The Dominican Republic Information and Communication Technologies Market Report MARKET OVERVIEW The Dominican Republic is the second-largest country in the Caribbean, with a population of approximately 9.3 million. During the last 3 years (2005-2008), the economy of the DR has had a very good performance, with an average annual GDP growth of 8.2%, well above the Latin American average growth. The DR’s telecommunications sector has experienced great growth in the past decade, playing an important role as a contributor to the economy, and positioning the country among the ones with best telecom infrastructures in Latin America. With an average annual growth of 26% for the past 3 years, it has been an important driver of the country’s economic growth. There is a great deal of foreign investment in the ICT market of the DR. The main telecom service providers are either of foreign or mixed capital (joint-venture between foreign and local groups). CODETEL/Claro ( America Movil), Orange (France Telecom), TRICOM, and Viva (Trilogy International Partners) are the 4 integrated telecom service providers which compete in the Dominican market. A recent investment that highlights the dynamism of the sector is that of Terremark Worlwide, a US-based firm that built the Network Access Point (NAP) of the Caribbean at the Cyber Park of Santo Domingo. It has been operating since September 2008, and has turned the DR into a strategic linking point for traffic of internet, data, voice, and images for the Caribbean and the Americas, consolidating itself as a mini technology hub in the region. There are key international players, including several Canadian firms, which are present in the ICT sector of the country through local distributors and/or partners. Some of the Canadian firms present in the DR are Nortel, Mitel, Research in Motion, Cognos, Intello Technologies, Superclick, Pixel Point, Aastra, Above Security, and Smart Technologies. International companies from other countries include Microsoft, SAP, ZTE Corporation, Ericsson, Airspan Networks, Motorola, Nokia, Cisco Systems, NCR, among others. There are several factors, such as the increase in general access to ICTs, increasing computer literacy, sophistication of telecom services offer, and the modernization of the information management systems of private and public sector entities, which are fuelling demand for a diversity of ICT technologies across different subsectors (software, biometrics, IT security, networks, hardware, etc). There are other niches linked to the ICTs which represent opportunities for Canadian companies, including IT auditing, call centers, and payment gateway enabled e-commerce platforms, among others. There are also opportunities for products and services providers linked to radio and television transmissions, two segments which have advanced considerably in the DR, both in coverage and in the adoption of new standards. The DR has been preparing for the transition to digital TV and radio, with many of the TV stations being ready for the switch. The Administration of President Fernandez, through INDOTEL and the Presidential Office of Information and Communications Technologies (OPTIC), has been a supporter of much-needed investment in technology in public institutions in order to modernize them and make them more efficient. Market and Sector challenges Policy and regulations The telecommunications sector of the DR is regulated by the Instituto Dominicano de las Telecomunicaciones (INDOTEL), which was formed in 1999 as the government’s telecommunications regulatory entity. INDOTEL regulates and supervises the rendering of services in the industry, as well as the radio frequency spectrum, and oversees the application of the provisions of the Telecommunications law. INDOTEL is also legally recognized as the arbitrator in conflicts regarding telecommunications service, both between providers, and between consumers and providers. Another big role of INDOTEL is contributing to increase the access to ICTs in rural and lower-income communities and facilitating access and improvements to other basic public services (health, security, etc) through projects funded by its Communications Development Fund (FDT). Suppliers for these projects are selected via international tenders published periodically by INDOTEL in national newspapers and its website. The DR has an excellent legal frame for the sector, which has recourse to the General Law of Telecommunications (Law No. 153-98), Law 126-02 on Electronic Commerce and Digital Signature, Law 53-07 on High Tech Crime, several complementary laws, as well as dozens of rules and regulations which guarantee investments and strengthen the business climate of the country. One of INDOTEL’s recent achievements is the implementation of the phone number portability, which will allow users to keep their phone numbers when changing service suppliers. With the portability, users can keep their phone numbers by paying a fee of DOP$80 pesos (aprox. US$2.20). The portability is expected to strengthen some key elements of the DR telecom sector, such as increased investments and innovation, improved quality of service, and diversification of the offers. Furthermore, it is expected to trigger a substantial reduction of prices and fees, and help advance towards technologic convergence. The telecom services (voice, cable, data, internet) are heavily taxed in the DR, with the end user paying 28% of taxes, through 3 different taxes on their monthly bills. Despite this high tax rate, the sector keeps growing each year; although not at the pace it could be should these taxes be lower. Market access Most ICT hardware and equipment either are exempted or pay a low customs duty when imported into the DR. However, the 16% sales tax (ITBIS) has to be paid by all equipment entering the country. Despite the existence of clear policies and regulations for the telecom sector, the license acquisition to be able to operate as a telecom service provider can be slow and costly, and the outcome is not always positive. It is recommended that Canadian companies interested in entering this segment look at the possibility of partnering with a local player which is already operating. For Canadian ICT companies interested in entering the DR market, it is recommended to do it through a qualified local partner such as system integrators, IT consultants and/or technology distributors. For all foreign companies thinking of finding a local distributor or representative, special attention should be paid to the DR’s Law 173, which protects local distributors and agents from “unjustified” termination of contracts by international partners. MARKET OPPORTUNITIES There are four main sub-sectors which represent the most opportunities in the ICT sector: Telecommunications The telecommunication services subsector (voice, data, video) is the cornerstone of the ICT sector in the DR. Three new major companies have entered in the last 2 years (2 of them with WiMax technology) which, added to the 4 large traditional suppliers, have intensified the competition even more. As a result, new services such as triple play, portable WiMax, wireless digital TV, and TV over mobile phones have become available in major urban centers. The DR has a 86% wireless lines teledensity. There are four players in the cellular telephony segment (Claro, Orange, Tricom and Viva), making it a real battleground based on new services, improved connectivity and signals, lower handsets prices, and a wide array of calling/internet plans. These 4 players have separately announced infrastructure and technology investments for 2009 which combined will amount over US 750 million. While France Telecom’s Orange entered the market in 2001 with the GSM standard, two of these players just recently migrated from CDMA to GSM standards. Being the fastest-growing segment in the telecom market, the wireless telephony will be the driver of investments in the telecom subsector. Another growth segment in telecommunications is the call centers. The DR has positioned itself as a quality host for offshore call centers. There are several international corporations with contact centers operations in the country, as well as local outsourcing centers to provide services to the local industry. These operations have fueled demand for equipment, software and solutions for such centers. On the Government side, INDOTEL is constantly engaged in telecommunications projects to improve access to ICTs in rural communities. Currently, INDOTEL and Codetel are halfway through a joint project that will provide broadband access to 501 remote communities throughout the country. Software Solutions The Dominican industry is submerged in a modernization process of its ICTs in order to keep up with an increasingly competitive environment caused by the constant entry of multinational corporations in different industrial and commercial sectors. While initially most investments were focused on telecom and computer hardware, substantial investments are being made in Enterprise Resource Planning (ERP) systems business intelligence (BI) and data mining softwares POS solutions, as well as IT security and surveillance technologies. Industry-specific software for the hospitality sector is a rapid growth market in the Dominican Republic. The booming tourism industry drives a growing demand for software and solutions for reservations management, facility management, connectivity, purchasing and inventory control. Furthermore, as the number of high-end restaurants and bars