
49
A data transmission technology developed for use on cellular phone frequencies. CDPD uses unused
cellular channels (in the 800- to 900-MHz range) to transmit data in packets
50
The three most competitive segments are: Local leased circuits, incoming ILD calls, and mobile
telephony
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operators, 9 departments had 3 operators, and 4 departments (including Lima) had
4 operators51 offering services [OSI02g, p.19]. The deployment of infrastructure for
mobile telephony is considerably more easy and requires less financial outlay than for
fixed telephony. Thus, it is more rentable for new market entrants to set up mobile
telephony infrastructure in the provinces. In addition, the feature of prepaid cards
for mobile phones makes mobile telephony financially more realizable for many low
income households.
Overall, the Peruvian telecommunications market can be considered to be competitive with relatively low barriers to market entry. However, it must be mentioned
that the market situation in Lima is quite different from the one in the provinces
and one should look separately at these two markets when analyzing the telecommunications market in Perú. All segments taken together, the new market entrants
have a total market share of approximately 30% and the rest is still controlled by
TdP [OSI01b, p.18].
5.5.3
Collaborative Efforts and Agreements
Due to the continued growth of the Internet, a number of collaborative organizations
have emerged that aim to promote the interests of certain groups or to foster the
general health of the industry. In the following, some examples of these collaborative
organizations are briefly described.
The “Asociación Cabinas Perú”52 is an association of owners and other stakeholder of cabinas throughout Perú. The main objective of this non-for-profit organization is to develop new services and tools for cabinas públicas in order to enhance
the quality of the services offered by the cabinas. The “Asociación Peruana de Empresas de Servicios de Internet”53 also has the goal to improve the quality of cabinas
públicas; however, it focusses on more specific areas than Asociació Cabinas Perú,
for instance developing secure online bill payment systems for customers of cabinas.
Another example of a collaborative organization is the “Asociación de Internautas
del Perú”54 , which is a non-for-profit organization that acts on behalf of Perú’s Internet users. Its main goals are to defend the rights of all telecommunications users
in Perú and to ensure that privacy and data security of users are not being violated.
Another very remarkable organization is the “Cibertribunal Peruano”55 , which
51
TdP, Nextel, Telecom Italia Movile (TIM), and BellSouth
52
<http://www.cabinasper.org>
53
<http://www.aspesi.cjb.net>
54
<http://internautas.hypermart.net>
55
<http://www.cibertribunalperuano.org>
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is an alternative dispute resolution center, that works online as well as offline. The
Peruvian Cibertribunal is a non-for-profit, non-governmental organization, that was
incorporated on November 12, 1999 and acquired the right to bear the title “Conciliation Center of the Minister of Justice”. It encourages conciliation processes, offers
arbitration as an alternative dispute resolution, and is competent on all issues regarding computer law.
Also noteworthy in the context of collaborative efforts among organizations is the
creation of a local Network Access Point (NAP) in 2000 as discussed in chapter 5.4.3.
This allows for faster connections because the bulk of local Internet traffic does not
have to be routed over international links anymore [Lae00a, p.1].
In light of the preceding discussion of the state of Internet services, the competitive structure of the basic telecommunications market, and collaborative organizations, it can be stated that the organizational infrastructure of Perú provides for
competitive market conditions, low barriers of market entry and multiple collaborative efforts on the part of the stakeholder of the market. Hence, Perú is rated level 4
(robust) in the organizational infrastructure dimension of the analytic framework.
5.6
Sophistication of Use
To truly understand the Internet capabilities of a country, it is necessary to examine
not only how many people use the services and where, but also how those people
employ the Internet. The following discussion addresses this question and starts out
by analyzing how the Internet is being employed by organizations. In this analysis,
the author only considers commercial organizations and not non-for-profit or governmental organizations because otherwise the scope of this paper would clearly be
exceeded. However, the large majority of organizations in Perú stems from the commercial sector and therefore an analysis including only this type of organizations is
relatively representative. The second part of this discussion will scrutinize sophistication of use as it is applied by individual users and the last section is dedicated to
electronic commerce, which is an integral constituent in the analysis of sophistication
of use of a given country.
Based on the data presented below, the sophistication of use of Perú’s Internet
user community is at the present time at level 2 (conventional ) as indicated in table
5.16.
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Applying the GDI Analytic Framework
Level 0
Sophistication of Use
None: The Internet is not used, except by a very small fraction of the
population that logs into foreign services.
Level 1
Minimal : The user community struggles to employ the Internet in conventional, mainstream applications.
Level 2
Conventional : The user community changes established
practices somewhat in response to or in order to accommodate the technology, but few established processes are
changed dramatically. The Internet is used as a substitute
or straightforward enhancement for an existing process (e.g.
e-mail vs. post). This is the first level at which we can say
that the Internet has “taken hold” in a country.
Level 3
Transforming: The use of the Internet by certain segments of users results in
new applications, or significant changes in existing processes and practices,
although these innovations may not necessarily stretch the boundaries of
the technology’s capabilities.
Level 4
Innovating: Segments of the user community are discriminating and highly
demanding. These segments are regularly applying, or seeking to apply,
the Internet in innovative ways that push the capabilities of the technology. They play a significant role in driving the state-of-the-art and have a
mutually beneficial and synergistic relationship with developers.
Table 5.16: Sophistication of use rating for Perú
5.6.1
Sophistication of Use among Organizations
To the knowledge of the author, there has been only one survey that tried to assess
how the Internet is utilized by Peruvian companies with Internet access. This survey
was conducted by Apoyo Consultores S.A. This organization is a commercial market
research institute and their surveys are not freely accessible and thus, the results are
not available for this study.
However, despite the unattainability of the above mentioned survey results, the
author tried to establish some measures as to the sophistication of use of Peruvian
companies by conducting an independent, preliminary assessment. In order to somewhat accurately represent the whole cluster of Peruvian commercial organizations,
the author identified the following ten segments that constitute the main pillars of
the Peruvian economy: Mining, Telecommunications, Service, Fishery, Retail, Industrial, Finance, Insurance, Agriculture, and Energy. From each segment, the web sites
of five organizations were examined as to their level of sophistication of use. All or-
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ganizations are publicly traded corporations and other than having to be in the right
segment they were picked by random. Each web site was assigned one of five possible
levels as defined by the analytic framework. To assign the levels, the author used the
web site specific guidelines as depicted in table 5.17.
Level 0
None: The organization is not present on the Internet
Level 1
Minimalist: The organization has a web site, but the site offers minimal
content and no interactivity
Level 2
Conventional : The organization uses its web site primarily for information
dissemination. Minimal feedback or guestbook functions may be present.
Level 3
Transforming: At this level customers or suppliers may conduct transactions with the organization via the web site, or may interactively check on
the status of a transaction, etc.
Level 4
Innovating: Level 4 organizations are pioneering new and distinctive applications, pushing the boundaries of existing Web functions.
Table 5.17: Sophistication of use of corporate web sites
Source: [Wol02, p.98]
Since the sample pool consists of companies whose stock is publicly traded, it
is very likely that it contains a disproportionate number of Internet-savvy organizations. As a result, the data that was ascertained suggests probably an upper bound
on sophistication of use among Peruvian Internet-using organizations as a whole.
The results of the survey are displayed in figure 5.10. For a detailed overview of the
individual results of each organization included in the study refer to table B.1.
The results show that 26% of the sampled organizations had either invalid or
nonexistent URLs (Uniform Resource Locator). Of the remainder, 68% of the organizations had web sites with rich informational content, such as detailed product
information, history of the company, description of former projects, contact information, etc. However, only 26% offered true interactive capabilities to its customers.
Most of these organizations come from the telecommunications, the retail, or the
finance sector. Typically, the interactive web sites of the telecommunications and retail companies allowed their customers to purchase products online, while the finance
companies offered some sort of online-banking services. There was no level 4 web site
among the sampled assortment.
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Figure 5.10: Sophistication of use rating of web sites of Peruvian organizations
5.6.2
Sophistication of Use among Individuals
While there was only one survey accessible to the author that provides information
about the using habits of all Peruvian Internet users, there are several studies that
are concerned with the practices of users of cabinas públicas. For the purpose of this
study, the latter will be considered representative for Perú’s entire user base because,
as mentioned in chapter 5.1, almost 90% of all users exclusively use cabinas públicas
for accessing the Internet. In addition, as discussed in the following, the one survey
that reflects the whole spectrum of Peruvian users acknowledges this assumption.
When comparing several surveys of Internet habits of cabina users, a certain
pattern of Internet habits becomes apparent. In all studies examined by the author56 , users stated that their most frequent activity in cabinas públicas is the use
of electronic mail (on average ca. 50%). Following are the search for information and
chatting.
Another interesting study regarding the habits of Peruvian Internet users was
conducted by Soong in April 200157 . Soong identified in his study five main areas of
interest and then compared the frequency of use of these activities between cabina
pública users and users that access the Internet by other means then cabinas públicas,
therefore covering the whole spectrum of Peruvian Internet users. As depicted in table
5.18, the study revealed slight differences between the habits of the two groups of
56
The examined studies are: [Fer01, p.9], [Pro01, p.24], and [OSI02f, p.12]
57
See [Soo01, p.2]
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Internet users. While 34.5% of cabina users frequently visit chat rooms, only 17.5%
of non-cabina users do so. However, the latter go considerably more frequently to
news sources on the Internet and also use e-mail slightly more often. The reason for
this is most likely the different social background of the members of the two groups.
While the non-cabina users usually come from relatively high social classes and have
a higher than average level of income and of educational training, people of all social
classes use the cabinas públicas. Despite the slight differences between the groups,
Soong’s study confirms that the general trends in Peruvian user habits that were
shown by the three other studies of cabina users are also valid for the rest of the user
community.
Activity
Cabina user
No cabina user
Use e-mail
48.9%
58.9%
Visit a chat room
34.5%
17.5%
Make long-distance voice-over-IP calls
18.8%
11.6%
Read local news
6.4%
13.9%
Read international news
5.7%
9.8%
Table 5.18: Frequent Internet activities according to a study by Soong
Source: [Soo01, p.2]
5.6.3
Electronic Commerce
A very important indicator for the level of sophistication of use of the Internet in a
given country is the degree to which electronic commerce has become an accepted
and utilized mean of conducting business transactions.
According to a study released by the “Área de libre comercio de las Americas”
(ALCA)58 in April 2001, only ca. 12% of all Peruvian Internet users have ever made a
purchase online [Sot01, p.30]. In addition, according to OSIPTEL, Perú, the country
with the fifth largest Internet user community in Latin America, had only a 0.9%
share59 of the total Latin American e-commerce market in 2001 [OSI02f, p.14]. These
numbers seem to confirm Bernstein’s hypothesis who stated in December 2000 that
Peruvian e-commerce is just barely in its infancy [Ber00e, p.1].
In general, the most basic barrier to e-commerce is the lack of potential customers due to low Internet penetration. However, as established many times during
58
Free Trade Area Americas
59
$11.5 million in total revenue
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the course of this study, Internet penetration in Perú is higher than average in Latin
America. According to Soto Platero et al., the reasons for the relatively low penetration of e-commerce in the Peruvian market are that
the level of knowledge, awareness, and dissemination of electronic commerce and information technology is unacceptably low. It is widely felt
as well that one of the obstacles to the development of electronic commerce in Perú is the lack of high-speed digital systems at accessible prices
[Sot01, p.28].
The first issue raised by Soto Platero et al. is a serious impediment to the proliferation of e-commerce. Due to Perú’s highly centralistic nature, the lack of awareness
of e-commerce is especially distinctive in the provinces outside the big metropolitan
areas, where access to technology is traditionally scarce. But even in the urban areas
exists a distrust towards e-commerce. According to a study by Jupiter Communications from February 2000, Perú’s poor product fulfillment structure is the main
reason for the low degree of trust that Internet users have in e-commerce [Jup00,
p.1]. Due to poor logistical infrastructure and the high degree of corruption of the
workforce, the delivery performance of the Peruvian postal service is not sufficient
so that many Internet users are not willing to spend money online on an item that
they might never receive. The second issue raised by Soto Platero et al. is regarding
Perú’s alleged lack of sufficient access to high-bandwidth systems. While this is generally true in the rural areas of Perú, in the urban areas, where more than 70% of
the total population resides, the access to public Internet access increased dramatically during the last decade. As already documented in chapter 3.3.3, most of the
Peruvian Internet users use solely cabinas públicas to access the Internet and almost
all cabinas use dedicated lines. The speed of connection varies between 64 Kbps
and 1024 Kbps, which should be sufficient for most Business to Consumer (B2C)
e-commerce activities, such as buying items online, participating in online auctions,
etc. Thus, while the telecommunications infrastructure of Perú and the Internet connection rate of private households certainly need improvement, the relatively high
degree of availability of public Internet access through dedicated lines in urban Perú
provides many users with the opportunity to engage in e-commerce and is therefore
not a major obstacle to the proliferation of e-commerce in Perú as stated by Soto
Platero et al.
Besides a sufficient amount of Internet users, the adequate accessibility of the
Internet, and an ample amount of bandwidth, a rather crucial factor for the development of e-commerce is the existence of forms of payment that make it possible to
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carry out transactions online [Sot01, p.30]. As a 2001 study by the Boston Consulting
Group shows, 57% of all online purchases in Latin America are paid by credit card,
9% by debit cards, and the rest by other means such as banking deposits, checks,
cash, etc. [OSI02f, p.16]. However, only 2% of Peruvians own a credit card, which is
due to the stringent requirements for obtaining credit cards through any of the commercial banks, making them inaccessible to the great majority of Peruvians. Enrique
Zevallos, the president of an Peruvian ISP, states that
the big issue for us is that people using the Internet in the cabinas do
not go to the bank. They do not have a credit card. They are people that
make this a cash economy [Sme00b, p.2].
Because of the lack of credit cards, businesses engaged in e-commerce have to
come up with innovative concepts to substitute for the deficiency of credit cards.
An example for such an innovative concept is the E-Lysium system. This project
was initiated by El Comercio, the biggest Peruvian newspaper in conjunction with
E-Lysium, a Miami based software firm and Q-Net, a Peruvian ISP. Cabinas that
have the E-Lysium system in place assign a personal identification number (PIN) to
their users, which gives them access to an account. Users can load this account up
with cash, paid over the counter to cabina owners. Provided that the account has
been filled with sufficient funds, the PIN60 can be used to purchase items online, or
to take on any other online activity that normally requires a credit card [Sme00a,
p.8 et seq.]. Another example for an innovative concept is the “ewong” system. E.
Wong, the largest supermarket chain in Perú, has set up a web site that allows its
customers to order groceries online and then pay for them on delivery [USD99b,
p.8]. Although, several more of such innovative substitute payment systems have
been deployed by e-commerce businesses, ultimately, the lack of credit cards can not
be totally compensated. Therefore, a rise in the use of credit cards would be a very
good basis for a deeper permeation of e-commerce in the Peruvian Internet market.
Another very crucial element for the fostering of e-commerce in a given country
is the existence of a supportive and reliable regulatory environment. An important
step that was undertaken in Perú in this direction was the creation of the “Instituto
Peruano de Comercio Electronico” (IPCE)61 in 1999. Among IPCE’s main functions
are the following [Far01, p.42 et seq.]:
• To play a leading role in the suggestions for legal and regulatory adaptation
related to e-commerce
60
The E-Lysium PIN has the same number of digits than a regular credit card
61
Peruvian institute for electronic commerce
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• To be a counterpart in national and international e-commerce projects
• To spread electronic marketing strategies
• To promote Internet-based transactions
• To spread knowledge about e-commerce systems
• To generate confidence in and awareness of e-commerce systems
• To promote the use of Spanish in electronic commerce
In 2000, the following three laws were passed into law that had a positive impact
on the e-commerce environment in Perú [Gal02, p.12 et seqq.]:
1. Law 27291 : Law permitting electronic contracts
• Allows the use of electronic media to communicate expressions of intent
• Internet contracts are accepted
• Consumers may use electronic records as evidence in the litigation and
judges may not refuse to admit such records
2. Law 27309 : Law on computer-related crimes
• This law added new articles to the criminal code and includes a chapter
on computer-related crimes
• Under this law hackers, sniffers, crackers, and virus authors are held criminally liable for their actions
3. Law 27269 : Law on digital signatures and certificates
• This law created a legal entity that issues, cancels, verifies, and gathers
digital certification
The presence of the IPCE had a positive influence on the e-commerce environment in Perú, which led just within one year of its existence to the issuing of the
above stated laws. These laws provide a legal basis for e-commerce, making it more
attractive for potential investors to engage in e-commerce activities. However, since
the issuing of the laws, there have been several reports of cases where there was a
lack of enforcement of these laws [Inf02, p.3].
Although Perú’s overall e-commerce market is still relatively small, it is rapidly
growing in size. From a total revenue of $5 million in 1999, the market more than
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doubled within two years and recorded a total volume of $11.5 million in 2001. For
2005, several credible sources62 project that the Peruvian e-commerce market will
increase to a total revenue of $164 million [Lae00b, p.2].
In summary, the organizational use of the Internet in Perú is predominantly
geared towards information dissemination and only few established processes have
been changed considerably. However, there are some examples of innovative organizations, such as E. Wong, which use the capabilities of the Internet to enhance or
add to existing processes (e.g. expand traditional channels of distribution). So far,
these innovative occurrences are relatively scarce, so that a transforming state (level
3) in the organizational use area has not been achieved yet. Considering the individual use of the Internet, the presented data suggests that the overwhelming majority
of individual users utilize the Internet merely as a straight-forward enhancement or
substitute for existing processes such as e-mail, search for information, chatting, or
voice-over-IP telephone calls. In the area of electronic commerce there have been
substantial improvements, such as the creation of a reliable legal framework, growth
rates of more than 50%, and the implementation of innovative processes (e.g. ELysium). However, as illustrated above, there are still significant obstacles, that so
far, prevent e-commerce in Perú from becoming a widely used form of business transaction. Therefore, even though there are indications that the degree of sophistication
of use in Perú might improve during the next years, right now Perú is rated level 2
(conventional ).
62
i.e. OSIPTEL, Businessweek, etc.
121
Chapter 6
Conclusions and Recommendations
The use and diffusion of the Internet in Perú have increased dramatically since its
beginnings in 1991. The proliferation of Internet access has been tremendous, while
at the same time the costs of services have decreased and the variety and quality of
services offered have increased. Moreover, the structure of the telecommunications
market has fundamentally changed, from a state-controlled monopoly to a free and
competitive market with low barriers to entry and a multitude of competitors and
services. Figures 6.1 and 6.2 display the results of this study, which are described
in detail in chapter 5, in the form of Kiviat diagrams. The first one shows only the
current state of Perú’s Internet diffusion, while the latter shows its development from
1994 until today.
In general, the Internet in Perú has been diffused in four distinct phases. The
first phase lasted from the mid 1980s until 1991. During this time, a multitude of
projects were started that all tried to establish some sort of networking capabilities
in Perú. Most of these projects were initiated by different entities and developed
independently from each other; however, none of them proved successful for various reasons. The emergence of RCP in 1991 symbolizes the beginning of the second
phase, which lasted until 1994. RCP established the first Internet connections in
Perú and systematically increased the scope of its operations. New members joined
RCP’s community on a frequent basis and within a couple of years, several hundred
organizations were associated with RCP. However, Internet users still came mostly
from the academic or other specialized sectors, were exclusively located in Lima or
a few other urban centers (e.g Arequipa, Cuzco), and the Internet infrastructure
was relatively austere. On the political side, the Fujimori government took over in
1991 and set a decade of drastic political, economic, and social reforms in motion.
The new government passed laws that prepared the telecommunications market for
the liberalization. Phase 3 had a duration of 4 years and lasted until 1998. During
122
Conclusions and Recommendations
Figure 6.1: Kiviat diagram of the Internet diffusion in Perú (2002-2003)
this time, the formerly state-owned monopolists were privatized and sold to private
investors. Furthermore, competition increased dramatically in the ISP market and
RCP, who was the de facto monopolist in the beginning of phase 3 (due to the lack
of competition), now had to share the market with roughly 50 competitors. However,
while the privatization of the market was completed, liberalization was not because
the incumbent operator (TdP) was granted a period of exclusivity in many segments
of the market, which eventually ran out in 1998. Phase 3 also marks the beginning
of the remarkable rise of the cabinas públicas. First implemented in 1995, cabinas
made it for the first time possible for regular Peruvians from the middle and lower
income sectors to access the Internet and thus, the model started to proliferate in
the urban centers, especially in Lima. Mainly due to the success of the cabinas, this
phase experienced growth rates in the user base of the Internet of up to several
hundred percent yearly. Phase 4 started in 1998 and continues until today. The commencement of this phase is denoted by the completion of the liberalization of the
telecommunications market in August 1998. TdP’s period of exclusivity ended and a
multitude of competitors entered the market, starting to deploy their own equipment
and infrastructure and extending the palette of services that were offered to the cus123
Conclusions and Recommendations
Figure 6.2: Kiviat diagram of the Internet diffusion in Perú (1994 to 2002-2003)
tomers. The proliferation of cabinas throughout the whole country continued and in
1998, the first cabinas were installed in rural areas. Based on this development is the
continued increase of the Internet user base, which currently includes approximately
10% of the entire population. Thus, Perú is one of the leading countries in Latin
America regarding users per capita, although its telecommunications infrastructure
and economic situation are only mediocre in comparison with other countries in the
region.
When examining Perú’s Internet development one finds that the notion of the
emergence and the rapid proliferation of the cabinas públicas stands out most and
is worldwide unprecedented. It probably is the most integral part of the Internet
diffusion in Perú. Another noteworthy milestone is the radical and rapid remodelling
of the structure of the telecommunications market which was finalized in less then
one decade. Perú leaped from a socialistic structure with state-owned monopolies to
one of the most liberal and unrestrictive telecommunications markets in the world
with a sound legal framework that guarantees the protection of private investment
and the free flow of market forces.
On the other hand, the most noticeable shortcoming of Perú’s Internet develop124
Conclusions and Recommendations
ment is the lack of an overall IT-strategy on part of the government or any other
organization involved in the process. The government focusses most of its resources
on the implementation of its Plan Huascarán and neglects the overall development
of the sector. There are various ongoing efforts and projects initiated by different
organizations (e.g. FITEL, RCP, OAS, etc.) that all try to enhance the Internet situation in Perú and to spread the technology (especially to the rural areas). However,
all of these projects are executed independently from each other and are not part of
a homogeneous, overall concept. It would be extremely beneficial for the Internet development in Perú if these efforts and resources could be centrally directed towards
the achievement of objectives of an overall strategic development plan. The main
objective of this plan should be to further broaden the scope of the Internet in Perú
by creating equal access opportunities and equal levels of technological development
throughout the whole country. If necessary, the government should use subsidies or
similar methods more frequently because they seem to be an adequate means of
guiding private investments into the desired direction.
Another significant deficiency of Perú’s current Internet situation is the lack of
an adequate enforcement of existing laws. Chapter 4 elaborates on this issue and
describes the legal framework that was established during the last decade. Its intention is to protect private investments and to foster free competition in order to
facilitate the growth of the sector. While Perú’s legal framework is one of the most
progressive in whole Latin America and worldwide, its lack of enforcement creates
distrust among investors and slows down the further development of the market.
In general, Perú’s Internet development shows some very unique and remarkable
features (e.g. cabinas públicas, RCP, high user base by at the same time low subscription rates) that shaped Perú’s Internet diffusion. The example of Perú has shown
that innovative efforts and unusual methods can, even in a for the expansion of the
Internet unfavorable environment, ultimately lead to success and help to facilitate
Internet development. While there are certainly areas that need further improvement (as described above), it might be beneficial to examine if the positive features
of Perú’s Internet development can be applied in similar ways in other developing
countries.
125
Appendices
126
Appendix A
Continuative Issues
A.1
Internet Domain Survey Background
The following text provides background on the Internet Domain Survey and describes
in a detailed way how the data was collected and compiled. It should be noted that
this section in its entirety is a citation [Int02, p.1 et seqq.].
A.1.1
The Old Survey
The Internet Domain Survey has been taken twice a year since 1987. The original
survey methodology counted hosts by walking the domain name tree and doing zone
transfers of domain data in order to discover hosts and further subdomains. It is described more completely in RFC1296. The old survey counted the number of domain
names that had IP addresses assigned to them.
However, by July 1997 the Domain Survey was not able to count a significant
portion of the hosts in the domain system, due to some organizations restricting
download access to their domain data. The blocking of downloads (or zone transfers
as they are called) had increased to the point where in the July 1997 survey we could
only download 75
A.1.2
The New Survey
In January 1998, we ran the first ”new” Internet Domain Survey. The new domain
survey is the reverse of the old survey. It counts the number of IP addresses that have
been assigned a name. This distinction is subtle but it does mean the new survey
is counting a different ”thing” than the old survey. Because of this, comparing data
from the old and new surveys will not necessarily be a good thing to do in all cases.
127
Continuative Issues
Internet Domain Survey Background
The new survey works by querying the domain system for the name assigned to
every possible IP address. However, this would take too long if we had to send a query
for each of the potential 4.3 billion IP addresses that can exist. Instead, we start with
a list of all network numbers that have been delegated within the IN-ADDR.ARPA
domain. The IN-ADDR.ARPA domain is a special part of the domain name space
used to convert IP addresses into names.
For each IN-ADDR.ARPA network number delegation, we query for further subdelegations at each network octet boundary below that point. This process takes
about two days and when it ends we have a list of all 3-octet network number delegations that exist and the names of the authoritative domain servers that handle
those queries. This process reduces the number of queries we need to do from 4.3
billion to the number of possible hosts per delegation (254) times the number of
delegations found. In the January 1998 survey, there were 879,212 delegations, or
just 223,319,848 possible hosts.
With the list of 3-octet delegations in hand, the next phase of the survey sends
out a common UDP-based PTR query for each possible host address between 1 and
254 for each delegation. In order to prevent flooding any particular server, network
or router with packets, the query order is pseudo-randomized to spread the queries
evenly across the Internet. For example, a domain server that handles a single 3-octet
IN-ADDR.ARPA delegation would only see one or two queries per hour. Depending
on the time of day, we transmit between 600 and 1200 queries per second. The queries
are streamed out asynchronously and we handle replies as they return. This phase
takes about 8 days to run.
A.1.3
The Results
Due to the differences in the old and new survey, it is not possible to directly compare
the host counts produced by each. However, we have tried to adjust the old domain
survey host counts in order to make some comparisons. The way we did this was by
assuming that if we missed a certain percentage of domains in the old survey, that the
final host count would be approximately that same percentage lower than the actual
value. So we took the old host counts and raised them by the proper percentage of
domains we couldn’t survey, to arrive at an ”adjusted host count”. This allows us to
have something to compare the new survey with through this transition period.
With the new survey we are now publishing five figures per top-level domain (on
our distribution by t-l-d charts). For each t- l-d, we show the total number of hosts
found (which equals the number of PTR records found), the number of duplicate
128
Continuative Issues
Internet Domain Survey Background
host names found (which usually indicate a host with many addresses), and then we
subtract the duplicate count to arrive at the final host count.
We also publish two new numbers, a count of hosts under the 2nd and 3rd level
domain names for each t-l-d. These counts will have different meanings depending
on how the particular t-l-d is organized. For example, for the .COM domain, the
number of 2nd level names equals the number of hosts in organizations using names
registered under .COM, and the number of 3rd level names is, possibly, meaningless.
However, some t-l-d’s like .UK and .AU, have a few fixed subdomains at the 2ndlevel (like .CO.UK) and so the 3rd level count shows the number of hosts within the
organizations at the 3rd level.
A.1.4
Observations
Because the new survey technique uses ordinary DNS queries, and because these
types of queries are used by many standard Internet applications, it is not acceptable
to block them. This allows us to gather all the data we need without the blocking
problems the old survey had. It also demonstrates that those who block zone transfers
of their domains in order to hide their host data have a false sense of security.
We decided not to try to verify the PTR entries we collected (by trying to look
up the name returned and verify its address matched the PTR record). One reason
is that this process would take far longer than the PTR lookup process. However,
another reason is that there are a lot of PTR entries that are wrong, even though
the host actually does exist. Cases were found where an IP address was pingable and
had a PTR entry, but a lookup on the hostname did not return an address.
In our distribution by t-l-d charts, we show an entry called ”ARPA” and one
called ”UNKNOWN”. The count for ARPA shows you the number of administrators
that tried to setup a PTR entry for a host but left off the trailing dot in their
zone files. These are hosts that probably exist, but have an invalid host name. The
UNKNOWN count shows you the number of PTR entries that did not have any valid
t-l-d name. These are sometimes typos, and other times entries for unused addresses
(for example, a domain administrator might put in the hostname ”unassigned” for
any unused address).
Note that this new survey has the same potential problems as the old survey.
Namely, that just because a hostname is assigned an IP address, or an IP address is
assigned a hostname, does not mean the host actually exists. To find out how many
hosts actually exist at a given time, we ping a 1
While comparing host counts per country code between the new survey and the
129
Continuative Issues
RCP
last old survey, we found that a very small number of countries lost a significant
number of hosts. We have not yet analyzed the data to find out exactly why this is
occurring, but it may be due to a number of reasons. We may just be having very
bad network connectivity or packet loss to certain foreign countries that interferes
with the data collection process. Another possibility is that in certain places it is
not common for providers to place entries in the IN-ADDR.ARPA tables. These
anomalies will be looked at further in future surveys as we fine tune the technique.
Another item some may notice is that our count of hostnames (or firstnames
as we call them) has interesting changes. For example, the number of hosts named
”www” has dropped between the old survey and the new survey. The reason for this
is that in the old firstname count, if a host had two names, for example nw.com
and www.nw.com that were both assigned the same IP address, the name ”nw” and
”www” would each be counted as a firstname for the same host. In the new survey,
a PTR record can only return a single official hostname for a particular IP address.
In the example above, the new survey would count either ”nw” or ”www” depending
on which name the administrator set up to be the official name. Since the ”www”
count dropped between surveys, it appears that the ”www.” prefix is used heavily
as an ”alias” for official host names.
A.2
A.2.1
RCP
RCP’s Mission
Potenciar las capacidades de los individuos y las organizaciones a través del uso
crı́tico y creativo de las tecnologı́as de información y comunicación en favor de una
sociedad de ciudadanos libres y prósperos.
A.2.2
RCP’s Philosophy
1. Las tecnologı́as de la información y comunicación resultan adecuadas cuando
son parte de sistemas donde el factor humano es mucho más relevante que la
infraestructura.
2. Las innovaciones tecnológicas generan impactos significativos cuando son parte
de dinámicas de cambio institucional. Esto supone transformaciones en la cultura de trabajo ası́ como en el diseño de los procesos organizacionales.
3. Comunicación no debe ser entendida sólo como difusión sino también como
gestión del conocimiento.
130
Continuative Issues
A.2.3
RCP
Perú’s First E-mail
The First Mail Message
>Received: from m2xenix.psg.com by Athena.MIT.EDU with SMTP
>id AA20752; Sun, 1 Dec 91 23:29:09 EST
>Received: by m2xenix.psg.com #22.1)
>id ¡[email protected]¿; Sun, 1 Dec 91 20:09 PST
>Received: by rcp.pe (5.61/1.35-huracan)
>id AA00258; Sun, 1 Dec 91 19:28:40 -0500
>From:[email protected] (Jose Soriano)
>—–RFC822 headers—->
>>Este es el primer mensaje que emana de la recien-creada
>Red Cientifica Peruana.
>
>This is the first message originating from the newly-created
>Peruvian Scientific Network
>
>C’est le premier message de la nouveau resseau scientifique
>peruvian.
>
>Jose Soriano (Perú)
>Carlos Saldarriaga (Perú)
>Nicolas Ramirez (Perú)
>Max Quiros (Perú)
>Martin Naranjo (Perú)
>Kim Morla (Perú)
>Yenny Melgar (Perú)
>Theodore Hope (USA)
>Guillermo Garro (Perú)
>Randy Bush (USA)
>y el resto del equipo de la RCP.
>
>Lima, domingo, 1-diciembre-1991 19:30
———————— fin de mensaje ———————
[Sor96b, p.3]
131
Appendix B
Additional Figures and Tables
B.1
B.1.1
Figures
Maps
132
Additional Figures and Tables
Figures
Figure B.1: Topographic map of Perú
133
Additional Figures and Tables
B.1.2
Figures
Cabinas Públicas
Figure B.2: Outside view of a cabina pública in a low class neighborhood in Lima
Figure B.3: Inside view of a cabina pública in Villa El Salvador, department of Huanuco
134
Additional Figures and Tables
B.1.3
Figures
Microwave Transmitters
Figure B.4: Microwave tower for wireless data transmission
Figure B.5: Microwave transmitter installed on the roof of a high office building in Lima
135
Additional Figures and Tables
B.2
B.2.1
Tables
Tables
Assessment of Sophistication of Use of Peruvian Companies
Index
Company
Economic sector
URL
name
1
Telefonica del
level
Telecommunications
Perú
2
BellSouth Perú
Assigned
<http://www.telefonica.
3
com.pe>
Telecommunications
<http:
3
//www.bellsouth.com.pe>
3
AT&T LA
Telecommunications
<http:
3
//www.attla.com/peru/
index.cgi?pagename=pe_
home&language=spanish>
4
Nextel Perú
Telecommunications
<http://www.http:
3
//www.nextel.com.pe>
5
Comsat Perú
Telecommunications
<http:
2
//www.comsat.com.pe>
6
Southern Perú
Mining
<http:
Copper Corp.
7
Buenaventura
2
//www.southernperu.com>
Mining
<http:
2
//www.buenaventura.com>
8
Perubar S.A.
Mining
N/A
0
9
Minsur
Mining
<http:
1
//www.minsur.com.pe>
10
Volcan
Mining
<http:
Compañia
2
//www.volcan.com.pe>
Mineria
11
Aero
Service
<http://www.
Continente
12
Aguaytia
3
aerocontinente.com>
Service
<http:
2
//www.aguaytia.com>
13
Lima Gas
Service
N/A
0
14
Perú Holding
Service
N/A
0
Service
<http://www.gmd.com.pe>
2
de Turismo
15
Graña y
Montero
136
Additional Figures and Tables
Index
Company
Tables
Economic sector
URL
name
16
Ripley
Assigned
level
Retail
<http:
1
//www.ripley.com.pe>
17
E.Wong
Retail
<http://ewong.com>
3
18
Saga Falabella
Retail
<http://www.
3
sagafalabella.com.pe>
19
Casas y Cosas
Retail
N/A
0
20
Santa Isabela
Retail
N/A
0
21
Pesquera
Fishery
<http:
2
Hayduk S.A.
//www.hayduk.com.pe>
22
Grupo Sipesa
Fishery
<http://www.sipesa.com>
2
23
Austral S.A.
Fishery
<http:
2
//www.austral-peru.com>
24
Pesquera
Fishery
N/A
0
Fishery
<http:
2
Diamante
25
Corporación
Pesquera Inca
26
Backus &
//www.copeinca.com.pe>
Industrial
<http:
Johnston
27
Metalurgica
2
//www.backus.com.pe>
Industrial
<http://www.mepsa.com>
2
Industrial
<http://www.
2
Peruana
28
Cementos
Lima
29
Corporacion
cementoslima.com.pe>
Industrial
<http://www.
Ceramica S.A.
2
celima-trebol.com>
30
Yura S.A.
Industrial
N/A
0
31
Banco Wiese
Finance
<http://www.bws.com.pe>
3
32
Banco de
Finance
<http://www.viabcp.com>
3
Finance
http:
1
Crédito del
Perú
33
Volvo Finance
Perú
//www.volvo.com.pe/
Financiera/index.asp>
34
América
Finance
<http://www.
Leasing S.A.
americaleasing.com>
137
2
Additional Figures and Tables
Index
Company
Tables
Economic sector
URL
name
35
Banco
Assigned
level
Finance
<http:
Internacional
3
//www.interbank.com.pe>
de Perú
36
Pacifico
Insurance
<http://www.
Seguros
37
Generali Perú
2
pacificoseguros.com>
Insurance
<http://www.
2
generali-peru.com.pe>
38
Wiese Aetna
Insurance
<http:
3
//www.wieseaetna.com>
39
Royal &
Insurance
<http:
Sunalliance
2
//www.royalsunalliance.
com.pe>
40
Rimac
Insurance
<http:
Internacional
3
//www.rimac.com.pe>
41
Bertin-Montori
Agriculture
N/A
0
42
Agro Industrial
Agriculture
N/A
0
Agriculture
N/A
0
Agriculture
N/A
0
Agriculture
N/A
0
Energy
<http:
2
Paramonga
S.A.A.
43
Empresa
Azucarera el
Ingenio
44
Agroindustrias
San Jacinto
45
Empresa
Agroindustrial
Casa Grande
46
Edelnor
//www.edelnor.com.pe>
47
Duke Energy
Energy
<http:
International
2
//www.duke-energy.com.
pe/IN/index.asp>
48
Southern Cone
Energy
N/A
0
Energy
<http:
2
Power Perú
49
Luz del Sur
//www.luzdelsur.com.pe>
138
Additional Figures and Tables
Index
Company
Tables
Economic sector
URL
name
50
Petróleos del
Assigned
level
Energy
<http:
Perú
//www.petroperu.com>
Table B.1: Assessment of sophistication of use of Peruvian
companies
139
2
Appendix C
Abbreviations & Acronyms
ADSL Asymmetric Digital Subscriber Line
ALCA Area de Libre Comercio de las Americas
APC Association for Progressive Communications
ARPA Advanced Research Project Agency
ASO American States Organization
ATM Asynchronous Transfer Mode
AT&T American Telephone and Telegraph company
ATTLA AT&T Latin America
B2C Business to Consumer
BITNET Because It’s Time Network
Bps Bits per second
BW Bandwidth
CDPD Cellular Digital Packet Data
CEPRI Comités Especiales de Privatización
CISAC Center for International Security and Cooperation, Stanford University
CITE Centers for Technical Innovation
CONITE Comisión Nacional de Inversiones y Tecnologı́as Extranjeras
CPI Centro Proveedor de Información
CPT Compañı́a Peruana de Teléfonos
140
Abbreviations & Acronyms
CTT Comisión Técnica de Telecomunicaciones
DESCO Centro de Estudio y Promoción del Desarrollo
DSL Digital Subscriber Line
ENTEL Empresa Nacional de Telecomunicaciones
ESAN Escuela de Administración de Negocios para Graduados
EuNET European Unix Network
FITEL Fondo de Inversión en Telecomunicaciones
FNC Federal Networking Council
FTP File Transfer Protocol
Gbps Gigabits per second
GDI Global Diffusion of the Internet (Project)
GDP Gross Domestic Product
GUI Graphic User Interface
IBM International Business Machine inc.
IDB International Development Bank
ILD International Long Distance
IMP Interface Message Processors
INEI Instituto Nacional de Estadı́stica e Informática
INICTEL Insituto Nacional de Investigación y Capacitación de Telecomunicaciones
IP Internet Protocol
IPCE Instituto Peruano de Comercio Electronico
ISP Internet Service Provider
IT Information Technology
ITU The International Telecommunication Union
IXP Internet Exchange Point
JVNCnet John von Neuman Computer Center Network
Kbps Kilobits per second
141
Abbreviations & Acronyms
km Kilometer
LAN Local Area Network
LDC Less Developed Countries
LMDS Local Multipoint Distribution Services
LSN Large Scale Networking
MB Megabyte
Mbps Megabits per second
MHz Megahertz
MTC Ministerio de Transportes y Comunicaciones
N/A Not applicable
NAP Network Access Point
NIKT Neue Informations- und Kommunikationstechnologien
NLD National Long Distance
NGO Non-Government Organization
NNTP Network News Transfer Protocol
NPV Net Present Value
NSF National Science Foundation
NSRC Network Startup Resource Center
OC Optical Carrier
OSIPTEL Organismo Supervisior de Inversión Privada en Telecomunicaciones
PAHO Pan American Health Organization
PERNET Academic and Scientific Network Perú
PIN Personal Identification Number
POP Point of Presence
PSTN Public Switched Telephone Network
RCP Red Cientı́fica Peruana
REDALC Red de Fondos Ambientales de Latinoamérica y el Caribe
142
Abbreviations & Acronyms
R&D Research and development
RedHUCyT Red Hemisferica Interuniversitaria de Información Cientifica y Tecnologica
ROI Return on Investment
SCPC Simple channel per carrier
SDNP Sustainable Development Networking Program
SLIP Serial Line Internet Protocol
SMTP Simple Mail Transfer Protocol
SRI Stanford Research Institute
TCP Transmission Control Protocol
TCP/IP Transmission Control Protocol/Internet Protocol
TdP Telefónica del Perú S.A.
TIM Telecom Italia Movile
TSI Telefónica Servicios Internet
UCLA University of California at Los Angeles
UCSB University of California at Santa Barbara
UNDP United Nations Development Program
UNESCO United Nations Educational Scientific and Cultural Organization
UNI Universidad Nacional de Ingenierı́a
UNI-CC Centro de Cómputo de Universidad Nacional de Ingenierı́a
URL Uniform Resource Locator
UUCP Unix to Unix Copy Protocol
WTO World Trade Organization
143
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Eidesstattliche Erklärung
Ich erkläre hiermit an Eides statt, dass ich die vorstehende Diplomarbeit selbstständig
angefertigt und die benutzten Hilfsmittel sowie die befragten Personen und Institutionen
vollständig angegeben habe.
Braunschweig, September 12, 2003
——————————————(Unterschrift)
171