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P:\INFS\COMMUNITY ACCESS\COMMUNITY ACCESS INDICATORS WORKSHOP NOVEMBER 2004-MEXICO\DOCUMENTS\09_PANAMA_E.DOC (185509) 11.11.04 15.11.04

REPUBLIC OF PANAMA

CONTRALORÍA GENERAL DE LA REPÚBLICA [TREASURY INSPECTOR'S OFFICE]

Dirección de Estadística y Censo [Directorate for Statistics and Census]

TELECOMMUNICATIONS IN THE REPUBLIC OF PANAMA

PREPARED BY: DORIS E. NIETO D.

PANAMA, 8 SEPTEMBER 2004

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TABLE OF CONTENTS

INTRODUCTION

I GENERAL

II TYPES OF SERVICE

III SITUATION OF TELECOMMUNICATIONS IN THE PUBLIC SECTOR

IV INDICATORS

V CALCULATION METHODOLOGY USED FOR THE SECTOR AND THE SECTOR'S CONTRIBUTION TO PANAMA'S GROSS DOMESTIC PRODUCT

CONCLUSIONS

ANNEXES

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INTRODUCTION

Communications comprise activities that are currently on the continuous rise in the economy of Panama following the introduction of new services, and in particular the opening up of the telecommunication market, the arrival of new licensee companies interested in providing the new services, and the competitiveness they generate.

This paper presents the general aspects of the evolution of communications within Panama's economy and the market's free competition resulting from the sector's privatization process. It then describes the various types of existing services, the situation regarding communications in the public sector and the points of access to new communication services available to the country's rural and suburban areas.

The paper also presents various indicators used to measure the activity, notwithstanding the limits and difficulties involved in obtaining them.

Lastly, we look at the sector's contribution to the country's gross domestic product as well as the methodology used to calculate gross value added. The annexes contain data illustrating the points made.

I GENERAL

The economy of the Republic of Panama is based mainly on the contribution generated by the services sector, which includes the Panama Canal; the banking centre, with 73 established banks, of which 55 are foreign investment and 18 are national investment; the international free trade zone (accounting for 7% of GDP); major insurance companies; international ports for the loading and unloading of containers; a global- level merchant navy register; state-of-the-art telecommunications; and a tourism sector that is developing rapidly, benefiting from the country's geographical location.

Over the last five years, Panama has undergone many changes with, first and foremost, the return of the Canal into Panamanian hands, as well as the privatization of State service-providing companies that has led to major innovations, in particular in the area of telecommunications.

The telecommunication market was privatized in 1997, when the British company Cable & Wireless paid USD 652 million for 49% of the shares of the State company INTEL - Instituto Nacional de Telecomunicaciones. This partial privatization of telephony comprised, inter alia, a five-year full exclusivity contract for local, national long-distance and international services, public telephony and the lease of voice circuits.

On 2 January 2003, the market was opened up to free competition for the aforementioned telecommunication services, and even though the Ente Regulador de los Servicios Públicos [Public Services Regulator] issued 61 licences for the operation of communication services, there are currently only 25 companies now operating and competing for the market, providing services such as basic, local and international telecommunication, public and semipublic telephone facilities, mobile cellular telephony, conventional trunk links, paging, Internet for public use, and so forth.

II TYPES OF SERVICE

The telecommunication infrastructure has improved considerably as a result of privatization and free market competition. This is clearly illustrated by the introduction of fixed, mobile and pre-paid telephony, the increased availability of modern public telephones and, above all, the major growth of the Internet service at residential level and within companies at national level. Moreover, telecommunication companies are installing network operation centres in Panama, taking advantage

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of the country's geographical location and the abundant availability of fibre optic submarine communication circuits on both coasts, allowing the interconnection of north, central and south America, Asia, Europe and Africa.

The communication sector comprises 30 types of service which may be offered or provided by natural or legal persons possessing a communication services licence in the Republic of Panama; there are two basic types of service: • Type A services: Services whose provision, for technical or economic reasons, is

authorized on the basis of time-related exclusivity or for a limited number of licensees operating on the basis of competition;

• Type B services: Other communication services, whose provision is authorized freely on the basis of competition.

As indicated, the common denominator in both cases is free competition, based on which it may be assumed that the prices of services are regulated by free offer and demand.

There are currently 30 types of service: • Local basic telecommunication service • National basic telecommunication service • International basic telecommunication service • Public and semi-public terminals • Leased dedicated voice circuits • Mobile cellular telephone service, A and B bands • Conventional trunk systems for public or private use • Fixed and mobile radiocommunication service • National telex service • International telex service • International telegraph service • International digital business service • Very small aperture terminals (VSAT) service • Data transmission service • Data switching service • Paging service • Public Internet service • Fax retransmission service • Maritime mobile communication service for public use • Maritime mobile communication service for private use • Aeronautical mobile communication service for private use • Low orbit satellite telecommunication service • Link service for broadcasting stations • Link service for television stations • Link service for high-fidelity audio signals, video and/or data, with or without use of radio

spectrum • Service for continuous or occasional radio or television transmissions via satellite

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• Call centre service for commercial use • Interactive television service with or without use of radio spectrum • Value added telecommunication service • Telecommunication services resale service

III SITUATION OF COMMUNICATION SERVICES IN THE PUBLIC SECTOR

Internal network infrastructure

Of the 57 entities which currently constitute Panama's public sector, excluding local governments, some 51 per cent have their own LANs and 20% have or plan to have WANs with national coverage.

Public key infrastructure

With the backing of a donation from the Organization of American States (OAS) and the specialized consultancy and technology services provided by Microsoft de Panamá, the Electoral Tribunal issued "Digital Certificates" to support the use of digital signature in electronic communications.

The first phase of this new project Promoting Electronic Government in Panama - Contraloría General de la República will be limited to internal use within the institute, which has installed a digital network at national level for communication with all its offices in the provincial headquarters and the country's main districts.

"INFOPLAZAs" - Public access points

These are an initiative of the Inter-American Development Bank (IDB), whose objective is to develop what it calls telecentres, for which purpose Panama's National Secretariat of Science, Technology and Innovation (SENACYT) created the Fundación INFOPLAZA to provide added impetus to the project.

As the project was devised with a view to small companies setting up cybercafes, SENACYT's national secretary agreed with IDB that the project should be social, low-cost and community-based, with the objective of providing the country's rural and suburban communities with a means of access to Internet and other information resources such as educational, training and distance-learning multimedia.

Thus February 2000 saw the inauguration of the Republic of Panama's first INFOPLAZA, in the district of Pedasí, province of Los Santos.

The technical coordination of the INFOPLAZAs stipulates that the service be set up in conjunction with an associate, for example a local council, public foundation, parish, or government or cooperative body. It must be a non-governmental organization (NGO).

Subsequently, SENACYT provides it with six computers; a network server; communication (concentrator and router) and Internet access equipment; a colour printer; structured wiring and ten cubicles. Training is also provided to the administrators contracted by the associate.

Between 25 cents and one United States dollar are charged for the use of the computers. This money is paid into the account of Fundación INFOPLAZA, to pay for the Internet connection and technical support.

Fifty-four INFOPLAZAs have now been set up, each with a set of multimedia computers connected to the Internet, printing facilities, e-mail and space on the Internet to advertise their activities or products.

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SENACYT also plans to carry out a feasibility study for a wireless communication system to connect the country's rural communities to the Internet.

IV INDICATORS

Panama's Ente Regulador de los Servicios Públicos (ERSP) is the State entity responsible for regulating the companies that provide the basic privatized services. ERSP is keen to develop a complete statistical yearbook reflecting the performance of the telecommunication sector over the last years.

To date, it has not been possible to prepare this complete yearbook of the sector's main indicators, as arrangements are under way for a systematized process for data collection and the development of a database. Nevertheless, the following statistical summary has been prepared for the sector covering the last seven years: 1) Basic telephone network. 2) Mobile telephone services. 3) Paging service. 4) Data transmission services. 5) Telecommunication sector personnel. 6) Basic telephone service quality. 7) Internet services (see annexes).

Regarding this last indicator, the statistics give an index of 8% for Internet penetration in Panama; thus approximately eight out of every 100 Panamanians use the Internet.

One factor that has directly influenced the development of Internet is teledensity, or access to telephones for connection to the Internet network. There is a close relationship between this factor and the number of computers per 100 inhabitants. To all this we must add the country's certification level, the quality of the telephone lines, and the degree to which computer equipment is up to date.

An ERSP study shows that there are around 70 000 computers in Panama, which means that three out of every 100 Panamanians have a computer. Calculated per family, this means that around 10 in every 100 families have a computer.

The most recent census of population and housing carried out by the Contraloría General, in the year 2000, registered a total of 58 945 homes with computers nationwide. At the same time, there has been an increase in the number of private Internet cafes and INFOPLAZAs, providing people with the opportunity to use the Internet if they are not equipped at home.

The company Cable & Wireless is the main telephone network operator, accounting for around 40% of Panama's Internet market. The remainder of users are catered for by companies like Internet Bell South, Cable Onda, and others.

V CALCULATION METHODOLOGY USED FOR THE SECTOR AND THE SECTOR'S CONTRIBUTION TO PANAMA'S GROSS DOMESTIC PRODUCT

Today, telecommunications in Panama have made significant progress within the national economy, as is borne out by their contribution to GDP: in 1998, they represented 3% of total GDP, and in subsequent years, around 5%.

It should be noted that the telecommunication sector's privatization in 1997 has made it difficult to obtain the financial information used to calculate value added at current prices, owing to the competition between companies. This is further complicated by the opening up of the market in

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January 2003 and the entry of over 60 licensees ready to offer the various different communication services; ERSP is coordinating the work with a view to obtaining the required information in the most timely manner possible.

As to calculation of value added at constant prices using the series, this presents drawbacks and limitations. Such is the case regarding the prices and valuation of some indicators which are difficult to calculate for the base year 1996 as the corresponding items did not exist on the market - for example, prepaid cellular and Internet.

Nevertheless, of the set of indicators collected by ERSP, use is made of the following: 1) Basic telephone network. Data related to the number of main lines according to type of

user and public telephones installed. 2) Mobile cellular telephone services. Cellular subscribers with prepaid card and cellular

subscribers with contract. 3) Internet services. Subscribers with the main service providers. This indicator is extremely

difficult to establish, as the tools and elements required to measure it more accurately are not available.

In addition to these indicators, use is also made of the number of internationa l calls, which up until 2003 was obtained directly from the tax paid per call, namely one Balboa (United Stated dollar). As of 2004, this tax has been ad valorem, based on the call's duration, thus the manner in which it is to be established has to be worked out for this year's calculations.

The indicators used are valuated at the base year's prices, with the exception of pre-paid cellular and Internet for which they are valuated at 1998 prices, as that was the year in which provision of those services began. When calculating the value per type of service, a weighted index is developed and used to extrapolate gross value added for the base year.

This approach allows the series to be calculated at current and constant prices for this major sector, based on the recommendations made in the 1993 System of National Accounts (Sistema de Cuentas Nacionales de 1993 (SCN'93)).

CONCLUSIONS

Development at global level requires constantly improved quality of service. This must inevitably go hand- in-hand with investment in human resources and infrastructure. Consumer demand at international and national level requires communications to advance by leaps and bounds. Communications thus play a major role in the development of countries and Panama cannot ignore this, given tha t its economy is based mainly on the services sector, and also given its natural geographical location.

In conclusion with the completion of this work, it is obvious that appropriate coverage indicators are required if this sector's full performance is to be realized as part of the country's economic activity. It should nevertheless be stressed that it has been possible to produce the current and constant series of telecommunication GVA by implementing the new 1993 System of National Accounts despite existing limitations.

We hope that participation in the Global Indicators Workshop on Community Access to ICTs will be of great benefit as far as the experiences of other countries are concerned, and that a better picture of the sector at global level will be obtained, with information on the application of solutions to problems relating to the sector's dynamics affecting data availability, processing in the absence of records of international calls now effected with the Internet, the development of production indexes within the sector, etc.

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BIBLIOGRAPHY

JORDAN, Wilfredo. Internautas a la panameña [Panamanian Cybernauts]. La Prensa (Panamá) SUPLEMENTO MARTES FINANCIERO N°257 (Tuesday, 28 January 2003).

Web page www.caibi.org/sesiones/xix/panama . National report: IMPULSANDO EL GOBIERNO ELECTRÓNICO EN PANAMÁ [Promoting electronic government in Panama].

Web page www.ersp.gob.pa.estadísticas. Ente Regulador de los servicios Públicos. ESTADÍSTICAS DE TELECOMUNICACIONES [Telecommunication statistics]. 101K - 31 August 2004.

Web page www.panamacom.com/panama. PanamáCOM– Hosting, Servidores Virtuales y dedicados. La infraestructura de Internet y de las Telecomunicaciones en Panamá [PanamáCOM - Hosting, virtual and dedicated servers. Internet and telecommunication infrastructure in Panama.]

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ANNEXES

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LIST OF TABLES AND GRAPHS

Annex 1 Basic telephone network in the Republic of Panama: 1998-2003

Annex 2 Mobile telephone services in the Republic of Panama: 1998-2003

Annex 3 Paging services in the Republic of Panama: 1998-2003

Annex 4 Data transmission services in the Republic of Panama: 1998-2003

Annex 5 Telecommunication sector personnel in the Republic of Panama: 1998-2003

Annex 6 Basic telephony quality of service in the Republic of Panama: 1998-2003

Annex 7 Internet services in the Republic of Panama: 1998-2003

Graph 1 Total GDP and GVA for communications in the Republic of Panama: 1997-96 to 2003-02

Annex 8 Total gross domestic product, gross value added for communications and percentage variations in the Republic of Panama at 1996 prices: 1996-2003

Graph 2 Internet customers per year in the Republic of Panama: 1997-2003

Annex 9 Number of customers for Internet service facilities in the Republic of Panama: 1997-2003

Annex 10 Population by gender, according to age group and specific age, in the Republic of Panama per province, census 2000

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Annex 1

BASIC TELEPHONE NETWORK IN THE REPUBLIC OF PANAMA: 1998-2003

THERE WAS ONLY ONE PROVIDER UP UNTIL 31 DECEMBER 2002

Indicator 1998 1999 2000 2001 2002 2003(E)

Main telephone lines operating 418 756 462 476 429 135 376 499 386 904 380 224

Main lines in largest city 272 382 305 947 (E) 285 000 347 000 221 575 216 728

Switching centre capacity 533 332 610 345 626 218 621 036 565 090 565 090

Public telephones 7 026 8 607 9 955 11 439 11 930 12 257

Coin telephones 5 184 6 026 6 453 6 991 7 789 7 967

Card telephones 1 842 2 581 3 502 4 448 4 141 4 290

International telephone circuits 1 247 1 662 4 308 4 746 5 530 6 442

(E) Estimate

Source: www.ersp.gob.pa.estadísticas Ente Regulador de los Servicios Públicos

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Annex 2

MOBILE TELEPHONE SERVICES IN THE REPUBLIC OF PANAMA: 1998-2003

THERE ARE TWO SERVICE PROVIDERS

Indicator 1998 1999 2000 2001 2002 2003

Mobile cellular telephone subscribers

86 389 223 193 410 401 475 141 525 845 834 031

Annual index of cellular telephones per 100 inhabitants

3.1 7.9 14.5 15.8 17.2 26.7

Cellular service subscribers with digital technology

85 883 223 193 410 401 475 141 525 845 834 031

Cellular subscribers - prepaid card 31 630 177 749 354 634 414 612 456 046 717 267 Cellular subscribers - contract 54 759 45 444 55 767 60 529 69 799 116 764

Number of base stations 132 183 207 213 340 457

Population coverage (%) 68% 69% 74% 77% 79% 82%

Coverage of national territory (%) 14% 20% (E) 22% 24% 28% 32%

(E) Estimate


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Annex 3

PAGING SERVICES IN THE REPUBLIC OF PANAMA: 1998-2003

THERE ARE SIX MAIN SERVICE PROVIDERS

Indicator 1998 1999 2000 2001 2002 2003

Subscribers to paging service 38 500 25 500 14 378 3 307 720 500

Annual index of paging service per 100 inhabitants

1.4 0.9 0.5 0.11 0.03 0.02


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Annex 4

DATA TRANSMISSION SERVICES IN THE REPUBLIC OF PANAMA: 1998-2003

THERE ARE VARIOUS SERVICE PROVIDERS

Indicator 1998 1999 2000 2001 2002 2003

Total telex subscriber lines N/R/K 166 180 105 72 85

Private leased circuits *3 816 *4 362 *(E)8 000 N/A N/A 230

Total number of public data network subscribers

N/R/K **146 **2 600 N/A N/A N/A

Data modems in operation N/R/K 4 872 N/R/K N/A N/A N/A

* Includes analogue FEs, TDM, frame relay, IBS, international frame relay

** Includes X.25 subscribers only

N/R/K No records kept

(E) Estimate

N/A Not available


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Annex 5

TELECOMMUNICATION SECTOR PERSONNEL IN THE REPUBLIC OF PANAMA: 1998-2003

Indicator 1998 1999 2000 2001 2002 2003(E)

Total telecommunication services full-time personnel

4 621 5 380 5 500 5 623 5 764 6 173

(E) Estimate


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Annex 6

BASIC TELEPHONY QUALITY OF SERVICE IN THE REPUBLIC OF PANAMA: 1998-2003

THERE IS ONLY ONE SERVICE PROVIDER

Indicator 1998 1999 2000 2001 2002 2003

% of faults rectified within 48 hours 66.0% 86.0% 98.0% 99.8% 97.5% 86.1%

Total number of main line faults per year

291 044 240 680 207 789 132 774 78 913 63.625

Faults per 100 main lines per year 70 52 48 30 19 16

Number of complaints per 1 000 customer invoices

550 552 484 (E) 600 159 283

% of operator-assisted calls answered within 10 seconds - national direct line

N/A N/A N/A 0.9787 0.986 1

% of operator-assisted calls answered within 10 seconds - international direct line

N/A N/A N/A 0.9733 0.985 0.9825

(E) Estimate

N/A Not available


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Annex 7

INTERNET SERVICES IN THE REPUBLIC OF PANAMA: 1998-2003

THERE ARE TEN MAIN SERVICE PROVIDERS

Indicator 1998 1999 2000 2001 2002 2003

Internet subscribers 17 350 24 680 42 982 48 570 57 985 69 234

Annual index of Internet subscribers per 100 inhabitants

0.6 0.9 1.5 1.6 1.9 2.2

– Internet subscribers - switched mode

17 030 24 080 40 520 43 713 51 607 55 387

– Internet subscribers - leased line 320 600 2 462 4 857 6 378 13 847

Internet international bandwidth (Mbps)

14/8 14/8 330/330 16/8 16/8 16/8

Outgoing international bandwidth for Internet (Mbps)

8 8 330 8 8 8

Incoming international bandwidth for Internet (Mbps)

14 16 330 16 16 16


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Graph 1

TOTAL GDP AND GVA FOR COMMUNICATIONS IN THE REPUBLIC OF PANAMA: 1997-96 TO 2003-02

-5

0

5

10

15

20

25

30

1997-96 1998- 97 1999-98 2000- 99 2001 -00 2002-0 1

Years

Per

cen

tag

e va

riat

ion

GVA for communications TOTAL GDP

Perc

enta

ge v

aria

tion

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Annex 8

TOTAL GROSS DOMESTIC PRODUCT, GROSS VALUE ADDED FOR COMMUNICATIONS AND PERCENTAGE VARIATIONS IN THE

REPUBLIC OF PANAMA AT 1996 PRICES: 1996-2003

(thousands of Balboas)

Percentage variation Years Total gross domestic product

Gross value added for

communications

Percentage contribution

Total Communications

1996 9 322.1 229.3 2.5% 1997 9 916.8 273.5 2.8% 6.4 19.3

1998 10 648.8 339.2 3.2% 7.4 24.0

1999 11 071.4 413.6 3.7% 4.0 21.9

2000 11 374.8 489.1 4.3% 2.7 18.3

2001 11 439.8 483.8 4.2% 0.6 –1.1

2002 11 697.1 506.4 4.3% 2.2 4.7

2003 12 172.1 524.6 4.3% 4.1 3.6

Source: Dirección de Estadística y Censo Contraloría General de la República de Panamá

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Graph 2

INTERNET CUSTOMERS PER YEAR IN THE REPUBLIC OF PANAMA - 1997-2003

0 220

10788

30165

38414 37175

33738

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1997 1998 1999 2000 2001 2002 2003 Years

Number of customers

Num

ber o

f cus

tom

ers

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Annex 9

NUMBER OF CUSTOMERS FOR INTERNET SERVICE FACILITIES PER COMPANY IN THE REPUBLIC OF PANAMA: 1997-2003

Company 1997 1998 1999 2000 2001 2002 2003

1) Ayayai 392 526 4 123

2) BSC 1 388 2 242 1 967 1 608

3) CWP 13 121 13 632 13 972 14 779

4) Advanced 1 1

5) Cable Onda 8 266

6) Cerco Wireless 220 210 248 145 188

7) Chiriqui Punto Com 386 115 8) Convergence 407

9) Fast Bee 294

10) Global Telecom 95

11) IFX Networks 10 000

12) Information Highway 193

13) Interdonet, Inc. 14 133 13 005 13 349 337

14) Internet Data 60

15) Internet Panama 385 16) Net2net, Corp 4 987 4 215

17) PSINET Panama 32 880

18) Ulatec, S.A. 3 015 2 679 2 862

19) Telecarrier 279 1 504

20) Liberty Technology 188

21) Uunet Internt. 22

22) Optynex Telecom. 49 TOTAL 220 10 788 36 165 38 414 37 175 33 738

Graph data

Years 1997 1998 1999 2000 2001 2002 2003

Number of customers 0 220 10 788 30 165 38 414 37 175 33 738


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Annex 10

POPULATION BY GENDER, ACCORDING TO AGE GROUP AND SPECIFIC AGE, IN THE REPUBLIC OF PANAMA PER PROVINCE

CENSUS 2000

Population Age (years)

Total Men Women

Masculinity ratio (males per 100

females)

Total 2 839 177 1 432 566 1 406 611 101.8

0-4 326 239 166 281 159 958 104.0

5-9 296 747 150 813 145 934 103.3

10-14 286 133 146 274 139 859 104.6 15-19 268 961 136 201 132 760 102.6

20-24 249 675 124 996 124 679 100.3

25-29 241 251 120 825 120 426 100.3

30-34 223 890 112 499 111 391 101.0

35-39 199 272 100 111 99 161 101.0

40-44 162 581 81 576 81 005 100.7

45-49 134 175 67 803 66 372 102.2 50-54 115 770 58 723 57 047 102.9

55-59 89 855 45 644 44 211 103.2

60-64 73 333 37 219 36 114 103.1

65-69 55 932 28 148 27 784 101.3

70-74 44 446 22 240 22 206 100.2

75-79 32 174 15 641 16 533 94.6

80-84 21 434 9 991 11 443 87.3 85-89 11 568 5 239 6 329 82.8

90-94 4 040 1 652 2 388 69.2

95 and over 1 665 664 1 001 66.3

Undeclared 36 26 10 260.0

Average age 25 25 25

Source: Dirección de Estadística y Censo Contraloría General de la República de Panamá

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