VZCZCXYZ0013
RR RUEHWEB

DE RUEHDG #0483/01 1141841
ZNR UUUUU ZZH
R 241841Z APR 09
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC 2634
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHLP/AMEMBASSY LA PAZ APR WASHDC 1789
RHDIFCC/FCC WASHDC

UNCLAS SANTO DOMINGO 000483 
 
SIPDIS 
 
EEB/CIP/BA FOR TIMOTHY C. FINTON 
FCC FOR ROBERT TANNER 
DOC/ITA/OTEC FOR ANDREW BENNETT 
STATE FOR WHA/CAR 
LA PAZ FOR A/DCM C LAMBERT 
 
E.O. 12958: N/A 
TAGS: ECPS ECON DR
SUBJECT: BROADBAND DEPLOYMENT INITIATIVES IN THE DOMINICAN 
REPUBLIC 
 
REF: STATE 27310 
 
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Summary 
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¶1. This cable presents initial reporting on broadband 
deployment initiatives in the Dominican Republic (reftel). 
There is one ongoing government initiative to provide 
broadband access to 508 rural communities that is scheduled 
to finish by September.  While future incentives are being 
considered by the regulatory agency, no others currently 
exist and broadband expansion is further hampered by 28 
percent in taxes levied on all telecommunications sales.  A 
Senate committee announced March 30 it would review and 
update the 1998 telecommunications law. End Summary. 
 
-------------------- 
"Indotel te conecta" 
-------------------- 
 
¶2. The Dominican Telecommunications Institute (Indotel), the 
GoDR regulatory agency, launched a tender in 2007 for a Rural 
Broadband Connectivity Program.  At that time, only 30 
percent of the country's 383 municipalities had broadband 
capacity.  The tender offered a subsidy of up to USD 5 
million. The winning bidder was Codetel (Mexican-owned), the 
largest company in the market, which offered to connect the 
508 communities with no cash subsidy but rather in exchange 
for the rights to a WiMax frequency in the country.  Indotel 
Executive Director Joelle Exarhakos told EconOff that the 
program has proceeded successfully and more than 100 rural 
communities have already been connected.  She said Codetel 
would complete the broadband deployment plan by September 
¶2009. By that time, every municipality in the country will 
have broadband access.  Under the program, Codetel provides 
256 kB/second or faster service to rural communities at 
prices that match the prices charged in urban centers where 
Codetel competes with other providers. 
 
¶3. Exarhakos told EconOff that Indotel does not have current 
plans for a second stage for the rural connectivity program, 
noting that with the completion of this plan, every 
municipality in the country will have broadband access.  She 
said that in many of these communities, local entrepreneurs 
have built connections to the networks servicing even smaller 
communities nearby.  Nonetheless, Indotel does not foresee a 
second stage of the rural program to venture into even 
smaller villages.  But Exarhakos told EconOff that she 
believes such incentives might not be necessary; part of the 
goal of the Rural Connectivity Program was to demonstrate 
rural residents' capacity to pay and it has.  In Monte Plata, 
a national provider, Dijitec, is developing infrastructure 
without any government incentive to compete with Codetel. 
 
¶4. In many of these communities, Indotel has set up 
Informatics Training Centers (CCI), where schoolchildren and 
residents can access the Internet and learn to use computers. 
 These centers are among the 846 centers around the country 
that Indotel has established as part of an information 
technology promotion program.  Indotel provides the hardware 
and software for the centers and community groups, schools, 
churches or town governments maintain and operate the 
facilities.  EconOff visited one such site in October 2008 at 
a church in Samana which was inoperable because there were no 
funds to pay the electricity bill.  Asked about these issues, 
Exarhakos candidly acknowledged that some of the committees 
have not succeeded in maintaining the facilities.  (Note: 
Following the meeting with Indotel, EconOff learned from the 
Samana church pastor that the facility remains closed six 
months later.  Although the electricity bill is paid, they 
have been waiting for two weeks for Indotel to provide a 
needed battery.  He said he does not know how to fund the CCI 
in the future. End note.) 
 
¶5. Sur Futuro is one of the non-governmental organizations 
that has taken on the operations of CCIs, and runs three 
centers in communities where the organization is also 
otherwise involved.  The group's education director told 
EconOff that while Indotel's CCI program provides an 
excellent service to communities, the lack of long-term 
funding limits its impact.  She said it costs between USD 500 
and 850 monthly to operate a CCI, funds that are difficult to 
 
come across in poor communities. Sur Futuro's president noted 
that she is aware that the Catholic Church struggles to 
maintain the CCIs it runs. 
 
--------------------------------------------- - 
Codetel: Social Investment, Commercial Success 
--------------------------------------------- - 
 
¶6. Codetel's participation in the rural broadband program has 
been directed by Ahmed Awad, who said the company's total 
cost of the program is about USD 50 million.  He said that 
while Codetel views it as a social investment, it has also 
proven relatively commercially successful. 
 
¶7. In addition to installing and maintaining the 
infrastructure for broadband connectivity in the 508 
communities, Codetel is responsible for setting up an 
entrepreneur program, establishing an Internet portal for the 
program and providing training in each community 
participating in the program.  In the entrepreneur program, 
Codetel has helped small businesspeople in many of the 
communities invest an average of USD 1000 to start up 
internet cafes or international call centers.  The Internet 
portal, which Codetel hired an NGO to construct, features 
geographic, demographic and interesting facts about each of 
the 508 communities.  Awad told EconOff he believes it is the 
only database of information about these forgotten locales. 
The training provided by Codetel is limited to a one-hour 
workshop provided to the highest level of school taught in 
each municipality.  Awad said that while the schools have 
received the trainers positively, he noted that one hour was 
insufficient to provide much training to the students. 
 
¶8. Awad told EconOff that the installed connections are 80 
percent wireless, but that despite the fact that this 
provides the opportunity for cellular-only service in these 
areas, many customers want wired hardware in their homes 
despite the higher costs.  Because the service is wireless, 
many locales contiguous to the participating communities have 
gained broadband access, Awad said.  "In addition to the 508 
municipalities, another 150 or so villages will receive 
service because of the wireless reach," he told EconOff. 
 
¶9. Awad said he hoped that Indotel would launch a sequel to 
this program, noting that there are another 1500 communities 
that lack broadband access.  However, he lamented the fact 
that the sector does not have an ongoing focalized subsidy 
that would reduce costs to rural users, which would make 
these consumers a more attractive target for private 
investment.  He also commented that the country needs more 
investment in information technology (IT) education in order 
to take advantage of the growing broadband penetration and 
stimulate demand for these services.  Perhaps most 
importantly, though, he cited the lack of reliable 
electricity as one of the highest hurdles impeding broadband 
growth both in rural communities and nationwide. 
 
¶10. Instead of providing incentives for growth, the GoDR has 
a policy of discouraging it with high taxes.  In an April 2 
interview with the newspaper Hoy, Codetel President Oscar 
Pena complained that the Dominican Republic has the fourth 
highest taxes on telecommunications of any country in the 
world, at 28 percent, and a 3 percent municipal tax appears 
likely to increase this burden even further.  Pena said that 
the implementation of the 3 percent tax would send a strong 
negative signal to investors. 
 
------------------------------ 
Congress to Review Telecom Law 
------------------------------ 
 
¶11. In a March 31 meeting with EconOff, Senator Euclides 
Sanchez, president of the Senate Public Works Committee, said 
that there were no plans to legislate any incentive programs 
to promote broadband deployment.  He said that this type of 
development promotion should occur through the regulatory 
agency, Indotel.  Nonetheless, he said he was concerned about 
the high taxes levied on the sector and said that this 
disincentive to investment merited legislative review.  Later 
the same day, a legislative assistant present in the meeting 
contacted EconOff with the information that Senator Sanchez 
had presented a motion in the committee to form a special 
commission to review and potentially modify Law 153-98, the 
 
telecommunications law.  In addition to the tax issues, the 
legislative assistant said the commission sought to modernize 
the nine-year-old law to better cover today's technologies 
and to close loopholes. 
 
¶12. In press reports since that announcement, both Indotel 
and the Dominican Telecommunications Company Association 
(Adomtel) have criticized Sanchez' intent.  The executive 
director of Adomtel said that the law was designed to 
self-modify as appropriate to address changing technologies. 
She worried that changes could be detrimental to a law under 
which the sector has thrived.  Indotel's president said that 
the review "does not make sense and is poorly timed." 
 
----------------------------- 
Perspective From a New Player 
----------------------------- 
 
¶13. One of the criticisms of the law disputed by Adomtel is 
that it creates entry barriers for new companies.  Manuel 
Bonilla, the manager of Wind Telecom, which entered the 
market last year providing WiMax Internet, MMDS subscription 
television and VoIP telephone service, told EconOff that the 
entry barriers that exist are the result of Codetel's decades 
of monopoly and are not written into the law.  Bonilla said 
he knew exactly how to challenge these barriers because he 
had helped to fortify them during his previous tenure as a 
vice president at Codetel.  Wind filed an injunction against 
Codetel for independent access to public portals in the 
Dominican Republic; Codetel initially disputed the claim but 
then settled out of court.  According to Bonilla, Codetel 
sought to settle with Wind in order to avoid granting similar 
access to all other companies.  While Wind settled because it 
was advantageous for it to do so, Bonilla noted that any 
other company could pursue similar claims to completion to 
open the market.  He said that Indotel could also take a more 
proactive stance to break down these barriers, but that its 
administration has preferred to only address these disputes 
when they are challenged by an industry player. 
 
¶14. Bonilla said that unserved and underserved communities in 
the Dominican Republic represent a key market for Wind.  So 
far, the company's only commercial launch has been MMDS 
television in Santo Domingo and Santiago.  Because it is not 
a hard-wired service, it reaches poor urban neighborhoods 
that have been historically overlooked by cable companies. 
He said that more than half of Wind's clients live in areas 
without cable television service.  While the company does not 
have a specific business plan to reach rural communities, he 
said that as they expand their wireless reach, they will 
cover many towns without cable access )- especially in the 
Cibao Valley region -- and he expects to see similar high 
results from these areas. 
 
¶15. Bonilla echoed Codetel's complaint about the high taxes 
on telecommunications in the Dominican Republic.  He said 
that these taxes have a direct impact on the accessibility of 
the products because they inflate the prices dramatically. 
He complained particularly about the 10-percent excise tax, 
saying it was ludicrous to levy such a tax on a sector that 
promotes development. 
 
¶16. Another challenge he noted is the high presence of small 
cable companies providing pirated programming at a low cost 
in poor areas.  He said that over 100 subscription television 
companies exist in the country and most of these do not pay 
for their programming.  Bonilla plans to file complaints with 
Indotel against these companies, but only once his company 
has launched a service that directly competes with them. 
While he would like to see Indotel independently crack down 
on this illegal activity, he says it is not Wind's place to 
challenge the pirate companies until it provides a legal 
alternative for the users. 
 
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COMMENT 
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¶17. Indotel's rural broadband deployment program is an 
important first step toward expanding access to broadband 
Internet in underserved areas of the country.  Yet these 
communities and other similarly disconnected zones will 
benefit more from a comprehensive reevaluation of 
 
 
 
telecommunications priorities offering standing incentives to 
companies that invest in underserved areas. 
BULLEN