Political backbone

Government evaluates the future of Peru's fibre backbone.

The growth of internet usage in Peru during the pandemic has led to all the candidates for the Presidency including internet access as a critical issue in their manifestos and campaign speeches.

Of particular concern is the inadequacy of the country’s fibre-optic backbone to cater for the increased demand. Delivery of the network was a project awarded in 2013 to Azteca Comunicaciones (Mexico), which began operations in 2016, through a subsidy of more than USD 300 million, to reach 180 of the 196 provincial capitals in Peru with fibre optic connections.

A telecommunications consultant in Peru summarised, “The project hasn’t delivered, reaching just 10% utilisation according to a World Bank report. The operating model for the backbone is now under review and the government has reached an impasse with Azteca, which has been reducing its operations in the country. It seems like the contract with Azteca will be terminated because they can’t agree on the operating model.”

“The project hasn’t delivered, reaching just 10% utilisation according to a World Bank report.”

Telecommunications consultant, Peru

What operating models could drive increased utilisation of the fibre backbone?

According to a director of an independent metropolitan carrier one solution could be, “Splitting the backbone such that the State would stop providing subsidies in areas where it is not necessary, which would respect the subsidiary role of the State contemplated in the Constitution. There would be several operators with potential interest in the acquisition of these sections of the network.”

An advisor to the Minister of Transport and Communication had a different proposal, “We should stick with the previous proposal, but consider a period of limited attendance for the backbone operator, in order to ensure its income while not affecting private operators.”

The telecommunications consultant proposes a third potential solution, “They could create 4 macro-regional operators (north, north central, south central and south), integrated with regional networks, with rate flexibility (competitive with private operators) and without affecting the current subsidy scheme.”

Another industry stakeholder offered yet another potential solution, “The backbone operator could be integrated within the regional networks, and this joint operation could be absorbed by a consortium of large operators, in a possible alliance with equipment manufacturers, maintenance service providers, or other related segments.”

So, there are plenty of potential solutions but it is most likely that the current transitional government will terminate the contract with Azteca, and leave the definition of the new dorsal (backbone) model to the new government that will take office in July.

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