CAF supports ASEP and AIG for greater digital inclusion in Panama

Panama has seen significant growth in the number of mobile data service subscribers. The number of subscribers has reached 6.1 million mobile lines, which means a penetration of 142.8% by 2020. Similarly, the total increase in mobile lines between 2017 and 2020 is 15.1%.

Upholding this trend means improving affordability of mobile data plans and favoring the migration to high-speed 4G and 5G networks, as well as expanding the coverage of mobile internet service to the uncovered population.

Therefore, in 2021, CAF—development bank of Latin America—and the National Public Service Authority (ASEP) in coordination with the Ministry of Economy and Finance (MEF) commissioned BlueNote Management Consulting to update the methodology used to calculate the value of the amount paid by mobile service companies for the use of spectrum in the AWS band (1700–2100 MHZ) for use of the mobile cellular services in Panama, along with a recommendation for the design of a roadmap towards the deployment of 5G technology in the nation. To reach these goals, technical aspects related to the theory of spectrum valuation and the local situation, local and international precedents were considered.

The methodology presented by BN was considered appropriate and was taken as a reference for the calculation and valuation by ASEP with the approval of the MEF and the Cabinet Council to determine the price of AWS for mobile operators.

As a result, the Cabinet Council of Panama approved the allocation of an additional spectrum for the AWS band, as well as its cost for mobile phone concessionaires, with the resulting funds to be used to close the digital divide and to have more Panamanians connect to the internet. The Council of Ministers approved draft Cabinet Resolution 41-22, which authorizes ASEP to apply the recommended methodology to set the price to be paid by mobile telephony concessionaires for the right to use the AWS band. This is an additional allocation of the AWS band with 120 MHz free, with the price to be set at B/.1,214,287 per MHz, which represents a 64% reduction in the current cost per MHz , which will help expand and improve mobile services nationwide. The measure in Panama is one of the most significant reductions in the entire region, where the most recent case is that of Colombia, which cut the price of the 1900 MHz band by 20 percent. 

In addition, CAF—development bank of Latin America—and the National Authority for Government Innovation (AIG), with non-reimbursable technical assistance funds, conducted the feasibility study of the 100% National Digital Coverage project in Panama, as part of the “regional strategy for the deployment of high-quality digital infrastructure and technologies that boost the competitiveness and productivity of economies and promote social equality by expanding internet-based services for households, governments and businesses.” This study seeks to expand connectivity coverage in Panama, with special emphasis on rural areas.

The study evaluated market conditions, feasible technical solutions, regulatory aspects and financing schemes, and based on this, it proposed a solution expected to extend the coverage of digital services to reduce the connectivity gap from the current 8.1% to less than 2%. This solution is set to include 230 new 4G base stations to cover 3150 towns with 373,000 residents, expanding LTE mobile internet coverage to 98.4 percent of the population. It also includes the expansion of the nation’s backbone fiber, by 1451 km, and the laying of distribution fiber optic by 1078 km, which allows connecting base stations at remote locations.

Together, these two studies promote digitalization and help Panama become a leader in promoting the inclusive digital transition, and not another dimension of inequality.  The digital transition can help overcome the structural challenges of Panama’s economy exacerbated by the pandemic: boosting productivity, promoting inclusion, strengthening institutions, and mitigating the climate emergency. If used well, it is an opportunity to make a leap in the quality of growth, by betting on innovation as a catalyst for change.

Similarly, with the support of CAF, ASEP and AIG are making progress in the design of a roadmap for the transition to 5G and the expansion of affordable digital coverage. Against this backdrop, state-of-the-art digital technologies are expected to radically transform the role of technologies in the Panama’s society and businesses. 5G technology will usher in a new era of internet applicable to all areas through massive connections, faster transmission speeds, lower latency and lower power consumption. Thus, the deployment of high-speed networks in Panama is critical to sustaining the growth of the digital economy.