Latin America, facing decisive times

In the words of U.S. Federal Communications Chairman, Ajit Pai, the deployment of 5G telecommunication networks is comparable to a second landing on the Moon. The anticipated speed and capacity 5G will bring will result in tectonic changes for economies and society — from work and leisure, to key services including education, health, and transportation.

The impact of technology platforms on economic sectors comes as no surprise. Economies of scale in network industries demonstrate the transformative power of technological services and applications when massively applied. The more these technologies are used by additional companies, or citizens, the greater their penetration grows, reaching remote areas and users where and for whom such services have never been accessible before. The growing digitization of the economy gives rise to many questions: What is the impact of incompatibility between certain technologies and applications? What relevance will the collection and handling of personal data have in this new ecosystem? How should we manage those technological platforms that connect the supply and demand of goods or services?

The novelty, however, is that these changes are happening even faster than expected, so re-thinking policies and institutions must happen now to keep pace.

What can Latin America do to foster digital transformation and fine tune its regulatory approach? It is important to close the digital divide, which affects 45% of Latin Americans. The region should also focus on developing digital services at a pace that meets citizen demand and encourage its intensive use in the productive sector. Similarly, encouraging use of digital services among entrepreneurs and smaller companies will help ensure they do not get left behind. Nations should also promote transparency and efficiency through the use of digital and electronic tools within their government institutions.

This will depend on governments investing sufficient resources, but even more importantly, on establishing new rules and institutions that drive and promote innovation. Digital consumers and citizens – virtually synonymous today – are a step ahead. Latin America is young, urban, and digitally-native. It is this demographic that is changing everything, as described by Jean Tirole, winner of the Nobel Memorial Prize for Economics.  And that means learning about and adjusting to meet their demands.

Although there is no single recipe for success, we should promote regulatory principles that will lead to a successful digital revolution. First, as countries seek to modernize how competition is evaluated, they should consider how changes will impact affordable and quality services for more of the population.

Second, regulatory approaches should avoid arbitrary differences between technologies and services (which consumers regularly use at the same time.) Digital consumers in Latin America increasingly demand user-friendly, social, and real services. To meet this demand, private companies should be free to invest to the benefit of users, with due institutional guarantees.  To this end, convergent regulators in Argentina, Chile, and Mexico are key. Their regulation should be light-touch, leaving space to innovation, to ensure healthy competition, while decisively addressing issues relating to intellectual property rights, piracy, taxes, data privacy and security.

Regulatory approaches should be constructed in a way that embraces innovation, rather than stifling it. Sandboxes in the financial industry, for example, help understand consumer habits as well as the behavior of businesses in new digital markets, which then paves the way to a modern agenda that will seek to simplify regulations in both digital and analog economies. Colombia should be commended for taking the first steps along this path to better connect its rural areas.

Finally, regulatory changes should be undertaken with an international vision in mind. Digital tax regulatory frameworks proposed by the OECD or, in the field of data, those proposed by APEC, serve as strong examples of this.

The agenda is complex. A deep and inclusive digital transformation is necessary, however, for Latin America to overcome the new development challenges and close productivity, inclusivity, and sustainability gaps to keep pace with the US, Europe, and Asia. The digital revolution is quickening in pace with the arrival of disruptive technologies such as the Internet of things, artificial intelligence, and 5G.  The private and public sectors in this region, in addition to academia and relevant international organizations, must join forces to maximize the benefits of these revolutionary changes so that Latin America is well prepared for this second landing on the Moon.

Original article available in Spanish here.

Ángel Melguizo, VP External & Regulatory Affairs, AT&T DIRECTV Latin America

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