Nicaragua’s Broadband Improvement Plan

The Government of Nicaragua has proposed new polices for the improvement of the Internet penetration in the country, in its “Plan de Buen Gobierno 2016”, the following goals have been proposed:

1. Install free internet in several tourist centers of the country,

2. Install free internet access in 100 schools, 70 technology classrooms and 38 parks,

3. With the National Broadband Project, together ENATREL and TELCOR, we will expand the network infrastructure in 72 municipalities to reduce the digital gap between rural and urban areas,

4. Increase 133,000 new Internet connections,

5. The National Broadband Plan will guarantee high quality, high-speed internet access. In its first phase, it will bring connectivity to 328,300 households, 38,866 companies, 276 health units and 100 telecentres in 72 municipalities,

6. With the Caribbean Regional Communications Infrastructure Program (CARCIP), 112,747 people from the Caribbean Coast will be provided with the high-speed Internet and telecommunications service,

7. In order to improve the quality of education, free Internet access will be guaranteed in 100 schools, 70 technological classrooms and 38 parks,

8. Ensure and promote the internet service in 134 municipalities’ parks.

According to the World Bank, Nicaragua has very low penetration compared to the LAC average, with fixed broadband subscriptions at 2.5 per 100 subscribers in Nicaragua compared to 9.7 per 100 subscribers on average in LAC, and far below the 26.15% of Organization for Economic Co-operation and Development (OECD) countries (World Bank, 2016b). The Government of Nicaragua with the help of the World Bank are working together in the development of a project called Caribbean Regional Communications Infrastructure Program (CARCIP) aimed at increasing broadband access and make further improvement in the development of ICTs, especially in the Caribbean region of Nicaragua, the World Bank will provide US$20.1 million credit with a 25-year maturity period and a 5-year grace period, while the Nicaraguan government will put up another US$2.6 million. The six-year program will provide broadband connectivity to some 48 locations, including schools, universities, health care centers, as well as SMEs. As a result of this Program, the population will obtain better access to higher quality and cheaper ICT services (World Bank, 2016c).

Besides the Caribbean Regional Communications Infrastructure Program, the Nicaraguan Telecommunications and Mail Institute (TELCOR, in Spanish) and the National Electricity Transmission Company (ENATREL) both are implementing a project aim to increase broadband penetration in Nicaragua with the goal of contributing to the economic and social development of the country, named National Broadband Plan. This project has an operation total of US$50 million,

of which US$25 million are being financed by the Inter-American Development Bank (IDB) and the other US$25 million from the Korea Infrastructure Development Co˗financing Facility for Latin America and the Caribbean (KIF). In addition, the project includes the execution of pilot programs that will support the government in developing the use of broadband in health and agriculture through the execution of pilot programs. The health pilot program will also have a strong gender component having the objective of reducing mother-child mortality. The agriculture program, on its end, will train agricultural workers in the use of ICT to improve the efficiency and productivity of their businesses.

6.3 Level of Technology Awareness by Nicaragua’s SMEs

Nicaragua has a low per capita income (US$2,027), and the main policy of the Government of Nicaragua is still focus in reducing poverty and inequality, attract more investment and create new jobs, poverty is not only affecting individuals in the adoption of the Internet technologies, but also is affecting firms. Croes and Tesone (2004) found SMEs in Costa Rica and Nicaragua have low technology awareness, technologies that are commonly used in similar organizations in the United States, and there are minimal technology applications in back office and front-office processing activities. These firms indicate a preference for person-to-person interfaces through low-tech means such as cellphones.

This survey analyzed the impact of technology on over 164 tourism-related firms’ business in the two countries. This survey found that technology had a greater impact on business strategy in Costa Rica than in Nicaragua. Technology had an impact in significant ways in nine out of ten firms in Costa Rica while three out of four firms in Nicaragua reported the same.

Firms in Costa Rica used computers to a higher degree than those in Nicaragua. Less than 1%

of all the employees in firms in Nicaragua use computers, compared to 29% in Costa Rica. On the other hand, 12% of the hospitality firms in Nicaragua reported that their employees do not use computers compared to nearly 10% in Costa Rica. On the other hand, less than 13% of the firms in Costa Rica, and less than 1% of Nicaraguan SMEs use the Web, while less than 10% of the firms in Costa Rica, and less than 4% in Nicaragua sell through the Internet.

According to Science, Technology, and Innovation in Latin America and the Caribbean Report by the Inter-American Development Bank, “the main obstacles to innovation reported by firms in Latin America are: constraints in securing financing for innovation (high costs of innovation and risks); the inability by firms to wait for long periods of time (perceived or real) before investments can be recovered or a positive return realized (rates of return); the small size of the market; and the shortage of qualified personnel” (IDB, 2010).

In Nicaragua of the 121,919 companies that had been registered up to 2007, 106,619 were

considered microenterprises (87.4%), consider as the main engine of economic growth. According to data from “Encuesta de Empresas Sostenibles Nicaragua 2015”, reflects that only 15 percent of microenterprises and 37 percent of small companies in Nicaragua invest in new technologies, possibly because of the high cost required to invest, compared to 77% in medium-sized enterprises and 87% in large companies (COSEP, 2015).

Regarding to the size of the company, micro and small companies reported they are having greater difficulty obtaining loans for general business purposes, as well as for the incorporation of new technologies, with 63% and 58% respectively. This shows that lack of funding is a major barrier to investment in innovation in LAC companies. Another possible barrier to invest in new technologies in Nicaragua could be the level of education of the entrepreneur. Workers with lower levels of education are more concentrated in micro and small enterprises. At a lower level of education, the entrepreneur simply will not have the demand to invest in technology (Álvarez Hidalgo, 2016b).

6.4 Nicaragua’s Internet User Behavior

According to Social Media Research for Central America by iLifebelt, the largest number of users of social networks in Central America and the Caribbean was led by men users with a percentage of 60.3%, while that of women users were 39.7% in 2015. However, in 2016 the number of female users had increased to 51%, while male users had declined to 49%. In the case of Guatemala, El Salvador and Nicaragua most of the users are still male. For Internet users in Central America, one of the biggest problems with the use of the Internet is speed, since no country in the region has at least 5% of its connections with speeds greater than 15Mbps, 35.20% agreed that the biggest problem was Internet connection speed in 2015, which percentage had already dropped to 22% in 2016 (iLifebelt, 2016).

Among the most common habits in Central America’s Internet users are visiting social networks with a percentage of 81.7%, 82% review email, 66% watch videos online, 53.8% access for chats, and 43.1% read news. As for the distribution of Facebook users in the region, Nicaragua reached 1.9 million users in 2016, an increase of 27% compared to the previous year, the largest increase in users in Central America. Among the motivations to use social networks are to know about news and events (71.3%); be connected to know what friends are doing (56.9%); keep in touch with other people (43.9%); seek for entertainment (38%) and leisure time (22.4%). The main device that users use to connect to the Internet in the region in 2016 was through smartphones (94.3%) an increase of 27 percent compared to the previous year, followed by PC (53.9%) and Laptop (53.7%). Most of the service offerings primarily address the entertainment segment of the market through music, videos, ringtones and games content. Services that focus on productivity such as agriculture, education and employment are less common (GSMA, 2016).

6.5 Nicaragua’s Mobile Market

In Nicaragua, there are more cell phones than people. According to official numbers from the Central Bank of Nicaragua (BCN, in Spanish), the country has 6.3 million inhabitants, there were 8,261,999 mobile phones in 2015, which means that at least every Nicaraguan has a mobile phone (Benjamín, 2015), but only approximately 2.5 million (30%) are smartphones, and only 1.2 million have daily internet connection. According to Connected Society Digital inclusion in Latin America and the Caribbean by GSMA, “One of the key barriers to affordability is the taxation of mobile services, particularly in countries such as Brazil and Argentina where consumer taxes account for over 30% of the total cost of mobile ownership”, while this tax in Nicaragua is 15% (the highest in Central America) (GSMA, 2016). In recent years, consumers have stopped buying a significant percentage of desktops and laptops, to join the technological world of tablets and smartphones. In Nicaragua, tablet sales grew by 105% in 2013 and smartphone sales by 23%; while laptops and PCs only had an increase of 8% each, according to the general manager of the technology company Comtech (Bejarano, 2014).

On the other hand, in Latin America the number of users who prefer to use mobile devices to surf the internet grew 61.3%, according to the Mobile Invasion Map by GuiaLocal.com. Data of the online visits from mobile devices (smartphones and tablets) in the first half of 2014 compared to the same period of 2013 shows that more than 50 million users, those who use desktop computers (desktops) fell 11.3%, while mobile users (smartphones) grew 70.1% and tablets 32%. Nicaragua is the country with the highest growth in the use of mobile devices to connect to the Internet throughout Latin America, with an annual growth of 123%. Brazil is one of the countries with the lowest growth rate, with only 9%.

Mobile phone imports have increased 10% in recent years; the country imported US$57 million in mobile phones in 2010, while in 2015 this number increased to US$63.4 million. This product has occupied the first place of imports of consumer durable goods, according to reports of the Central Bank of Nicaragua (BCN, 2015).

6.6 The Implementation of ICTs in Nicaragua’s Public Transportation System

In 2012, the city’s regulatory entity for municipal transport (Irtramma, in Spanish) announced a pilot plan that would last three months for the implementation of the use of taximeters, which promised a thousand taxis would provide the taximeter service, but the pilot project failed in early 2013, because they concluded that the population would feel that the taximeter continues counting even if they get stuck in a traffic jam, as well as the taxi cooperative saw the implementation of the taximeter as a very expensive investment, since each device had a cost of US$200 (Lara, 2014).

The second attempt to modernize the service with the option of electronic payment through

POS was in 2014, which provided more security to both the passenger and the taxi driver, because it creates the possibility of not carrying cash. They tested it in 20 units, but the population was not familiar with this form of payment, since the passenger needed to pay 4% more for the ride, for that reason the project was canceled (La Prensa, 2014).

The third attempt was in early 2015, the Colombian company Efytaxi proposed to provide a new private transport service in Nicaragua, through a mobile application similar to Uber. Although there were 3,700 people who had downloaded the application, there were only about 400 taxi drivers who were registered to Efytaxi, which made it very difficult to cover the demand with the few taxi drivers registered. After seven months of operating in the country, the company decided to close and move to Guatemala. The company failed mainly because many of the taxi drivers refused to invest in mobile Internet plans to be able to offer the service, although Efytaxi provided two months of free Internet at the beginning, many taxi drivers prefer to buy mobile recharges of C$20 (US$0.70) and not make monthly payments of US$15, and the second reason was that many taxi drivers still did not have smartphones (Reyes, 2016).

In 2013, Irtramma signed a 15-year contract with the private company MPeso to manage the electronic payment on the buses in Managua. This new service allows the passengers to use electronic cards to pay, these smart cards had a value of 57.50 NIO (US$1.97) and could be rechargeable, this contract allowed the company to earn 0.16 cents NIO for each time the passenger make use of the card, which promised an annual profit of 46,720,000 NIO.

At first due to lack of advertising of the company, the population was not yet aware of this new service, another problem was that there were not enough charging machine, which caused long waiting times to buy for a card or for recharging, there was also a lack of information, the cards were damaged quickly, there were even situations when the card automatically blocked itself or run out of cash without having been used. Due to a malfunction in the electronic system of the charging machines, MPeso was fined (Moncada, 2013).

The modernization through the electronic payment on the buses did not improve the payment service; rather it made many users feel dissatisfied and refused to use the smart card to pay, demanding to maintain the traditional payment in cash for the fare. Another reason for the failure of this project is the lack of communication and transparency of the transport regulator, for not overseeing and requiring MPeso company to provide the necessary equipment for recharging the cards, as well as the training of the company’s staff and the appropriate propaganda so that users could accept this service (Montez Rugama, 2014).

Chapter 7 Results and Discussion

Tourism industry in Central America is an industry full of competition and threats, especially when all the countries provide similar tourism products. Diversification and product positioning are the key factors for Nicaragua’s tourism industry to stand out among its neighboring countries, by planning in advance, making use of new technologies and taking effective strategies to innovate, Nicaragua’s tourism can surpass its competitors, create jobs and reduce poverty.

This research is aimed at understanding the tourism development in Nicaragua, define its strength, weakness, opportunities and threats through a SWOT analysis and evaluate whether Nicaragua has or not the technology and resources to implement Internet plus in tourism industry.

The results were obtained through the interpretation of books, national tourism statistics, newspaper, journals and research papers related to tourism development in Nicaragua.

7.1 Nicaragua’s Tourism Industry: SWOT Analysis

This chapter is based on the analysis of the data collected, we are going to discuss about what are the strengthens Nicaragua can take advantage of? And what are the threats it is facing? In order to better understand Nicaragua’s tourism actual situation and provide further suggestions. This research through a SWOT analysis will try to answer the question proposed at beginning of this research: What are the strengths, weaknesses, opportunities and threats of Nicaragua’s tourism industry? The results obtained through the document analysis method was summarized and interpreted as follows:

Strengths:

1. The government is developing new programs: In order to stimulate the public-private investment in the sector and improve the tourism offer, the Government of Nicaragua has been developing new strategies to boost the development of tourism industry and strengthen the country as an international tourist destination. It has been identified as priority to develop and expand the national strategy of tourism promotion to new destinations and increase the tourism offer by providing a better infrastructure and higher quality of the services (Gobierno de Nicaragua, 2012).

2. International promotion: Recent projects have been carried out for the promotion of Nicaragua’s tourism products in national and international markets through the production and maintenance of web pages, videos, magazines, media and fairs (INTUR, 2010).

3. Cheapest country in Central America: Nicaragua’s Consumer Price Index (CPI) is relatively low comparing to its neighboring countries, which can be a competitive advantage when choosing a tourist destination to go by international tourists (Marek, 2014).

4. A country rich in natural resources: Nicaragua is a country rich in resources and natural

attractions.

5. Third safest country in Central America and the Caribbean: Nicaragua is one of the three safest countries in Central America and the Caribbean (Institute for Economics &

Peace, 2016).

6. Beautiful paradises: Home of many beautiful beaches, best wind conditions and waves for surfing lovers.

7. Constant investment in the hotel sector: In recent years Nicaragua has experienced a constant wave of investment in the hotel sector, which has helped to improve the tourist offer and the quality of the accommodation facilities in the country. There have also been hotels that have improved their quality ranking (Bejarano, 2016).

Weakness:

1. Low-quality infrastructure and accommodation facilities: Poor quality tourism infrastructure, the surrounding landscapes of the tourist attractions are in bad conditions, as roads and transportation, making it difficult for tourists to get to those places (Usher &

Kerstetter, 2014). As well as the lack of quality of tourism accommodation facilities that don’t comply with minimum safety requirements (UNCTAD, 2013).

2. Low-quality service: Lack of quality in the tourism offer, for example the tourism service providers have very limited knowledge about the international tourist’s travel behavior, which affects when selling the right product in the right place and the right time to the right customer (UNCTAD, 2013).

3. Lack of diversification and appropriate supply for demographic segment: there is a lack of innovation in tourism diversification, for example Nicaragua still hasn’t been able to attract international tourists from different markets as Asia, Africa or Eastern Europe.

Nicaragua’s tourism market does not provide the appropriate supply for the demand generated by the demographic segment of all age groups. For example, according to the Service Policy Review of Nicaragua states that INTUR plans to increase tourism demand from the United States retiree market (estimated at 40 million persons), but at the present no national plan exists for the development of facilities for elderly people (UNCTAD, 2013).

4. Lack of tourism service center: it is need the implementation of tourism service center that provide information to tourists.

5. Lack of internationalization: English speaking environment needs to be improved. Tour guides that provide tourism service to international tourists should be trained with required knowledge in English, in order to provide a better service.

6. Insufficient budget for promoting tourism: the budget required for the promotion of Nicaragua’s tourism is relatively lower comparing to its neighboring countries as Costa Rica, Panama and Guatemala.

7. Lack of awareness of new technology: Low adoption of new technologies by tourism service providers due to lack of knowledge of how to use them and constraints in securing

financing for innovation (GSMA, 2016).

Opportunities:

1. Nicaragua emerging as a new tourism destination: Nicaragua has been claimed to be cheaper, safer, less crowded and less developed than its neighboring countries. This can be an opportunity to attract those backpackers on a limited budget (Marek, 2014).

2. Implementing new direct flight connections: With the implementation of new direct flight connections to the U.S, would increase the demand for Nicaragua’s tourism from that market (Blanco, 2015).

3. Construction of the interoceanic canal: With the construction of the interoceanic canal in Nicaragua (expected to be finished by 2020) and further improvement of the basic infrastructure would help to boost the country’s economy and expose the country as an

3. Construction of the interoceanic canal: With the construction of the interoceanic canal in Nicaragua (expected to be finished by 2020) and further improvement of the basic infrastructure would help to boost the country’s economy and expose the country as an