Pro-competitive opinion in the telecommunications market

1. Introduction 

On October 18, 2010 the Ministry of Federal Planning unveiled a national telecommunications plan called “Argentina Connected” (the “Plan”). The main goal of this Plan is to set up fiber optic services throughout all the provinces of Argentina.

This Plan has been created with the object of digital inclusion, the development of the spectrum,  complete management of the entire service, creation of the necessary infrastructure and the connectivity needed to provide the most updated communications technology to the whole country.

The idea is to eliminate the current digital gap existing between the different users of telecommunications networks and the different regions of the country. The implementation of this Plan also generates competition in a sector that is strategic for national development.

2. Importance of the telecommunications market

According to the Antitrust Commission the telecommunications market was traditionally identified with the provision of the basic telephony service. However, it acknowledged that, as a consequence of the technological development of the last twenty years, this market has changed. The agency considered that this sector is fundamental for the economic and social development of the country since it generates regional integration, national development and the international insertion of Argentina.

3. Structure of the sector and competition

The Antitrust Commission reviewed the structure of this market analyzing the different elements that comprised the networks that are used by the companies to provide its services. As a consequence of the characteristics of the industry, there is an important market related with the provision of infrastructure services between telecommunication companies.

The provision of such services requires a specific structure that combines network elements and interface infrastructure. The first has the function of managing and transmitting information and is composed of the transmitting networks and the second comprises the terminals that allow users to connect with the networks.

The networks’ assets have a very important role in telecommunications services. The operators that provide services should have the capacity to connect their users and also to connect them with other customers that use other providers’ networks. Therefore, communication between users may be performed by the development of a private network which requires new investment (e.g. new networks) or by the interconnection (both functional and physical) of the networks of different service providers. The possibility of having access to the networks of other service providers is essential for effective competition in this sector.

This possibility of access generates the development of networks and services from smaller local or regional operators, reducing entry barriers in the sector. The regional traffic centers provided in the Plan will generate the development and the exchange of local contents, allowing local operators to provide services without depending on the infrastructure of the incumbent national telecommunication companies.

4. The importance of a neutral national transportation network

Transport networks are those that connect different urban centers located within the extensive geographical regions by massive ducts. The information that is transformed into voice, image or data is transported through these ducts.

The demographic structure of Argentina has determined the existence of “routes” with more concentrated traffic information. The principal route of national information traffic is conformed by a horizontal layout that connects Buenos Aires with the principal centers of the provinces of Santa Fe, Córdoba and Mendoza. Some transporters invested in infrastructure and as a consequence there are pro-competitive effects related with this route. However, it is not the same case for the routes that connect the cities of the north and south of Argentina.

This reality in the offer of infrastructure generates a different competition environment in the different regions of Argentina. The free evolution of the market was unable to reduce these differences.

5. The significance of the Plan

According to the Antitrust Commission’s interpretation, the existence of a Governmental policy regarding the integration of the different regions of Argentina is very important and the Plan is a material step towards this goal.

The Antitrust Commission considers this Plan to be highly pro-competitive for the development of the sector in Argentina since the development of a neutral transportation network will allow for the regional proliferation of new players and a better exchange at a national level.

The Antitrust Commission considered the Plan will generate benefits to the competitive environment since it will reduce the technology gap and facilitate access to a neutral network, among other benefits. It stated that the Plan will dramatically change the competition in telecommunications services as a consequence of the public infrastructure to be built, which will also indirectly stimulate private sector investment, particularly in regional economies.