Colombia at the forefront of regional digital development

Colombia has an extraordinary opportunity in the years to come to be at the forefront in Latin America in the field of digitization. The dwindling of factors that allowed rapid growth, with rates above 6% at the beginning of the 21st century, and the modest 1.8% growth in 2017, together with the international drop in oil prices, are pushing Colombia to redefine its productive structure toward higher value-added schemes, in which the appropriation and use of digital technologies by all—regardless of their place of residence and socio-economic status—play a pivotal role.

Taking steps to modernize the guiding framework of the ICT sector in the nation will have a positive impact, because it will help increase productivity and economic growth. A 1% increase in digitization would result in a 0.32% GDP growth and a 0.26% increase in labor productivity. Based on CAF estimates, the cumulative impact of a 41% increase in access to broadband internet in Colombia by 2020 would result in a USD 17,880-million growth for the GDP (equivalent to 2% of the GDP) and nearly 500,000 additional jobs (1.9% of the labor force). Thus, placing Colombia’s advancement in the field of digitization at the front and center of the government’s political agenda has been a success and an example for the rest of the region.

It is important to make headway in building a new sectoral framework adapted to the reality and challenges of a convergent ecosystem, one that enables governments to maximize the social and economic benefit derived from increased access to ICTs, while encouraging investments needed to close the digital divide and build connectivity infrastructure to support the productive transformation of the fourth industrial revolution.

For these measures to be successful, policies for the assignment of radio frequencies must focus on maximizing social well-being. Radio frequencies are a key resource for the provision of services, and their availability in proper conditions plays a pivotal role for the benefits generated by ICTs to be fully leveraged. Thus, striking a balance between the bidding price and conditions to be met by providers—such as coverage obligations—is consistent with international best practices. Countries with greater LTE deployment (United Kingdom, Sweden, the Netherlands and Portugal) are those where regulators found this balance, where both aspects were relatively expensive, the expansion of LTE coverage was slow, and in many cases, is still lagging (Italy or France)[3]. Another central issue is the duration of licenses for the use of radio frequencies, which is a key factor for decisions and commitments to investment in the industry, because it defines their ROI outlook. In the current scenario, characterized by the need for increasingly higher investments, Colombia needs to ensure licenses with longer duration. Colombia (10 years) currently ranks second, after Paraguay (5 years), in the list of countries in the region with the shortest duration of licenses, far from successful examples such as Chile, which offers 30-year licenses^[4].

In the current convergent scenario, consistent with the best experiences worldwide in managing universal access funds, and in which Colombia differs from the region as it currently allocates different amounts for the technology or service provided, the establishment of a single, technologically neutral fund to be allocated to the telecommunications sector is very positive, built as a project coordinating entity that directs investments along strategic guidelines to effectively address access and provision of this universal service. Additionally, we must acknowledge the laudable goal of ensuring funds for financing public access TV and strengthening of local content.

Connecting all Colombians, closing all digital divides related to socio-economic status, age, gender, or geographic location, is an economic, but fundamentally ethical imperative goal. All citizens should be able to access the benefits of the internet, and this goal is attained through the promotion of investments to ensure universal access. Expanding the foundations of public-private cooperation based on partnership projects, overcoming affordability barriers through subsidies of sustainable projects or the introduction of mechanisms for coverage obligations as a way of payment for the use of radio frequencies are appropriate policies to maximize the positive impacts of digitization on the economy and the population. Measures such as those proposed in the international scenario, as in the case of Chile, led to auction processes which established requirements such as investments, coverage goals and job plans, among others, which allowed the nation to position itself as regional leader in 4G deployment, giving rise to benefits that generated savings of up to USD 250 million to the Chilean State. The way forward should be placing investment mechanisms and the maximization of social well-being above tax revenue, as in the case of governments such as Hong Kong with 5G, which is considering not charging for the use of the spectrum, in order to reduce investment costs and accelerate deployment.

Updating the guiding framework for the sector will be critical to the role that Colombia will play in the regional and global digital ecosystem and for the well-being of all Colombians. It is an urgent challenge, as taking a leap in efficiency and productivity is the way forward to sustain accelerated growth to build a nation with more and better opportunities for all. Otherwise, as McKinsey suggests for the region, economic growth in the next 15 years could be 50% slower than in the preceding 15 years.