Wireless data and communications providers in Costa Rica spent almost two years in a relative state of post-monopoly peace. That changed a few days ago, however, with an announcement by former communications monopoly ICE with regard to its prepaid wireless rates.
The cost of using ICE’s extremely popular Short Message Service (SMS) went up by almost 100 percent, which means it now costs three colones (not even a U.S. penny) to send a text message to another cell phone in Costa Rica.
Many smartphone users in Costa Rica initially shrugged off the rate increase; they thought they could always use mobile apps such as WhatsApp, Skype or online social networks to communicate via wireless broadband without having to send text messages or even use airtime minutes. Doing this, however, will probably consume their prepaid amounts even faster since they found out that, from now on, they will be charged for every kilobyte used.
Spanish mobile carrier Movistar was quick to follow in ICE’s footsteps insofar as text messaging, but it drew the line at raising its wireless Internet fees. Claro had already beat both ICE and Movistar in this regard, as it had tacitly raised its prepaid rates weeks before. As it stands, Movistar’s wireless Internet data rates for prepaid customers are looking better than ICE, and very similar to Claro. There is no doubt that the three major wireless players in Costa Rica are waiting on each other to make the next move.
A Confusing, Yet Regulated, War
There is a referee setting the rules of engagement for this mobile communications combat. The Superintendency of Telecommunications (SUTEL in Spanish) is the government entity in charge of setting limits. For example, the three colones rate for each text message sent by wireless prepaid customer is the maximum allowed by SUTEL, and Claro was the first to take advantage of it. ICE eventually caved in with its big announcement, quickly followed by Movistar.
Although the SUTEL sets the pace for the combatants to engage in business battles, there is one more regulatory entity that can trump the wireless carriers and even the SUTEL: The Regulatory Authority of Public Services (ARESEP in Spanish). This agency is not in step with the SUTEL and has already warned ICE about raising its fees again. The ARESEP sees wireless services as either telecommunication or information services, and it vows to keep communication fees down while allowing mobile service providers to charge as they please with regard to information services. SUTEL, on the other hand, wants to make SMS a communications-only service, which will allow them to prevent further increases.
ICE has thus far shown greater interest in being aggressive with regard to pricing. Claro tends to test the waters and stay just under the limits promulgated by the SUTEL. Movistar follows ICE’s cue. The casualties of this war are the consumers since the wireless landscape is becoming confusing. ICE would like to convert many prepaid customers into monthly subscribers, and they are trying to do so by pressuring them with their prized wireless Internet service. Claro and Movistar are not quite ready to handle many subscribers, and for the time being they may realize greater profits with prepaid accounts.
The Wireless Internet Elephant in the Room
ARESEP has the power to undo rate increases and can even influence the market with certain measures. For the time being, however, regulators are waiting to see how the three wireless service providers handle upgrades such as mobile telephone number portability and 4G technology. The most significant aspect to watch will be how SUTEL and ARESEP react to the double-digit growth of mobile Internet use in Costa Rica. According to a July article in business weekly El Financiero, Movistar estimates that 83 percent of all its customers are Internet users, and 50 percent access online services via smartphones.
Many of these wireless Internet customers, however, use their mobile devices as modems. They take advantage of unlimited wireless data plans to download films, play video games, stream audio, and make video conferencing calls. For these users the status quo is ideal: They can take up as much bandwidth as they want for one low, prepaid rate.
The problem with this situation is that these data-hungry users are saturating the network and moving providers to raise their fees and meter their networks. Again, the wireless carriers would like to convert these prepaid Internet junkies to subscriber models where they will pay a little more to download all they want; but, the regulators are concerned that ICE, Claro and Movistar may just want to entice prepaid customers to subscribe now just so they can downgrade their services and increase their fees in the future.