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Despite being considered one of the leaders in Latin America in terms of telecommunications, Chile is seeing a growing need to increase investment in telecoms infrastructure to meet the demands of the expanding economy.
Through digitalization and the internet of things, traditional industries such as mining and agriculture are consuming increasingly higher levels of bandwidth, while emerging trends of smart cities and the country's plans to position itself as a global hub for astronomy projects in the north require forward thinking but also money.
Money is the key to any future plans and in this Telecom Infra Report, BNamericas looks at how the country is studying different ways of combining public and private funds to bolster Chile's telecoms infrastructure.
Current state of play
According to telecom regulator Subtel, Chile had 18mn internet connections and a penetration rate of 97.5% in 3Q17, which initially sounds good.
However, the highest speed fixed telecoms networks are concentrated in 23% of the cities that make up 80% of the population.
In a country prone to natural disasters, a robust fiber network with redundant capacity is seen as a matter of national security and there is no current law to guarantee that.
Chile's relative weakness in terms of fiber communications became exposed in 2015, when floods in the north severed two fiber optic cables leaving a stretch of more than 1,000km of the country without communications.
In September 2017 there were 3.1mn fixed line connections, 49% of which were in the Santiago metropolitan region, according to Subtel. Only 12% of fixed line connections were fiber-based. Cable modem continued to be the dominant technology, accounting for 54% of fixed line connections followed by ADSL (26%).
The average fiber coverage for members of the OECD was 21% in December 2016 compared to Chile's 6.7%.
Average speeds in Chile were 8.6Mbps, according to Akamai's 2016 internet report, three times lower than South Korea.
According to Subtel, there were some 22,000 mobile base stations covering 98% of the country.
Some 82% of broadband connections in Chile are mobile. In March, 2017, there were 9.1mn 4G connections.
Chile sees traffic of 2-2.5Tbps, of which 50% comes from homes, 25% from public services, 10% SMEs and 1% mining and astronomy.
In 20 years, traffic will increase about 32 times to 81.2Tbps. Mining and astronomy are projected to make up 4.4% of that data, according to a Subtel infrastructure report from November 2017.
Subtel has proposed a telecoms investment plan through 2022 using a US$3bn telecoms infrastructure fund.
This includes investment in last mile infrastructure, the Wi-Fi ChileGob program that now provides free broadband access to 1,223 hotspots in over 300 municipalities, and extending fiber to underserved regions and subsidizing the migration to digital TV.
The flagship connectivity project of the Chilean government's 2020 digital agenda, announced by President Michelle Bachelet in 2015, is Fibra Austral, almost 4,000km of submarine and terrestrial fiber connecting the remote south.
Fibra Austral consists of 2,829km of submarine cable running from Puerto Montt to Puerto Williams with landings at Caleta Tortel and Punta Arenas and three stretches of terrestrial fiber running 1,000km.
Chilean telco CTR, in association with Huawei Marine, won the contract for the submarine part and one of three terrestrial stretches. The companies will receive 52.7bn pesos (US$86mn) in subsidies.
The two remaining terrestrial stretches, Los Lagos and Aysén, are expected to be awarded before the end of Bachelet's administration in March.
The government also expects the high bandwidth to facilitate connectivity for research stations in Antarctica and Chile's space research and satellite industry, and there are plans to eventually launch another tender to connect Chilean Antarctica to Puerto Williams.
Satellites are increasingly being used to monitor the country's farmland, while powerful telescopes in the north require huge amounts of bandwidth.
Chile-China Trans-Pacific Fiber
Chile is also studying a project to build a 20,000-24,000km submarine cable connecting to China and costing up to US$650mn.
China's Huawei carried out a prefeasibility study last year and three potential routes are being considered: Valparaíso-Juan Fernández Islands-Easter Island-Auckland-Sydney-Shanghai; Valparaíso-Juan Fernández Islands-Easter Island-Tahiti-Shanghai; and Punta Arenas-Auckland-Shanghai.
Some observers have questioned the logic of building a cable to Asia given that the country's consumption of content from Asia is limited.
In January another submarine cable project came to light. Google plans to connect Chile to the US, with a potential Central American landing in Panama.
The Valparaíso-Los Angeles link is a bid to catch up with cloud rivals Amazon and Microsoft.
The 6,000km Chile-US route would be one the largest data highways in Latin America. Dubbed Curie in honor of scientist Marie Curie, it would become operational in 2019. Investment figures have not been disclosed.
Private sector investment
The 2014 auctioning of the 700MHz band came with social coverage obligations for the winners to make sure they invest in underserved areas.
Entel launched the 700MHz network in May 2016, and by March 2017 had met the coverage obligations, with 660 base stations deployed. The company was aiming to double the amount of base stations by the end of 2017.
In December, operator WOM said it will invest US$350mn over the next 24 months to double the number of base stations to 6,000, which comes in addition to the US$650mn original investment plan when the company kicked off operations in 2015.
Claro Chile, a unit of América Móvil, said it will invest US$300mn over the next three years in its residential and SME business, allowing the company to overtake Movistar as the second largest fixed-line provider in the residential market, behind VTR.
Claro Chile has invested US$400mn in modernizing, expanding and increasing capacity of its fixed-line network, having built a hybrid fiber coaxial (HFC) cable that has allowed it to connect 1.8mn homes.
Cable operator VTR said in April last year it continues to invest in its HFC network, upgrading existing networks from analog.
As of March all new VTR broadband plans had a minimum of 30Mbps, while 50% of VTR's client base had speeds of over 50Mbps.
Meanwhile, companies like Amazon Web Services have been looking at investing in a datacenter in Chile to compete with the likes of Google and Gtd in this booming business.
But divergent private and public sector investments, without a unifying plan, will be insufficient to meet Chile's connectivity goals over the next five years, said Subtel.
Telecoms operators association Atelmo has estimated that Chile needs US$26bn in public and private investment in telecoms infrastructure by 2025 to keep pace with growth in the digital economy.
For that reason the watchdog is considering public-private partnership models, such as that of Fibra Austral, and is finalizing a plan before the end of the current government. The state will act as the instigator in these types of projects, while the investment model may vary.
To encourage investment, Chile will leverage its net neutrality law to ensure there is competition in services but not on infrastructure.
Concession contracts will be drawn up, distributing the project financing risk between the state and private players. The loan structure will rely primarily on the project's cash flow.
Financing can be long term, with infrastructure bonds to be acquired by pension funds and insurance companies.
Infrastructure integration and sharing will be encouraged to avoid duplication of investments.
Over the next five years, Subtel is looking at tendering six 30-year digital infrastructure concessions covering the whole country, and starting with a US$10mn tender to deploy fiber in the northern city of Iquique.
The five-year plan aims for 100% fiber coverage in urban areas of over 5,000 inhabitants, 96% coverage of the general population, and 99% of companies and institutions.
The tendering of spectrum will not be exclusive to large operators. Mining, forestry and other private sector companies could potentially request spectrum for their own use, as long as they meet social coverage obligations.
"We have to stimulate investment through all possible mechanisms through public-private concession models of different types," Subtel head Rodrigo Ramírez recently told BNamericas.
"In one case, it may make sense for only private investment; in another, public. As an industry we need to agree on which projects are a priority, and what concessions model best suits them."